2019 (12) TMI 322 - HC - Income Tax

Court admits appeal challenging section 32 interpretation as substantial question of law. Expenditure issue not entertained. Registry instructed to notify Tribunal. Respondent's Counsel waives service.

Pr. Commissioner of Income Tax-14, Mumbai. Versus M/s. Indian Seamless Steels & Alloys Ltd.

Pr. Commissioner of Income Tax-14, Mumbai. Versus M/s. Indian Seamless Steels & Alloys Ltd. - TMI Issues:1. Interpretation of section 32 of the Income Tax Act, 1961 regarding depreciation claim.2. Allowability of expenditure on DSRM trial run as revenue expenditure.Issue 1: Interpretation of section 32 - Depreciation ClaimThe appeal challenges the order of the Income Tax Appellate Tribunal (Tribunal) for the assessment year 1998-99. The Revenue questions whether the Tribunal was correct in holding that the claim for depreciation was optional and could not be imposed on the Assessee if not claimed during the assessment under normal provisions of the Act. The key concern is the justification of the Tribunal's stance prior to the insertion of Explanation-5 to section 32 of the Income Tax Act, 1961. The Tribunal's interpretation of the law is under scrutiny to determine the legitimacy of the depreciation claim and its imposition on the Assessee.Issue 2: Allowability of Expenditure on DSRM Trial RunRegarding the expenditure of &8377; 6,32,80,798/- incurred on DSRM trial run, the Revenue questions the Tribunal's decision to treat it as revenue expenditure, especially considering that the expenditure was made before commissioning. The Revenue seeks clarification on the correctness of allowing such expenditure as revenue expenditure without taking into account the timing of the expense in relation to the commissioning process. The interpretation of revenue expenditure rules in light of the specific circumstances surrounding the DSRM trial run expenditure is a critical aspect of this issue.The Court, after hearing the arguments, concluded that the issue related to the expenditure on DSRM trial run was already decided in favor of the Assessee in a previous case. Consequently, this particular question did not present a substantial question of law and was not entertained. However, the Court admitted the appeal on the question concerning the interpretation of section 32 of the Income Tax Act as a substantial question of law. The Registry was directed to inform the Tribunal about the appeal to ensure the availability of relevant papers and proceedings. The Respondent's Counsel waived service, and the case was scheduled to be heard along with another Income Tax Appeal.