TaxTMI 
TaxTMI 
2025 (3) TMI 1001
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....ght in allowing 100% depreciation to fly ash silo treating it as a pollution control equipment? 4.Whether in the facts and circumstances of the case, the Tribunal was right in treating the amount adjusted by IFCI from the new loan sanctioned by it towards interest payable on earlier loans as interest actually paid by the assessee within the time stipulated under Section 43AB? 5.Whether in the facts and circumstances of the case, the Tribunal was right in holding that excise duty, customs duty, windmill power receipts etc. do not form part of the total turnover for the purpose of calculating the benefit u/s. 80HHC? 6.Whether in the facts and circumstances of the case, the Tribunal was right in granting full depreciation on the dumpers even though there was no evidence adduced that they had used it for more than 180 days, or even received the same in their site prior to 180 days?' 2. We have heard Mr.Narayanaswamy, learned Senior Standing Counsel appearing for the Income Tax Department/appellant and Mr.P.J.Rishikesh, learned counsel appearing for the assessee/respondent. Question of law No.1:.Whether in the facts and circumstances of the case, the Tribunal was right in holdin....
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....ft to the experts in that field. This decision relates to deduction of tax at source by that assessee in the context of interconnect charges/access/port charges to BSNL. 9. The matter was highly technical in nature, and adjudication of the tax dispute called analysis or the nature of services rendered by the payee. It is in that context that the Supreme Court had directed the CBDT to issue directions to all officers that, in matters requiring an understanding of technology, the Department need not proceed solely on the basis of the records available with officers but can avail the assistance of technical experts. 10. They note that with the emergence of our country as part of BRICS and with the surge in technological advancement, one must take benefit of the available technology including human resources. Their directions are as follows: Before concluding, we are directing CBDT to issue directions to all its officers, that in such cases, the Department need not proceed only by the contracts placed before the officers. With the emergence of our country as one of the BRIC countries and with the technological advancement matters such as present one will keep on recurring and hence....
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.... 377 (SC)] xiii)CIT vs. Jagatjit Indus. Ltd. [241 ITR 556 (Del.)] xiv) CIT vs. Hindustan Times Ltd. [241 ITR 509 (Del.)] xv) CIT vs. Steel Complex Ltd. [238 ITR 1054 (Ker.)] xvi) CIT vs. Asher Textiles Ltd. [240 ITR 483 (Mds.)] 14. The Tribunal has noted the position that what was replaced was a pneumatic conveying system. The system that replaced the old system ie., the BBE, is pollution free and reduces the consumption of electricity. To be noted, these finding emanate from the material available on record before the authorities in support of the position that the shift from pneumatic conveyer to BBE, was for power conservation and elimination of pollution. 15. Mr.Narayanaswamy has cited the following cases: i) Commissioner of Income Tax vs. Sri Mangayarkarasi Mills (P) Ltd. [(2009) 315 ITR 0114 (SC)] ii) Commissioner of Income Tax vs. Sarangpur Cotton Mfg. Co. Ltd. [(2017) 393 ITR 0108 (SC)] iii) Indore Municipal Corporation vs. Commissioner of Income Tax [(2001) 247 ITR 0803 (SC)] iv) North Karnataka Expressway Ltd. vs. The Commissioner of Income Tax-10 [(2015) 372 ITR 145 (Bombay)] v) Moradabad Toll Road Co. Ltd. vs. Assistant Commissioner of Income Tax [(2....
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....anvassed by the assessee before the lower authorities with all supporting material. 19. We have heard both learned counsel and taken note of the cases cited by them. The claim of expenditure in regard to replacement of machinery has been a burning issue in the State of Tamil Nadu. Claims were made either under Section 31 relating to 'current repairs' or in terms of Section 37 of the Act being a claim of expenditure. 20. In Saravana Spinning Mills (P) Limited (Foot Note Supra (33)) and Sri Mangayarkarasi Mills Limited (Foot Note Supra (19)), the Supreme Court considered claims under Section 31 of the Act. The Bench adumbrates the components of a mill and the processes involved therein, stating at paragraph 10, as follows: 10. From the above facts, it is clear that Blow Room, Carding, Combing, Drawing, Roving, Spinning and Winding are different Departments/Divisions in a textile mill. In each Department/Division there are several machines. Each of the above Departments/Divisions perform different functions and the functioning of each Department/Division produces a different Output which is carried forward to the next Department/Division having different machines therein. For exam....
