TaxTMI 
TaxTMI 
2016 (6) TMI 1388
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..... The first ground raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the action of the Assessing Officer in treating the lumpsum consideration of Rs.. 65,00,000/- towards sale of Drum Plant (giving up right to manufacture) as business income as against capital gains admitted by the assessee. 3. Brief facts of the case are that during the previous year relevant to the assessment year under appeal, the assessee has received an amount of Rs..65,00,000/- from M/s. Balmer Lawrie & Co. Ltd. towards giving up of right to manufacture. The consideration for giving up the right to manufacture was received in pursuance to an agreement dated 27.11.2002 entered into between the assessee and M/s. Balmer Lawrie & Co. Ltd. [a Government of India Enterprises]. The assessee has claimed the above lumpsum consideration of Rs..65 lakhs as capital gain, whereas, the Assessing Officer has treated the same as business income by relying on the decision in the case of Mcdowell and Company Ltd. v. Commercial Tax Officer 154 ITR 148(SC). 4. On appeal, after considering the submissions of the assessee and also by considering relevant provisions of section, by confirming ....
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.....6.2. Though proviso to 28(va) abundantly clarifies that Section 28(va)(a) intends to tax only those items which are not taxable under the head capital gain, yet the provisions of the Act neither expressly nor by implication convey that Section 55(2) overrides Section 28(va). The non usage of the words "non withstanding anything contained in any other provisions of the Act in Section 55, further makes it clear that a particular item could be taxed either under the head capital gain or under business income depending upon the facts and circumstances of the case. 7.6.3. No doubt, it is true as cited by the AR that the agreement consist of 3 parts (i) Transfer of Plant & Machinery for Rs. 30 lacs , which the buyer has to pay to the Appellant. (ii) Giving up the right to manufacture for Rs. 65 lacs, for which the buyer has to pay the Appellant for refraining from manufacture and (iii) Supply and procurement of material for 5 years - This is mutually depended and subject to penalty for non fulfillment of the respective obligation and further backed by bank guarantee on either side. However, in page 2 of the agreement between M/s. Chemplast Sanmar Ltd ....
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....pt as it is linked with the commitment given by the Appellant for the purchase of material for a certain period, the income should also be accrued during the period of agreement. The Appellant therefore submits that the amount of Rs. 65 lacs has to be spread over a period of 5 years starting from November 2002. The argument of the AR here also is untenable. The appellant company already received the entire consideration and there is no concept of deferred revenue income under the Income Tax Act. Moreover Section 28(va) clearly taxes any sum received or receivable under an agreement for not carrying out any activity in relation to business. The provisions of the act does not differentiates between lumpsum consideration or otherwise. 7.6.7. For the reason stated above the assessee's appeal fails. The treatment of Rs. 65 lacs being compensation for giving up the right to manufacture as business income by the A.a is upheld. No relief for the appellant." 5. On being aggrieved, the assessee is in appeal before the Tribunal. 6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The Assessing Officer treat....
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....ndalay Investment P.Ltd. (C.A. No.2523 of 2011)" reported in 332 ITR 602 (SC), wherein it was held that vide Finance Act 2002 w.e.f. 01/04/2003 i.e. from A.Y. 2003-04 the said capital receipt is made taxable. Facts of the said cited decision were identical that during A.Y.1997-98 the said appellant had received Rs. 50 lacs from Ranbaxy Lab Ltd. as noncompetition fees in terms of an agreement dated 31/03/1997. The relevant portion is reproduced hereunder:- "The assessee, which was carrying on the business of manufacturing, selling and distribution of pharmaceutical and medical preparations, received during the assessment year 1997- 98 Rs. 50 lakhs from Ranbaxy as non-competition fee. It agreed to transfer its trade marks to Ranbaxy and in consideration for such transfer the assessee agreed that it shall not carry on directly or indirectly the business hitherto carried on by it. The agreement was for 20 years. The Tribunal held that the amount was a capital receipt; but the High Court reversed the decision. On appeal to the Supreme Court: Held, reversing the decision of the High Court, that prior to April 1, 2003, when Parliament stepped in to specifically tax such ....
