THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD vs. NIRMA LIMITED

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 346 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD Versus NIRMA LIMITED ========================================================== Appearance: M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 01/08/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. The revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 [for short ‘the Act, 1961’] being aggrieved by the order dated 24.02.2022 passed by the Income Tax Appellate Tribunal, “D” Bench, Ahmedabad [for short ‘the

Tribunal’]

ITA

No. 1187/AHD/2013/A.Y.2000-01. Page 1 of 6

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 2. Following substantial question of law is proposed: “Whether on the facts and in the circumstances of the case, and in law, the Appellate Tribunal has erred in holding

the

expenses

Rs. 70,28,41,657/- incurred for setting up of Soda Ash Project and Lab Fronted Project as revenue in nature?” 3. It is the case of the revenue that the assessee-Company in the computation of income tax treated the expenses of Rs. 70,28,41,657/- as revenue expenditure but the Assessing Officer, while framing the assessment under section 143(3) read with section 254 of the Act, 1961, considered the same as capital expenditure. 4. Being aggrieved, the assessee preferred an Appeal before the CIT (Appeals). The Page 2 of 6

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 CIT(Appeals) confirmed the order passed by the Assessing Officer. 5. Being aggrieved, the assessee therefore preferred appeal before the Tribunal who, by the impugned order, reversed the order of the CIT (Appeals) by treating the expenses in question as revenue in nature by relying upon the decision of this Court in the case of the assessee reported in 367 ITR 12(Guj.). 6. The Tribunal, while allowing the appeal filed by the assessee, recorded the findings of fact that the proceedings before the Tribunal was in 3rd round of litigation and on the earlier occasion, the Tribunal had set aside the issue pertaining to the claim of the assessee for Soda Ash Project expenses and Lab Page 3 of 6

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 Frontend Project expenses as revenue expenditure as such projects were part of the existing business of the assessee. 7. The Tribunal followed the decision of this Court reported in 367 ITR 12 in the own case of the assessee wherein, this Court has held as under: “9. Having heard the learned counsel for the parties and having perused the documents on record, we notice that the

Commissioner

Income-Tax (Appeals)

and

the

Tribunal concurrently came to the conclusion that there was interconnection, inter- lacing and inter-dependence of the management,

financial

and administrative control of various units of Nirma Limited. It was on this ground, the Tribunal held that the business in question is continuation of the existing business and not a new business. In this context, the decision relied on by the authorities below of this Court in the case of Alembic Glass Industries Ltd (supra) laid down tests for ascertaining whether a business was part of existing business or the assessee was starting a new unit. It was held that Page 4 of 6

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 merely because the unit was coming to a distant point by itself would not mean that it was a new business. 10. If the facts as recorded by the Commissioner of Income tax (Appeals) and the Tribunal can be said to have achieved finality, it would emerge that the assessee through its existing administrative mechanism started a new facility for production of soda ash and had also set up facility for production of a material called “lab” for its captive consumption for the purpose of its existing manufacturing business. It is no doubt that the assessee is engaged in the business of manufacture of soap and the soda ash and “lab” so produced is used by way of captive consumption. When such facts viewed in light of the findings of the Commissioner of Income-Tax (Appeals) and the Tribunal, we have no reason to interfere with the ultimate conclusion. Had it been a case of entirely a new project undertaken by the assessee as canvassed by the counsel for the Revenue, a serious question of claiming pre-operative expenditure of interest by way of revenue expenditure would arise. However, when the authorities below found that it was an expansion of the existing business, applying the tests laid down by this Court in the case of Alembic Glass Industries Ltd (supra) in view of the decision of the Supreme Page 5 of 6

C/TAXAP/346/2022 ORDER DATED: 01/08/2022 Court in the case of Dy. CIT v. Core Health Care Ltd [2008] 298 ITR 194/167 Taxman 206(SC), the fact whether the borrowing is capital or revenue expenditure

would

no consequence.” 8. In view of the above, it cannot be said that the Tribunal has committed any error in allowing the appeal of the assessee holding that the expenses incurred for setting up Soda Ash Project and Lab Frontend Project are revenue in nature. We are therefore of the opinion that no question of law much less any substantial question of law arises proposed or otherwise from the impugned order of the Tribunal. The Appeal is accordingly dismissed. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) JYOTI V. JANI Page 6 of 6