TaxTMI 
TaxTMI 
2013 (10) TMI 770
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.... & 203/JU/2006 for the A.Y. 2002-03. Copy of the said order was furnished, which is placed at pages 11 to 34 of the assessee's compilation. 5. After considering the submissions of both the parties and the material available on record, it is noticed that an identical issue having similar fact has already been adjudicated by this bench of the tribunal in the preceding assessment year in ITA No. 159/JU/2006 vide order dated 09/12/2011 and the relevant findings have been given in para 3.4, which are reproduced verbatim as under:- "3.4 We have heard both the parties. Before us, both the parties have made the submissions which have been considered. The fact is that the amount received back as share capital cannot be a ground for charging lesser interest from the parties to whom the amount has been paid because the party becomes the owners of the shares and appreciation in share and dividend will belong to that party. Both the transactions are separate and distinct and charging of lower rate of interest cannot be justified. We are also not aware that such share capital was raised during the year or the party purchased the shares from other parties. The ld. CIT(A) has considered the ....
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....to Rs. 84,07,021/- towards bank charges/reduction in interest rate on loan. 6. Directing the AO to allow deduction u/s 80IA/80IB in respect of the profits of power plant & unit No.2 of Polypropylene Multi Filament Yarn & unit No.3 of spun yarn. 8. Vide ground No. 1 & 2, the grievance of the department relates to the deletion of disallowance of depreciation of leased assets and the direction for not treating the lease rent income as income from other sources instead of "business income". 9. As regards to this issue, learned counsel for the assessee at the very outset stated that this issue is covered in favour of the assessee by the earlier decision of this bench of the tribunal in assessee's own case for the A.Ys. 1996-97 & 1997-98 in ITA NO. 67 & 68/JU/2003 reported in (2005) 93 TTJ (Jd) 41 : (2005) 93 ITD 78 (Jd), which has been affirmed by the Hon'ble Jurisdictional High Court in the case of CIT Vs. Shree Rajasthan Syntex Ltd. (2008) 7 DTR (Raj) 393. The above contention of the learned counsel for the assessee was not controverted by the learned C.I.T. D.R. 10. After considering the submissions of both the parties and material on record, it is noticed that the issue ....
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....Officer during the course of assessment proceedings, noticed that the assessee had claimed a sum of Rs. 3,33,26,540/- under section 37(1) of the Act being the replacement/reconditioning of assets. The Assessing Officer asked the assessee to justify the allowability of the same. In response, the assessee submitted that Autoconer machinery and DG set had been replaced by spending a sum of Rs. 3,33,26,540/- and those replacement were for existing machineries therefore the company had charged the same under section 37(1) of the Act. It was further submitted that replacement had been done under Technological Up-gradation Fund (TUF) of Ministry of Textile and accordingly, the assessee-company had replaced the above machines. Reliance was placed on the following case laws:- 1) DCIT Vs. Bhilwara Spinner Ltd. 99 TTJ 180. 2) CIT Vs. Janki Ram Mills Ltd. 196 CTR 561. After considering the submissions of the assessee, the Assessing Officer held that the assessee had acquired new assets in place of existing assets which had been sold out. Therefore, new assets would give enduring benefit to the assessee, so it was a capital expenditure and the assessee should have shown it as an additi....
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....ards purchase of Recone Engine is the expenditure on reconditioning of the old engine and no new physical asset is acquired. In support of his claim the Ld. A/R placed reliance in the cases of DCIT Vs. Bhilwara Spinners Ltd (2002) 99 TTJ (Jd) 180 (ITAT, Jodhpur), CIT vs. Janaki Ram Mills Ltd &. Ors (2005) 196 CTR 551 (Mad), CIT vs. Mahalaxmi Textile Mills Ltd (1967) 66 ITR 710 (SC) and CIT Vs. Sakthi Textiles Ltd (2001) 250 ITR 449. The Ld. A/R further submitted that all the above expenditure is towards replacement of parts of plant and machinery. the expenditure is revenue expenditure as all plant and machinery is spinning mill together amount to a single unit and cannot work independently. the impugned expenditure incurred in replacement of Autoconer machine and Crank Shaft and Reconditioning of Engine of textile mill is revenue expenditure because all machinery put together amount to a single unit. These item/unit cannot work independently but can work only as a part of spinning mill. Therefore, the claim of 100% depreciation on this item is allowable to the company because such expenditure is definitely an expenditure of revenue nature as the same is required for the running....