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.... of a capital asst being land or building or both, is less than the value adopted by the Stamp Valuation Authority, the value so adopted shall for the purpose of section 48 of the Act be deemed to be the full value of consideration received/accrued as a result of such transfer. In the instant case, the value fixed by the stamp valuation authority was Rs..553.68 lakhs, which has been reduced to Rs..396.72 lakhs on appeal by the Inspector General of Registration. Such being the case where the value adopted by the Stamp Valuation Authority is higher than the actual consideration stated to have been received by the assessee, the consideration for the purpose of computing long term capital gain shall be taken as Rs..3,96,72,377 as determined by the Stamp Valuation Authority. Therefore, the assessee was show caused as to why the above said value should not be taken as the full value of consideration. The assessee mainly submitted before the Assessing Officer that having approved the sale consideration by the Appropriate Authority constituted under the provisions of the Income Tax Act, it is not open for the Assessing Officer to substitute such value by some other notional value. In view ....
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....eration of Rs..1,44,00,000/- to Chennai Petroleum Corporation Ltd. through registered sale deed dated 27.06.2002. The assessee returned the income from capital gains arising from this transaction at Rs..1,33,95,555/-. The Assessing Officer examined the documents in respect of the above transaction and found that the registering authority has determined the value of the property at Rs..553.68 lakhs. As the value determined by the registered authority was felt very exorbitant, the purchaser filed representation before the Special Dy. Collector (Stamps), who has determined the value at Rs..501.36 (land 497.04 lakhs and building Rs..4.32 lakhs). Not accepting the value as determined, the purchaser approached the appellate forum viz., the Inspector General of Registration, who vide his order dated 02.01.2004, determined the value of the property at Rs..396,72,377/- (land Rs..392,40,000/-, building Rs..432,377/-). As even the order of the appellate authority was felt unrealistic, the purchaser approached the Hon'ble High Court of Madras, which granted an interim stay on the operation of the order of the Inspector General of Registration. The case of the assessee could not be referred to ....
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....idered opinion that when the penal provisions of Chapter XXC of the Act was very much available at the time of transaction taken place and when the provisions of section 50C of the Act came into effect in the subsequent financial year, the Assessing Officer was not correct in applying the provisions of section 50C of the Act. Similar ratio was laid down by the Kolkata Benches of the Tribunal in the case of Neville De Noranha v. ACIT 115 TTJ 390. However, any final judgement against the stay on operation of the order of the Inspector General of Registration, which is pending before the Hon'ble Jurisdictional High Court, would be final. The ground raised by the assessee is allowed subject to the decision of the Hon'ble Madras High Court. I.T.A. No. 52/Mds/2009 A.Y. 2005-06 [Assessee's appeal] 9. With regard to the assessment year 2005-06, the only effective ground raised in the appeal of the assessee is with regard to confirmation of disallowance of provisions for gratuity. 9.1 The assessee has made a provision of Rs..7,50,23,640/- towards Gratuity Fund with Life Insurance Corporation of India, which was also approved by the Commissioner of Income Tax, Chennai. The assessee ....
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....me overrides section 43B of the Act, as section 43B is only general provision. The Assessing Officer rejected the contentions of the assessee and disallowed the provision for gratuity holding that unless the said provision is paid, it is not allowable in view of the provisions of section 43B of the Act. On appeal, the Commissioner of Income Tax (Appeals) allowed the claim of the assessee and deleted the disallowance observing that similar issue has been allowed in assessee's own case for the assessment years 2005-06 and 2006-07. 3. Departmental Representative vehemently supports the order of the Assessing Officer in disallowing the provision for gratuity submitting that since the said amount is only a provision and not paid is hit by the provisions of section 43B of the Act. 4. Counsel for the assessee relied on the order of the Commissioner of Income Tax (Appeals). He further submits that the Revenue in earlier years accepted the decision of the Commissioner of Income Tax (Appeals) in deleting the provision for gratuity for the assessment years 2005-06 and 2006-07 and no further appeal was filed by the Revenue on similar issue. Counsel relied on the following dec....