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....crap (raw material) is put in and what comes out is steel or iron or aluminium. Another example, in the case of "Pasteurization Plant" we have three chambers and Ducts. In the first milk is collected, in the second it is heated and in the third it is cooled. Duct carries hot and cold water. The raw material is Raw Milk, the end product is the pasteurized milk. In the Heat chamber there is the heater. In the Cooling Chamber we have cooling plant which has a concept similar to air-condition plant. Such a process is one integrated process. Therefore, the Tribunal and the High Court erred in holding that the manufacturing process in the textile mill is one continuous integrated process. 21. A distinction is made between the processes in a spinning mill vis a vis and those in a steel industry or air conditioning plant for the reason that, in a spinning mill, each Department deploys different items of machineries and hence the replacement of machines in a particular department would come within the connotation of the term 'current repairs'. 22. We are in this case concerned with a cement manufacturing plant and the claim is not under Section 31 but under Section 37 of the Act. In Sarav....
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....not attract Section 31(i) even though the expenditure is revenue in nature. Therefore, the basic test, which had not been applied, in the present case, by CIT(A), Tribunal and the High Court, is whether the expenditure came within the expression "current repairs". Instead all the three authorities proceeded on the footing that since the expenditure was revenue it constituted "current repairs". It is for this reason that we have interfered with the concurrent findings given by CIT(A), Tribunal and the High Court. 23. A claim under Section 37 in regard to replacement of machinery has been looked into by a subsequent judgment of the Supreme Court in CIT V. Sri Mangayarkarasi Mills Limited (Foot Note Supra (19)). At paragraph 14 of that decision, and referring to the earlier decision in Saravana Spinning Mills (Foot Note Supra (33)) the Bench states as follows: 14. The first issue that needs to be resolved is whether each machine in a textile mill is an independent item or merely a part of a complete spinning mill, which only together are capable of manufacture, and there is no intermediate marketable product produced. In our view, this issue has been satisfactorily answered by the ....
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....oduction capacity were unavailable on record. The matter was hence remitted to the Commissioner of Income Tax (Appeals) for denovo consideration, including specifically on the point relating to production capacity, and the assessee was given liberty to place the necessary details before the authority. 28. We are given to understand that several appeals touching on the same question have been remitted to the first appellate authority by this Court and Mr.Narayanaswamy confirms that the Department has accepted the position that increase or otherwise in production capacity would be an important and critical parameter to determine whether the expenditure incurred on replacement of machinery is revenue or capital. 29. The Department, he says, has accepted the claim under Section 37 as allowable, in circumstances where the assessee has been able to demonstrate that the production capacity has remained static, both pre and post replacement of machinery. 30. In view of this admitted position, we propose to decide this issue, based on the factual position that the production capacity has not increased. In fact, the Departmental Representative accede to the fact that the production capaci....
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.... assessee but accepted. Hence, and in the interests of consistency, this substantial question of law is answered in favour of the revenue and against the assessee. Question of Law No.3: Whether in the facts and circumstances of the case, the Tribunal was right in allowing 100% depreciation to fly ash silo treating it as a pollution control equipment? 36. The assessee had claimed 100% depreciation on a 'Fly Ash handling system'. The depreciation claimed was a sum of Rs. 2, 78, 90, 013/- and the relevant Entry in the depreciation table in Appendix I of the Income Tax Rules, 1962 in terms of Section 2(iv)(e) of the Act reading as follows: III. MACHINERY AND PLANT 2........... (iv) Air pollution control equipments, being-. . . . '(e) Ash handling system and evacuation system'. 37. The assessing authority was of the view that the above Entry required an eligible assessee to both 'handle' fly ash, meaning to contain it, as well as to evacuate it in a proper fashion. In the assessee's case, fly ash is an input for the manufacture of cement. The fly ash was being stored in large silos or storage tanks and was being channelised from those tanks into the processes of cement m....
