Rajasthan High Court - Jaipur
Chambal Fertilisers And Chemicals Ltd vs Joint Commissioner Of Income Tax on 15 July, 2019
Author: Chief Justice
Bench: Chief Justice
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Income Tax Appeal No. 23/2019
Chambal Fertilisers And Chemicals Ltd.
----Appellant
Versus
Joint Commissioner Of Income Tax
----Respondent
For Appellant(s) : Mr. Sanjay Jhanwar with Mr. Rajat Sharma and Mr. Ankit Sareen HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Order 15/07/2019 Following questions of law are urged for consideration in this appeal:-
A) Whether under the facts and circumstances of the case and in law, the Ld. ITAT was justified in reversing the order of Ld. CIT(A), deleting the disallowance of Rs. 1,00,00,000/- made by the Assessing Officer on account of diminution in the value of fertilizer bonds?
B) Whether under the facts and circumstances of the case, the Ld. ITAT has erred in disallowing the expenditure of ₹.1,91,59,945 incurred on construction of the anicut by treating the same as capital expenditure?
It is urged that the Tribunal erred in law in holding addition of ₹.1,91,59,945/-.
(Downloaded on 30/08/2019 at 10:50:13 PM)(2 of 3) [ITA-23/2019] The facts in respect of the Question (B) are that on 23.3.2010, the State of Rajasthan through its Chief Engineer, Water Resources Department, approved construction of an anicut, in terms of which, maintenance and appurtenant structures (to be put up) were by assessee at its own cost. The officers of the Government were allowed the right to inspect it. The State reserved its right to assess the quantity of water and manage it eventually. Furthermore, water charges consumed by the assessee were indicated. The residents of nearby village were provided the facility of drawing water free of cost. The assessee had to pay compensation for Government as well as for private property, on account of construction of the Dam and anicut. Other terms for the use of Dam - which is defined by period of time, (and control of which exclusively vested in the assessee), were also provided.
In these circumstances, ITAT concluded that the expenditure which was sought to be claimed as revenue, fell in the capital stream. To do so, the ITAT relied upon Mysore Minerals Ltd. vs. Commissioner of Income Tax (1999) 239 ITR 775.
It is urged on behalf of the assessee that title to the land or the property nowhere vests in it and that the rights reserved by the State Government clearly depict that at all material times, it exercises overall effective control. It is submitted that in these circumstances and having regard to the facts in Mysore Minerals Ltd. (supra), the application of that precedent was not apt.
Learned counsel for the appellant also relied upon the judgment of Supreme Court in L.H. Sugar Factory and Oil Mills (P) Ltd. vs. Commissioner of Income Tax, (1980) 125 ITR 293 (SC).
This Court is of the opinion that there is no merit in the appeal with regard to Question (B).
A wider meaning was attributed to the subject of ownership of property in Mysore Minerals Ltd. (supra), wherein Supreme Court held as follows:-
"In our opinion, the term "owned" as occurring in section 32(1) must be assigned a wider meaning. Any one in possession of (Downloaded on 30/08/2019 at 10:50:13 PM) (3 of 3) [ITA-23/2019] property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, Registration Act, etc. "Building owned by the assessee" the expression as occurring in section 32(1) means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act, Registration act etc., but nevertheless is entitled to hold the property to the exclusion of all others."
Having regard to the facts of this case, the application of Mysore Minerals (supra) was justified and appropriate - also because full and effective control of the structure and entire underlying property is with the assessee. Also this agreement is not confined by time. Question (B) therefore does not arise.
Appeal is admitted on Question (A).
Issue notice of the appeal on the said question to the respondent.
(SANJEEV PRAKASH SHARMA),J (S. RAVINDRA BHAT),CJ Anil Makwana /133 (Downloaded on 30/08/2019 at 10:50:13 PM) Powered by TCPDF (www.tcpdf.org)