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....e Finance Act, 1983, with effect from April 1, 1984. Section 40A says that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head "Profits and gains of business or profession". Similarly, section 43B opens with a non obstante clause. Section 40A(7) provides that in cases covered by the provisions of clause (a) no deduction shall be allowed in respect of any provision whether called as such or by any other name made by the assessee for the payment of gratuity of his employees on their retirement or on termination of their employment for any reason. However, clause (b) of section 40A(7) clearly provides that to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year clause (a) will not apply. This means exception has been carved out in respect of payment of sums by way of any contribution towards an approved gratuity fund. Thus the Legislature wanted to give a special treatment to pro....
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.... which disallows deduction of any provision of gratuity to employees on their retirement is itself made subject to s. 40A(7)(b) which allows such deduction as long as it is made towards an approved gratuity fund. There is no dispute that in the instant case the provision made is towards contribution to an approved gratuity fund. Therefore the claim by the assessee for deduction on this score was clearly justified. We are accordingly of the opinion that no substantial question of law arises in this regard as well." 8. Respectfully following the said decisions, we uphold the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance made for approved gratuity funds. 9. In the result, appeal of the Revenue is dismissed." 9.5 After considering the ratio laid down by the Hon'ble Kerala High Court and the Hon'ble Delhi High Court, the Coordinate Bench of the Tribunal in the case of ACIT v. Tyco Sanmar Ltd. (supra) decided the issue in favour of the assessee is also applies to the fact of the present case. However, for more clarity, the gratuity to be deductible, the conditions laid down in section 40A(7) had to be fulfilled. The deduction could no....
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....order of earlier assessment year of one of the group company of the assessee, the ld. CIT(A) dismissed the ground raised by the assessee. Further, it is an admitted fact that for both the assessment years 2003-04 and 2005-06, the assessee has not disputed about the addition before the Tribunal. Against the ground raised in the assessment years 2006-07 and 2007-08, the ld. Counsel for the assessee, by relying on the decisions in the case of ACIT v. Torrent Pharmaceuticals Ltd. 137 ITD 301 (Ahd) and Escort Ltd. v. ACIT 104 ITD 427 (Del), submitted that the issue is squarely covered by the above decision and expenditure incurred on ERP should be of revenue in nature. 11.4 After perusing the above orders, we find that by following the decision of the Delhi Benches of ITAT in the case Escort Ltd. v. ACIT (supra), the Ahmedabad Bench of the Tribunal in the case of ACIT v. Torrent Pharmaceuticals Ltd. (supra), has observed and held as under: "10. First ground is with regard to confirming the disallowance of Rs. 63 lakh which was claimed by assessee on revenue account. The contention of assessee before Ld. CIT(A) was that the assesseecompany had entered into an agreement with I....
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.... Arawali Constructions Co. (P) Ltd. (2003) 259 ITR 30 (Raj) but the facts in that case are also in regard to distinguishable as in that case the software was an outright purchase of computer programme which relates to technical "know-how". We find that the Assessing Officer has not given any finding as to the fact that whether expenditure on computer software gives an enduring benefit to an assessee, the duration of time for which the assessee right to use the software becomes relevant. Accordingly we are of the view that in case the software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter or say less than 2 years, it may be treated as revenue expenditure. Hence, we find that the CIT(A) has recorded a categorical finding that the software programme without which the computer cannot work and with the advancement of technology, the programme changes during short period and this change is requirement of the business of the assessee i.e. share broking. Accordingly, we delete the addition confirmed by CIT(A) and this issue of assessee's appeal is allowed.". Further....
