2020 (11) TMI 97 - HC - Income Tax

High Court partially allows Tax Case Appeal; key issues on expenditure, depreciation answered.

M/s. Chennai Petroleum Corporation Limited Versus The Deputy Commissioner of Income Tax, Large Tax Payer Unit, Chennai

The High Court partly allowed the Tax Case Appeal. Substantial Question of Law No.1 was answered against the assessee, upholding the Tribunal's decision ... Allowable deduction u/s 37 - expenditure incurred towards revamping of visbreaker unit which was abandoned - Tribunal disallowed deduction - HELD THAT:- As perused the findings recorded by the Tribunal and find that the Tribunal rightly reverse the order passed by the Commissioner of Income Tax ['CIT(A)' for brevity] on this aspect. The Tribunal took note of the decision of the Hon'ble Supreme Court of India and arrived a finding against the assessee, We find no grounds to interfere with the said finding. Accordingly, the Substantial Question of law No.1 is answered against the assessee. Grant of depreciation on the repair charges incurred on Vis Breaker - HELD THAT:- Having held that the deduction is not allowable under Section 37 of the Act with regard to the expenditure incurred for revamping of vis-breaker Unit. The Tribunal ought to have considered the claim for consideration at vis-breaker Unit. Though there is a reference made to the said submission of the assessee, We find that there is no specific finding rendered by the Tribunal on that record. That apart, We find that such a claim for depreciation was not made by the assessee before the Assessing Officer or before the CIT(A) as an alternate submission and it was raised only before the Tribunal. Therefore, We are inclined to grant liberty to the assessee to raise that issue before the Assessing Officer which can be considered in accordance with law. Depreciation on gas sweetening plant - HELD THAT:- Issue decided in favour of assessee in own case [2013 (8) TMI 525 - MADRAS HIGH COURT] wherein held on the admitted case that business was a going concern and the machinery could not be put to use due to raw material paucity, we reject the Revenue's contention, thereby, confirm the majority view of the Income Tax Appellate Tribunal. Issues:1. Allowability of expenditure incurred towards revamping of visbreaker unit under Section 37 of the Income Tax Act.2. Grant of depreciation on repair charges for Vis Breaker.3. Disagreement with the Order of the Third Member of the Tribunal and High Court decisions regarding the claim of depreciation on gas sweetening plant.Issue 1: Allowability of Expenditure Incurred for Revamping of Visbreaker UnitThe appellant filed an appeal challenging the order of the Income Tax Appellate Tribunal regarding the deduction of expenditure incurred for revamping the abandoned visbreaker unit under Section 37 of the Income Tax Act. The High Court noted that the Tribunal rightly reversed the order passed by the Commissioner of Income Tax and found no grounds to interfere with this decision. The Substantial Question of Law No.1 was answered against the assessee, upholding the Tribunal's decision on the non-allowability of the expenditure.Issue 2: Grant of Depreciation on Repair Charges for Vis BreakerThe High Court observed that the Tribunal did not provide a specific finding on the claim for depreciation on the repair charges for the visbreaker unit. The appellant had not raised this claim before the Assessing Officer or the CIT(A) but only before the Tribunal. Therefore, the Court granted liberty to the assessee to raise this issue before the Assessing Officer for consideration in accordance with the law. Substantial Question of Law No.2 was remanded to the Assessing Officer for the limited purpose of evaluating the claim for depreciation on repair charges incurred on the visbreaker unit.Issue 3: Disagreement with Previous Tribunal and High Court DecisionsRegarding the claim of depreciation on the gas sweetening plant, the High Court referred to a previous decision in the assessee's own case for the Assessment Year 1998-99. The Court decided in favor of the assessee, following previous judgments and legal interpretations. Substantial Question of Law No.3 was answered in favor of the assessee, aligning with the judgment of the Division Bench in the assessee's own case. The Court upheld the decision based on legal precedents and relevant interpretations of the Income Tax Act.In conclusion, the High Court partly allowed the Tax Case Appeal. Substantial Question of Law No.1 was answered against the assessee, while Substantial Question of Law No.2 was remanded to the Assessing Officer for further consideration. Substantial Question of Law No.3 was answered in favor of the assessee, following legal precedents and previous judgments. The Court provided detailed reasoning for each issue, ensuring a comprehensive analysis of the judgment.