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....ses but has only been used in production. We do not see the merit in this objection as we are of the view that the condition concerning 'evacuation' would stand fulfilled by any measure of ensuring that the fly ash has been effectively used. 44. The mode and manner of disposal is irrelevant so far as it is efficient and achieves the object of removal from the atmosphere. Needless to say, the use of fly ash in the manufacturing process has effectively rid the premises of the pollutant, and in a gainful manner. We wonder what could be a better mode of evacuation. We hence agree with the conclusions of the Tribunal that the method followed by the Assessee for containment and use of fly ash effectively achieves the twin objects of both handling/containing the fly ash as well as evacuates it from the premises by channelising it into the production process. 45. For that matter, any effective methodology/machinery that is followed/installed by an assessee to contain the dispersion of fly ash would satisfy the object and intendment of this requirement. The Assessee is entitled for the grant of 100% depreciation in this regard. This substantial question of law is answered in favour of the....
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....n. This implies actual out go of money from the assessee to the financial institution. In this case, there is only adjustment of the interest payable. As allowance is based only on actual payment and not on the basis of adjustment the claim is disallowed. If the intention of the legislative was to include adjustments of the type claimed by the assessee the term actually paid would not have been used. In view of the above, the claim is not accepted.' 49. The CIT(A) sustains the disallowance, as against which the assessee filed an appeal before the Tribunal. The Tribunal has reversed the orders of the lower authorities returning a finding that the claim was in order, since the amount had actually been paid by the assessee. 50. We are unable to glean any support for the above conclusion by the Tribunal from the records. In fact, the findings of the assessing authority are contrary insofar as the assessee was specifically asked to provide materials in support of the submission that the loan had been disbursed, which it had been unable to do. We too sought such a clarification from the assessee requiring it to produce some material, either by way of bank statement or letter of corro....
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....Explanation to Section 80HHC, therefore, clearly shows that export turnover did not include excise duty and sales tax. The export turnover is the numerator in the above formula whereas the total turnover is the denominator. The above formula has been prescribed to arrive at the profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty, cannot form part of the total turnover. In fact, if the denominator was to include the above two items and if the numerator excluded the above two items then the formula would become unworkable. In the circumstances, we are of the view that in order to ascertain the export profits, the above two items cannot be introduced to inflate the total turnover artificially in order to reduce the benefit which an assessee is entitled to. Ultimately, the object of Section 80HHC is required to be kept in mind in order to encourage exports. The Legislature has applied the above formula in order to find out the profits derived from the exports. In this connection, Section 80HHC(1) may also be noticed. Under Section 80HHC(1), it is, inter alia, provided that where an assessee is engaged in the business of exports of any good....
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..... Hence, we do not find any merit in these appeals. 54. Hence, this question of law is answered in favour of the assessee and against the revenue. Question No.6:Whether in the facts and circumstances of the case, the Tribunal was right in granting full depreciation on the dumpers even though there was no evidence adduced that they had used it for more than 180 days, or even received the same in their site prior to 180 days?' 55. The assessee had claimed depreciation of 25% on dumpers purchased from Bharath Earth Movers Limited (BEML), Bangalore. The assessing authority had noted that both the dumpers had been dispatched from BEML only on 29th of September, 1995 as established by the gate passes produced. 56. Having regard to the distance that the dumpers had to travel to reach from Bangalore to reach the assessee's factory at Jayanthipuram, the claim of the assessee for full depreciation was rejected and depreciation was granted for part of the year at 12.5%. The order of the assessing authority was confirmed by the CIT(A) as well. In second appeal, the Tribunal reversed the orders of the lower authorities giving the benefit of doubt to the assessee. 57. A categoric findi....