TaxTMI 
TaxTMI 
2025 (3) TMI 1001
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.... 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? 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 N....
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....ing to him, supports the contention that if at all one were to undertake such exercise, it is best left 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 BR....
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....TR 892 (Mds.)] x) CIT vs. Rex Talkies [148 ITR 560 (Ker.)] xi) CIT vs. Madras Auto Services (P) Ltd. [233 ITR 468 (SC.)] xii) Alembic Chemicals Works Co. Ltd. vs. CIT [177 ITR 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....
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....ucts Ltd (Foot Note Supra (36)). On first principles, he submits that there has been no enduring benefit that has been brought about by replacement of the pneumatic system by BBE. The submissions in relation to power efficiency and pollution efficiency are clearly part of the record and there are findings in the order of the lower authorities to show that this view was canvassed 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, ....
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....ferent Segments of production like Blow Room, Carding, Combing, Roving, Winding etc. In the case of a textile mill there is no process whereby raw-material is fed on one end and the finished product comes out at the other end without intervention in between. For example, in the case of continuous Casting Machine in the Steel Industry we have one continuous integrated process under which scrap (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 ....
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....ibunal and the High Court that the expenditure was revenue in nature. We find no merit in this contention. As stated above, even if the expenditure incurred is revenue in nature, still it may not fall in the connotation of the words "current repairs" under Section 31(i) which test has not kept in mind. As held by Chagla C.J. in the case of New Shorrock Spinning and Manufacturing Co. (supra) all repairs do 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 decisi....
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....text of a textile mill and cement production plant. 26. In the event that the replacement had resulted in the production capacity being status quo, evidently, the replacement would be revenue in nature and in an event where the production capacity had stood enhanced, the inference was that the expenditure was capital in nature. 27. In Ramaraju Surgical Cotton Mills (Foot Note Supra (48)) the comparative details of production 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 cla....
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....unal was right in holding that the assessing officer cannot give any finding on the eligibility to benefit of Sec.35(i)(iv), while the matter has been referred to and is pending before the competent authority? 35. This very issue has come up for consideration in T.C.Nos.2632 and 2633 of 2006 and by order dated 09.12.2024, we have decided the question adverse to the assessee following an order of the Tribunal dated 26.12.2002 for AY 1996-97 that has not been agitated by the 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........... ....
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....ned counsel, we are of the considered view that the assessee must succeed. It is true that the entry in question reads 'Ash handling system and evacuation system'. The grant of 100% depreciation is thus for a process that must both contain and evacuate fly ash that pollutes the air. It is nobody's case that the silos installed in the factory do not achieve the purpose of handling/containing the pollutant. 43. The main objection taken by the authorities is that the fly ash has not been disposed outside the premises 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 c....
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....ursed of fresh loan and the letter of the IFCI acceding to the request of the Company furnished along with the return of Income amounted to furnishing of evidence of payment. The issue revolves around the scope of the expression "actually paid". According to the Assessee the extinguishment of liability would amount to actual payment. The Assessee's argument is not accepted for the reason that the adjustment of interest payable cannot be equated with the expression "actually paid". The S.43B also requires the assessee to furnish evidence of payment along with the return. 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 th....
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....ition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This Clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading of the' above two clauses shows that they include anything which has nexus with the sale proceeds. Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds. Further, the meaning of export turnover in Clause (b) of the 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 circu....
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.... in the balance-sheet. In the circumstances, the above two items cannot be included in the total turnover. We prefer this interpretation as it advances the object sought to be achieved by the Legislature. Lastly, we are of the view that sales tax and excise duties are levied under the separate enactments which have different objects. We are concerned with Section 80HHC which is a separate code by itself. Hence, the general definition of the word turnover or the case law dealing with the said definition under the Sales Tax Act which is a State levy, cannot be imported into Section 80HHC of the Income-tax Act. 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 autho....