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....self. It is only part of the total machinery. When all plant and machinery is put together it amounts to a single unit and no new assets are created in the process of replacement of worn out machines. The replaced machinery includes Autoconer for Rs.2,28,76,138/-. This Autoconer is a machine for rewinding yarn from small plastic bobbins produced on pinning ring frame and making a big size bobbin. Independently, this machine has no function and it is part of total block of spinning machine' This is a machine only for knotting a small contents on a plastic bobbin. The flow of material diagram has been annexed herewith. This has no independent existence or utility unless work together with other machines, its function is auxiliary. It is only a supporting machine. Therefore, the cost incurred in such Autoconer is a revenue expenditure. Further, the amount includes Rs. 74,96,357/-, which is towards purchase of Crank Shaft for Kirlosker Diesel Generator. The original cost of the engine in assessment year 1998-99 was Rs. 4,24,41,846/-. The electricity connection from R.S.E.B. was discontinued by the appellant from assessment year 1998-99. The spinning factory completely runs by the elect....
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....d Appendix-I, Part-A - III - Machinery and Plant (2-C). However, the appellant has claimed l00% depreciation/the total expenditure incurred for replacement of these three machines as revenue expenditure u/s 37(1) of the Act. The AO has mentioned in the assessment order that in assessment year 2002-03 the purchase of above mentioned three machines was treated as capital expenditure by the AO and was confirmed by the CIT(A). However, in this year the position is some what different than assessment year 2002-03 because at the time of decision by CIT(A) for assessment year 2002-03 on 4-1-2006 the decision of the ITAT, Jodhpur Bench in the case of DCIT Vs. Bhilwara Spinners Ltd (2006) 99 TTJ 180 was not reported, though the decision was given in the month of December,20O5/The decision was published in January, 2006. The decision in this case is squarely applicable to the appellant's case also. Held: "The impugned expenditure incurred in replacement of cards/blow room machinery/combing machinery of textile mills is a revenue expenditure because all plant and machinery put together amount to a single unit. these items/units cannot work independently, but can work only as a part of the ....
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....rposes. The following is the text of the letter dated 19th Dec. 2003 by SITRA. Most of the counsel appearing for the assessee contended that the Tribunal had rendered a factual finding that the expenses related to purchase of machinery parts such as ring frames, simplex machines, doubling machines, cone winder, electronic yarn cleaner, card conversion equipment, speed mothers, etc. were allowable as revenue expenditure by upholding the finding of the CIT(A). It is also their claim that considering the factual finding which is the same as the one concluded for the immediate preceding year, the same cannot be re-agitated before this court in the absence of any further finding contrary, or material or change of law. The said contention of counsel for the assessees cannot be brushed aside. It is also brought to our notice that the tribunal had allowed similar claim after conducting personal inspections in the spinning mills, which replaced parts. It is also stated that inasmuch as the question raised now by the Department had been settled by a series of decision of this court as well as the apex court and where long standing precedents settled the law, the courts would be slow to di....
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....ence to the contentions of learned senior counsel for the Department, it is stated that whether a particular expenditure is in the capital field or revenue field cannot be decided on the basis of the inclusion in the depreciation schedule. The depreciation schedule will be relevant only after the question as to whether the expenditure is in the revenue field or capital field. if the expenditure is found to be in the capital field and is eligible for depreciation, then only the depreciation schedule is to be looked into for determining the rate at which depreciation can be granted. If in the alternative, it is found that the expenditure is in the revenue field, the question of referring to the depreciation schedule for finding out the rate of depreciation will not arise. In the circumstances, it is the claim of the assessee that the reliance of the Revenue on the depreciation schedule to support their contention is misconceived and does not, in any way, advance the case of the department' As rightly pointed out, the Revenue has not brought out any error either in law or on facts in the decision rendered by the Tribunal. The supreme court has also held at p.386 that "The idea of '....
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....rwise, if the expenditure incurred for purchase of machinery is allowed in this year it will not make any difference on the income/profit/tax of this year or in the subsequent years as there is a NIL returned income in assessment year 2004-05, there is a returned loss in 2005-06 and NIL returned income in assessment year 2006-07. The tax has been paid under section 115JB in all the three years. Considering the above facts and circumstances and the submission put-forth by the Ld. A/R of the appellant, I hold that the expenditure of Rs. 3,33,26,540/- for replacement of Autocone, DG set and Crank Shaft is revenue in nature and not the capital expenditure. The addition is deleted. The appeal is allowed on this ground." Now, the department is in appeal. 18. Learned CIT D.R. strongly supported the order passed by the Assessing Officer and reiterated the observations made in the assessment order. It was further stated that in the preceding year, the ITAT has confirmed the view of the Assessing Officer by considering the replacement as a capital expenditure in ITA No. 159/JU/2006 for the A.Y. 2002-03 vide order dated 09/12/2011. 19. In his rival submissions, learned counsel for th....
