COMMISSIONER OF INCOME TAX vs. TRIVENI ENGINEERING & INDUSTRIES LTD

Whether Reporters of local papers may be allowed to see the judgment ?

To be referred to the Reporter or not ?

Whether the judgment should be reported in Digest ? BADAR DURREZ AHMED, J 1. These three appeals pertain to the assessment years 1994-95, 1995-96 and 1997-98 arising out of the common order dated 14.02.2008 passed by the Income-tax Appellate Tribunal in ITA Nos. 294 and 295/Del/2003 and ITA No.1961/Del/2004 respectively.

The revenue is aggrieved by the fact that the Income-tax Appellate Tribunal allowed the expenditure incurred by the assessee in connection with the modernization and expansion of, inter alia, its Deoband and Ramkola units by treating the same as expenditure of a revenue nature. The appellant / revenue is further aggrieved by the fact that the tribunal allowed the said expenditure although the assessee, in its books of accounts, had treated the same as capital expenditure. The appellant / revenue has also raised the issue that the tribunal had 2009:DHC:233-DB

The Assessing Officer as well as the Commissioner of Income-tax (Appeals), in each of the three years in question, disallowed the expenditure under the head “administrative expenses” incurred in connection with modernization and expansion of the Deoband and Ramkola units, by holding that the expenditure had been incurred for acquiring a benefit of an enduring nature and consequently it was capital in nature. The Assessing Officer had also noted that the expenditure had been capitalized in the books of accounts maintained by the assessee and, therefore, the assessee was asked to explain as to why the said expenditure should not be treated as capital in nature. The assessee offered the explanation that the expenditure had been incurred to improve the profitability of the company inasmuch as, after such expenditure, the assessee would be in a position to crush more sugarcane in its Deoband and Ramkola units. The Assessing Officer, however, did not accept this explanation and capitalized the administrative expenditure and allowed depreciation thereon @ 25%. The Commissioner of Income-tax (Appeals) confirmed the views of the Assessing Officer.

The tribunal noted the arguments of the learned counsel for 2009:DHC:233-DB

After hearing the arguments on behalf of the assessee as well as the revenue, the tribunal observed that there was no dispute about the fact that the assessee had been carrying on its sugar business in a number of units, including its units at Deoband and Ramkola. The assessee had modernized these two units with a view to achieve a greater capacity. In this process, certain capital expenditure was incurred and administrative expenses had been allocated on an estimate basis towards the renovation and modernization of the said units. The tribunal held that though the expenses had been capitalized in the books of accounts of the assessee, this would not be conclusive of the nature as to whether the expenditure was of a capital nature or a revenue nature. The tribunal followed the decision of the Supreme Court in the case of The Kedarnath Jute Manufacturing Co. Limited v. The Commissioner of Income Tax (Central), Calcutta : 82 ITR 363 2009:DHC:233-DB

In these circumstances, we feel that no interference with the impugned order of the tribunal is called for. The tribunal has correctly 2009:DHC:233-DB

No substantial question of law arises for our consideration. The appeals are dismissed.