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....course of assessment proceedings, the assessee contended that an identical issue has been allowed in its favour in the appellate forum in its own case. However, the Assessing Officer has not accepted the submissions of the assessee since the fact remains that the issue has not reached finality. 12.2 On appeal, the ld. CIT(A) has observed that in assessee's own case for the assessment years 1998-99, 1999-2000 & 2001-02, the ld. CIT(A) in his order in ITA Nos. 152 to 154/2004-05 decided the issue in favour of the assessee. Accordingly, by following his own order for the earlier assessment years, for the year under appeal also, the ld. CIT(A) decided the issue in favour of the assessee and the addition of Rs..1,14,115/- made by the Assessing Officer was deleted. 12.3 Aggrieved, the Revenue is in appeal before the Tribunal. Against the above deletion of addition under section 40A(9) of the Act, the Revenue has filed appeals for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08. 12.4 We have heard rival contentions and perused the materials available on record. Against the claim of the assessee towards contribution to benevolent fund, the Assessing Officer has made add....
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....by exception provided under section 40A(9) is acceptable. Accordingly, I direct the AO to allow contribution of Rs. 97,335/- made by the appellant to the Benevolent Fund. The appellant, therefore, succeeds on this ground." By following the above order of the ld. CIT(A) and also by following his own order for earlier assessment years, the ld. CIT(A) has deleted the addition made by the Assessing Officer for the assessment year 2003-04 and for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08 also the ld. CIT(A) deleted the addition made by the Assessing Officer. The only contention of the Department is that the earlier order of the ld. CIT(A) in assessee's own case in ITA Nos. 152 to 154/2004-05 has not become final cannot be accepted since the Department has not filed any order of higher forum having modified or reversed the above decision of the Coordinate Bench of the Tribunal. Under the above facts and circumstances, we sustain the order of the ld. CIT(A) on this issue for all the above assessment years under appeal and dismiss the ground raised by the Revenue. 13. The next common ground raised in the appeal of the Revenue for the assessment years 2003-04, 2004-05....
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.....2 The assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT, after considering the submissions of the assessee and also by considering various judicial pronouncements including the decision of the Tribunal in the case of ACIT v. TANFAC Industries in I.T.A. No. 2800/Mds/2005 and 48/Mds/2007 dated 31.10.2007, the ld. CIT(A) has held that the assessee is eligible to claim deduction under section 80IA of the Act and allowed the ground raised by the assessee. 13.3 On being aggrieved, the Revenue is in appeal before the Tribunal. On similar facts of the case, the Revenue also filed appeal for the assessment year 2007-08. The ld. DR mainly relied on the decision of the Tribunal in the case of Chettinad Corporation Ltd. in I.T.A. No. 1029/Mds/2005 dated 05.01.2007, which the ld. CIT(A) ought to have followed. 13.4. We have heard both sides, perused the materials on record and gone through the orders of authorities below. It is an admitted fact that 96% of the power generated by the assessee has been captively consumed in the assessee's factory itself. Therefore, the Assessing Officer has held that the assessee is not eligible to claim deduction under section 80IA ....
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....ptive basis. There is no necessity that power generated should be wheeled through an Electricity Board grid, before it is consumed. Further, we also find that this Tribunal in assessee's own case for assessment year 2006-07 in I.T.A. No. 1014/Mds/10 dated 3rd June, 2011, had held as under at paras 12 to 16 of this order:- "12. Short facts apropos are that assessee had sold to M/s OPG Metals P. Ltd. directly without wheeling the electricity through TNEB Grid. Out of the total power generated 39% was sold by assessee to the said M/s OPG Metals P. Ltd. A.O. put the assessee on notice that income attributable to sale of power to M/s OPG Metals P. Ltd. would not be eligible for deduction under sec. 80IA of the Act. Assessee replied that there was no difference between drawing power from captive generation or through the grid and both had to be considered in the same status. A.O. was not impressed. He held that captive consumption of electricity would not be eligible for deduction under sec.80IA of the Act. Resultant disallowance of deduction came to Rs..9,36,80,721/-. 13. In its appeal before the CIT(A), argument of the assessee was that an unreasonable distinction....