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....ave considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it appears that the assessee replaced certain parts of the machineries of spinning mill namely Autoconer by incurring expenses of Rs. 2,28,76,138/-. This machine was being used for rewinding yarn from small plastic bobbins produced on pinning ring frame and making a big size bobbin. The Autoconer is a part of a spinning machine and is working together with other machines, it helps in carrying out the process. So, it was a supporting machine used for knotting the yarn from small contents on a plastic bobbin to big cones. This machine does not have independent functioning rather it was a part of the total plant, therefore it cannot be said that the assessee replaced an independent machine by acquiring a new one rather a part of the old machine was replaced for proper functioning. Therefore, expenses incurred by the assessee were revenue in nature and not the capital in nature. Similarly, the assessee by incurring an expenditure of Rs. 74,96,357/- replaced the Crank Shaft for the DG set engine. The original cost of the DG set in the A.Y. 1998-99 was Rs. ....
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.... rupee loan into foreign currency loan. It was further stated that due to conversion of loan, there was a reduction of interest rate from 14.8% to 12.5% as such a sum of Rs. 47,07,131/- paid to the IDBI was allowable expenditure. It was further submitted that an amount of Rs. 36,99,890/- was paid to the IDBI for reduction of interest rate from 16.35% to 12.5% on loan of Rs. 690 Lac taken for replacement of machineries under the RUF scheme under the Government of India. The reliance was placed on the following case-laws:- a) India Cement Ltd. Vs. CIT (1966) 60 ITR 52 (SC). b) CIT Vs. Siwakami Mills Ltd. (1998) 144 CTR 72 (SC). c) DCIT VS. Paramount Hotels Ltd. (2001) 71 TTJ 704 (Mum). d) Dharangadhra Chemical Works Ltd. Vs. CIT (1977) CTR 180 (Bom) 24. Learned CIT(A) after considering the submissions of the assessee observed that the assessee had taken working capital from IDBI at the interest rate of 16.35% p.a., but the said interest did not suit to the assessee. Therefore, he requested the IDBI to reduce the interest rate and the IDBI agreed to this proposal with the condition that 50% of the total interest amount payable upto the assessment year 2004-05 should be ....
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....w was in foreign currency, for that purpose, the assessee converted the rupee loan into foreign currency loan and paid a sum of Rs. 47,07,131/- to the IDBI for conversion of such loan. Those expenses were paid during the year under consideration and for converting the rupee loan into foreign currency loan, the rate of interest was also reduced from 14.74% to 5.2%. Similarly, the assessee also paid Rs. 36,99,890/- for reduction of interest rate from 16.35% to 12.5% on the loans taken for replacement of machinery under RUF and TUF schemes of Government of India. The assessee was benefited as the interest rate was reduced and those expenses were incurred by the assessee during the year under consideration and related to the business exigency. In the present case, learned CIT(A) deleted the disallowance made by the Assessing Officer by following the decision of this bench of the tribunal in the case of PI Industries Udaipur and Secure Meters Ltd. No contradictory decision was pointed out during the course of hearing, therefore, we do not see any valid ground to interfere with the findings of the learned CIT(A) on this issue and accordingly do not see any merit in this ground of the dep....
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....d to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that the assessee had debited an amount of Rs. 2,62,21,573/- as freight and handling charges which included expenditure on account of clearing and forwarding expenses. He asked the assessee to furnish the details as regards to deduction of TDS on such clearing and forwarding charges. From the details so filed, the Assessing Officer noticed that the assessee had made TDS only on agency charges and no TDS was deducted on the remaining amount of Rs. 1,94,56,548/-. The assessee relied the circular No. 723 issued by the CBDT and submitted as under:- "That the company is deducting TDS from payment to CHA towards agency charges and has timely deposited in Government account. The payment to CHA other than agency charges is reimbursement of expenses not liable for TDS." 34. The Assessing Officer was not satisfied with the reply of the assessee and made the disallowance by observing that the assessee had not deducted the TDS on the payments to the clearing and forwarding agents for carriage of goods. He therefore made disallowance of Rs. 1,94,56,548/- by invoking the provisions ....