SHAHABAD COOP. SUGAR MILLS LTD. vs. CIT, KARNAL

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ITA/584/2009HC Punjab & HaryanaPHHC01084707200930 November 2009Author: MR. JUSTICE SATISH KUMAR MITTAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose from the order of the ITAT. Regarding the expenditure of Rs. 1,15,000/-, the Court noted that the Assessing Officer, CIT(A), and ITAT had concurrently found that the expenditure was on account of the installation of machinery (for 'multitudes' and 'S.S. Polly baffle Type') and not for repair and maintenance, as claimed by the assessee. The assessee had failed to provide a satisfactory explanation to demonstrate that the expenditure was indeed for repair and maintenance. Consequently, the ITAT's affirmation of the disallowance was upheld. The Court did not explicitly mention the labour charges issue separately but subsumed it within the broader finding regarding installation expenses.

What were the facts?

The assessee, The Shahabad Cooperative Sugar Mills Ltd., filed an appeal under Section 260-A of the Income Tax Act, 1961, against the order dated 25.05.2009 passed by the Income Tax Appellate Tribunal (ITAT), Bench A, Chandigarh. The appeal pertained to assessment year 2005-06. The Assessing Officer had disallowed an expenditure of Rs. 1,15,000/- claimed as revenue expenditure on account of installation of machinery, treating it as capital expenditure. The Commissioner of Income Tax (Appeals) and the ITAT affirmed this finding. The expenditure was charged to the erection/commission head for 'multitudes' (Rs. 1 lac) and 'S.S. Polly baffle Type' (Rs. 15,000/-). The assessee failed to explain how this expenditure constituted repair and maintenance rather than installation.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the ITAT was justified in rejecting the claim for deduction of labour charges as revenue/business expenditure under Section 37(1) of the Act, despite documentary evidence. 2. Whether the ITAT was justified in rejecting the claim for deduction of erection and commissioning of machinery charges as business expenditure, despite documentary evidence. Assessee's Contentions: The assessee argued that the labour charges and erection/commissioning of machinery charges were revenue/business expenditures allowable under Section 37(1) of the Act, and that documentary evidence supported this claim. Revenue's Contentions: The revenue did not present specific contentions in the judgment, but the Assessing Officer, CIT(A), and ITAT held that the expenditure was on account of installation of machinery and thus capital in nature, not repair and maintenance. The assessee failed to provide a satisfactory explanation to counter this.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 260-A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 584 of 2009 DATE OF DECISION : 30.11.2009 The Shahabad Cooperative Sugar Mills Ltd. .... APPELLANT Versus CIT, Aayakar Bhawan, Karnal ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present: Mr. Rajiv Sharma, Advocate, for the appellant-assessee. SATISH KUMAR MITTAL , J. ( Oral ) The assessee has filed this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), against the order dated 25.5.2009, passed by the Income Tax Appellate Tribunal, Bench A, Chandigarh (hereinafter referred to as `the ITAT') in ITA No. 21/Chd/2009, pertaining to the assessment year 2005-06, raising the following substantial questions of law :- (i) Whether the ITAT was not justified in rejecting the claim of deduction being revenue/business expenditure on account of labour charges ignoring the documentary evidence on record being allowable as per the express provisions of law enunciated u/s 37 (1) of the Act? (ii) Whether the ITAT was not justified in rejecting the claim of deduction being business expenditure on account of erection and commissioning of machinery charges ignoring the documentary evidence on record? ITA No. 584 of 2009 -2- We have heard learned counsel for the appellant and have gone

through the impugned order.

In this case, the Assessing Officer disallowed the expenditure of Rs. 1,15,000/- on account of installation of machinery as revenue expenditure and the said expenditure was treated as capital expenditure. The Commissioner of Income Tax (Appeals), Karnal [hereinafter referred to as `the CIT (A)] as well as the ITAT have affirmed the finding of the Assessing Officer that the said expenditure was not on account of repair and maintenance, as claimed by the assessee, but the same was on account of installation of machinery. It has been held that as per the details filed, the expenditure was charged to erection/commission head on account of multitudes supplied Rs. 1 lac and S.S. Polly baffle Type Rs. 15,000/-. It is stated that in reply, the assessee could not explain as to how the said expenditure is on account of repair and maintenance and not on account of installation of machinery.

In view of the aforesaid finding of fact recorded by the CIT (A) as well as the ITAT, we are of the opinion that no substantial question of law arises from the order of the ITAT.

Dismissed. ( SATISH KUMAR MITTAL ) JUDGE November 30, 2009 ( MEHINDER SINGH SULLAR ) ndj JUDGE

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