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....oned in Sec. 80IA(1) of the Act, has been rejected by the Tribunal in the order impugned. In our considered view, the Tribunal was well justified in having rejected such a stand of the appellant. Having referred to sec. 80IA(1) of the Act, we are also convinced that what are all to be satisfied in order to be eligible for the deduction as provided under sub-sec.(1) of Sec.80IA, the assessee should have set up an undertaking or an enterprise and from and out of such an undertaking or an enterprise set up, any profit or gain is derived, falling under sub-sec. covered by subsec.(4) of Sec.80IA of the Act such profit or gain derived by the assessee can be deducted in its entirety for a period of 10 years starting from the date of functioning of the set up. The contention that profit or gains can be claimed by the assessee only if such profit or gain is derived by the sale of its product or power generated to an outsider cannot be the manner in which the provisions contained in Sec.80IA(1) can be interpreted. The expression 'derived'; used in the said Sec.80IA(1) in the beginning as well as in the last part of the sub-sec. (4) makes it abundantly clear that such profit or gain ....
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....sment years 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 is dismissed. 14. The next common ground raised in the appeals of the Revenue for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08 is that the ld. CIT(A) has erred in holding that the entire upfront fee and guarantee commission paid by the assessee is allowable. 14.1 In the assessment year 2004-05, the assessee has incurred an amount of Rs..1,01,13,627/- towards upfront fees (Rs..47,50,000) and guarantee commission (Rs..53,63,627) and claimed the same as revenue expenses. The Assessing Officer, however, treated the same as prepaid expenses and allowed only Rs..14,84,764/- as an allowable expense. 14.2 During the course of hearing before the ld. CIT(A), the assessee has submitted the details of upfront fees/guarantee commission and claimed that the upfront fees were all revenue expenses. In view of the decision in the case of CIT v. Meenakshi Mills Ltd. 290 ITR 107 (Mad) and in the case of DCIT v. Gujarat Alkalies and Chemicals Ltd. SC 167 taxman 203/215 CTR 10, the ld. CIT(A) has held that the upfront fees of Rs..47,50,000/- paid by the assessee is of revenue in nature and allowed the same. With regard to....
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....nd allowed the ground raised by the assessee. 15.2 After considering the rival submissions, we find that the observations of the ld. CIT(A) is found to be correct, wherein the ld. CIT(A) has held as under: "10.1 However during the course of the hearing the appellant has put forth before me two decisions substantiating its claim. I have carefully considered the submissions and gone through both the decisions. In the case of DCIT Vs Eicher Motors Ltd - 82 TTJ 61, the Hon'ble Indore Bench has held that the provision for gratuity, made on actuarial valuation was an ascertained liability and the same could not be added back to the book profits. In the other case cited by the Appellant the Hon'ble ITAT Mumbai in the case of Greaves Chitram Ud Vs DCIT - (9 SOT 143) has also held that the gratuity liability, which was based on actuarial valuation, was deductible from the book profits as ascertained liability. As the fads and circumstances of the appellant are exactly similar to the case discussed above and as it has not been denied by the AO that provision for gratuity has been made on actuarial basis, respectfully following the decision of the ITAT, Indore (supra) and ....
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....ord and gone through the orders of authorities below. The non-compete fees paid by the assessee has been claimed as deferred revenue expenditure was disallowed by the Assessing Officer. By considering the decisions of the Chennai Benches of the Tribunal in the case of Orchid Chemicals & Pharmaceuticals v. ACIT 137 TTJ 373 and also in the case of ITO v. Seafil Leasing 124 TTJ 531, the ld. CIT(A) directed the Assessing Officer to treat the non-compete fees paid as deferred revenue expenditure and allow 1/10th of the expenditure as deduction for every year by observing as under: "4.2 I have considered various submissions made by the appellant during the appeal proceedings. In similar circumstances, there is a decision of Hon'ble Chennai ITAT in the case of Orchid Chemicals & Pharmaceuticals Vs ACIT 137 TTJ 373 and also one more decision of Hon'ble ITAT Chennai in the case of ITO Vs Seafil Leasing 124 TTJ 531 ITAT, Chennai. I am of the considered opinion that these decisions have similarities to the facts and circumstances of the present case and hence this expenditure may be allowed as deferred revenue expenditure for a period of 10 years. This decision of mine is in ....
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...., shall not be dealt with by the said U.Mohanrao. In consideration of the same, the said U.Mohanrao would be paid a sum of Rs. 50,00,000/- as a non-compete fee. The agreement laid down the restrictive covenants that the said U.Mohanrao shall not manufacture directly or indirectly any of the products mentioned above and shall not deal with the said products in any manner or advise, assist, aid, either directly or indirectly, any competitor or any other person in either establishing, managing, promoting or developing the business of the said products or any product similar thereto; he shall not act as a Consultant or use any knowhow, design or drawings directly or indirectly and refrain from disclosing or divulging any information relating to the knowhow, trade practices, etc. The agreement was to be effective for a period of five years from the date of the agreement. 7. On 29.04.1996, yet another agreement was entered into between the assessee and the said U.Mohanrao, former Chairman and Managing Director of Cutfast Abrasive Tools Limited, as by way of a non-compete agreement that the said U.Mohanrao shall not, in any manner, assist any third party, or sell or render advise....
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....x), the Tribunal, by a cryptic order, rejected the assessee's claim. There is hardly any discussion in the order, particularly with reference to the non-compete fee agreements, referred to above. Aggrieved by this, the assessee is on appeal before this Court. 9. Learned counsel appearing for the assessee placed reliance on the decision of the Apex Court reported in [1971] 82 ITR 902 (CIT Vs. Coal Shipments P. Ltd (S.C.)), [1980] 124 ITR 1 (Empire Jute Co. Ltd. Vs. Commissioner of Income Tax (S.C.)) and [1989] 177 ITR 377 (Alembic Chemical Works Co. Ltd.) and pointed out to the guiding factor in the matter of considering the claim as to whether the expenditure would fall under the capital or revenue head. Making particular emphasis on the fact that the expenditure incurred was more in the field of indefinite income earning operation and not in the context of strengthening the income earning structure, he submitted that the Tribunal and the Authorities below committed a serious error in looking at the enduring benefit concept for the purpose of rejecting the assessee's case. 10. Referring to the decision reported in [1980] 124 ITR 1 (Empire Jute Co. Ltd. Vs.....
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.... be only a capital expenditure, has been fine-tuned, that even when expenditure was incurred for obtaining advantage of enduring benefit, nonetheless, the same can be taken as one of revenue account. In the decision reported in [1980] 124 ITR 1 (Empire Jute Co. Ltd. Vs. Commissioner of Income Tax (S.C.)), the Apex Court pointed out that the test of enduring benefit is not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. In a transaction of transfer of allotment of loom hours, on the question as to whether it is a revenue expenditure or a capital expenditure, the Apex Court pointed out that a payment may be a revenue payment from the point of view of the payer and a capital payment from the point of view of the receiver and vice versa. Thus whether an expenditure is capital or revenue has to be determined with regard to the nature of the transaction and other relevant factors. Referring to the decision reported in [1965] 58 ITR 241 (PC) (Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd.), the Apex Court pointed out that "there may be cases where expenditure, even if ....
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.... operating the profit-earning apparatus and was clearly in the nature of revenue expenditure. " 16. Thus the question as to whether an expenditure is revenue or not has to be seen from the context of an expenditure forming "part of the cost of the income-earning machine or structure" as opposed to part of "the cost of performing the income-earning operations". -- [1971] 82 ITR 902 (CIT Vs. Coal Shipments P. Ltd. (S.C.). 17. Thus, the consistent guiding principles in matters of understanding an expenditure as a capital or revenue, as held by the Apex Court, is to find out the aim and object of the expenditure and the commercial necessities of making such an expenditure. The question has to be considered in the background of the facts of each case, that "the idea of "once for all" payment and "enduring benefit" are not to be treated as something akin to statutory conditions; nor are the notions of "capital" or "revenue" a judicial fetish. " - [1989] 177 ITR 377 (Alembic Chemical Works Co. Ltd.). 18. Going by the above-said principle, if one looks at the decision reported in [1991] 191 ITR 249 (Chelpark Company Ltd. Vs. Commissioner of Income Tax), one may f....
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....nd Chelpark Company Ltd. (supra) before the Hon'ble Jurisdictional High Court in the case of Carborandum Universal Limited v. JCIT (supra). However, by considering the judgement of the Hon'ble Apex Court in the case of CIT v. Coal Shipments P. Ltd. (supra), the Hon'ble High Court has observed that the payment was in respect of the performing of the business of the assessee, held that the expenditure is only on revenue account and not on capital account. Respectfully following the above decision of the Hon'ble Jurisdictional High Court in the case of Carborandum Universal Limited v. JCIT (supra), we find no infirmity in the order passed by the ld. CIT(A) for both assessment years 2006-07 and 2007-08 and thus, the ground raised by the Revenue is dismissed. 17. The next ground raised in the appeal of the assessee for the assessment year 2005-06 is that the ld. CIT(A) has erred in deleting the repairs in the form of renovation to building. 17.1 The assessee has incurred a sum of Rs..60,35,328/- towards repairs in the form of renovation to building and claimed the same as revenue expenses. It was the submission of the assessee that the assessee company has not derived any benefit ....
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....r a relatively short period of time. Any repair and renovation work carried on in a building cannot long lost and after short period again such repair/renovation work has to be carried out, otherwise, the building can be ruined. The case law relied on by the Assessing Officer as well as the ld. DR in the case of CIT v. Saravana Spinning Mills P. Ltd. (supra), the assessee who engaged in the manufacture of yarn, spent amounts for replacement of ring frames, which had worn out. When the assessee has claimed it under current repairs within the meaning of section 31(i) of the Act, the Hon'ble Supreme Court has observed that the replacement of the ring frame constituted substitution of an old asset by a new asset and therefore, the expenditure incurred by the assessee did not fall within the meaning of "current repairs" in section 31(i) of the Act. However, in the instant case, the assessee has not acquired or created any new asset to enhance the income of the assessee. Therefore, the case law relied on by the ld. DR has no application to the facts of the case. 17.6 In the case of CIT v. Ooty Dasaprakash (supra), the Hon'ble Madras High Court has held that the expenditure was incurre....
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.... income of the assessee. 18.2 On appeal, by following the decision in the case of Gotan Lime Syndicate v. CIT 59 ITR 718 (SC), the ld. CIT(A) allowed the issue in favour of the assessee. 18.3 The Revenue is in appeal against the order of the ld. CIT(A). The ld. DR relied on the decision in the case of Enterprising Enterprises v. CIT 293 ITR 437 (SC) and supported the order of the Assessing Officer. 18.4 We have heard both sides, perused the materials on record and gone through the orders of authorities below. By following the decision in the case of Gotan Lime Syndicate v. CIT (supra) the ld. CIT(A) allowed the ground raised by the assessee, wherein the Hon'ble Supreme Court has observed as under: "The appellant firm, which carried on the business of manufacturing from limestone, was granted, under a lease dated March 4, 1949, from the Government of Jodhpur, the right to excavate limestone in certain areas. The lease expired on July 14, 1952, but it was extended by the Government for a short periods. Pursuant to a policy adopted by the Government, the Rajpramukh of Rajasthan sanctioned 15 sq. miles of lime deposits to the appellant on October 4, 1954, on the terms....
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....o be excavated or extracted: the more you take the more royalty you pay. The minimum payment or the dead rent also has the same characteristic, i.e., it is an advance payment in respect of a certain amount of raw material to be excavated. ABDUL KAYOOM V. COMMISSIONER OF INCOME-TAX [1962)44 LT.R. 689) (S.C.) and PINOL INDUSTRIES LTD. V. COMMISSIONER OF INCOME-TAX [1960] 40 LT.R. 67 (S.C.) distinguished. None of the tests laid down in the various authorities to distinguish between revenue expenditure and capital expenditure is exhaustive or universal. Each case must depend on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter entire aspect. In deciding such cases one should avoid the temptation to decide by matching the colour of one case against the colour of another. ABDUL KAYOOM V. COMMISSIONER OF INCOME-TAX [1962] 44 LT.R. 689 (S.C.) followed. It is not the law in every case, that if an enduring advantage is obtained the expenditure for securing it must be treated as capital expenditure, for the ordinary case, the cost of the material worked up in a manufactory is....