THE LAKSHMI MILLS COMPANY LIMITED,COIMBATORE vs. ACIT CORPORATE CIRCLE - 2, COIMBATORE

आयकर अपीलीय अिधकरण “ए” ायपीठ चेई म।
IN THE INCOME TAX APPELLATE TRIBUNAL
“A” BENCH, CHENNAI

माननीय ी एबी टी. वक , ाियक सद" एवं
माननीय ी मनोज कुमार अ'वाल ,लेखा सद" के सम)।
BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकरअपील सं./ ITA No.364/Chny/2024
(िनधा*रण वष* / Assessment Year: 2014-15)
The Lakshmi Mills Company Ltd.
686, Avanashi Road,
Coimbatore -641 037. बनाम/
Vs.
ACIT
Corporate Circle-2,
Coimbatore.
थायीलेखासं./जीआइआरसं./PAN/TAN No. AAACT-7564-R
(अपीलाथ/Appellant)
:
( थ / Respondent)

अपीलाथकीओरसे/ Appellant by :
Shri T. Banusekar (Advocate) – Ld. AR
थकीओरसे/Respondent by :
Shri Nilay Baran Som (CIT) -Ld. DR

सुनवाईकीतारीख/Date of Hearing
:
31-12-2024
घोषणाकीतारीख /Date of Pronouncement
:
15-01-2025
आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member)

As is evident, the issues that fall for our consideration are - (i)
Disallowance of Dedicated Power Feeder Line expenses for Rs.263.88
Lacs; (ii) Disallowance of repairs for modernization expenses for Rs.296.46 Lacs; (iii) Disallowance of Prior period electricity charges for Rs.82.85 Lacs under normal provision and while computing Book Profit;
(iv) Inadmissible expenses for Rs.14.60 Lacs; (v) Inadmissible expenses for Rs.18.91 Lacs.
2. The Ld. AR advanced arguments and referred to various documents to support the case of the assessee. Reliance has been placed on various case laws, the copies of which have been placed on record. The Ld. CIT-DR also advanced arguments supporting the orders of lower authorities. Having heard rival submissions and upon perusal of case records, the impugned issues are adjudicated as under. The assessee being resident corporate assessee is stated to be engaged in manufacturing activities.
3. Disallowance of Dedicated Power Feeder Line expenses
3.1 It was submitted that due to heavy load shedding power cut and restriction to use power, the HT consumers were not able to get power from TANGEDCO which was required to achieve 100% efficiency in installed capacity. Accordingly, the assessee obtained feeder facility from TANGEDCO for Rs.263.88 Lacs and dedicated feeder line was installed with the approval of TANGEDCO. Though the cost was incurred by the assessee, the ownership thereof would be with TANGEDCO. The Ld. AO held that the expenditure was to be capitalized since the assessee got an advantage of enduring nature with the introduction of the technology. Accordingly, depreciation of 15% was allowed and the 4

remaining amount as claimed by the assessee for Rs.224.30 Lacs as revenue expenditure was disallowed.
3.2 The Ld. CIT(A) further held that since the feeder line was owned by TANGEDCO, the assessee would have no right to claim depreciation on such installation since the assessee was not the owner thereof. The Ld.
AO was directed to verify the aforesaid fact and disallow the depreciation also. In effect, the directions of Ld. CIT(A) potentially enhanced the assessment. Aggrieved, the assessee is in further appeal before us.
3.3 It is undisputed fact that the assessee does not own the aforesaid feeder line. The same is also evident from the letter issued by Tamilnadu
Power Distribution Corporation Ltd. as placed on record. It has been clarified therein that TANGEDCO reserves every right to use the supply line and equipments for supply to other consumers. The Board is the owner of the property and the Board has the liberty to connect to any line, if required. It is settled position of law that to claim depreciation, it is essential that the assessee should be the owner of the capital asset which is not the case here. At the same time, it could be seen that the expenditure has been incurred by the assessee to conduct its business more efficiently. The advantage may be enduring in nature, nevertheless, the same was intended to enable the assessee to carry on its business more efficiently and profitably leaving the fixed capital untouched. Therefore, the expenditure would be revenue expenditure.
This ratio has been laid down by Hon’ble High Court of Delhi in the case of CIT vs. Saw Pipes Ltd. (300 ITR 35) wherein Hon’ble Court has followed the decision of Hon’ble Apex Court in CIT vs. Madras Auto is the decision of Hon’ble High Court of Punjab & Haryana in CIT vs.
Lakhani Rubber Works. These case laws have similar facts.
Respectfully following the same, we would hold that the entire expenditure would be allowable as revenue expenditure. The Ld. AO is directed to allow the same in full as revenue expenditure and reverse the depreciation as allowed to the assessee on this expenditure. The corresponding ground stand allowed.
4. Disallowance of repairs for modernization expenses
4.1 This expenditure was incurred by the assessee to install Elite compact Spinning system. The purpose of the compact spinning system was to arrange the fibers in a completely parallel and closed position before twists was imparted. Accordingly, the expenditure was held to be incurred for installing a new technology system to improve the final product. The assessee got enduring benefit. Accordingly, depreciation was allowed against the same and remaining amount of Rs.274.22 Lacs was disallowed. This issue, though contested by the assessee, remained to the adjudicated by Ld. CIT(A).
4.2 Considering the fact that this issue has not been adjudicated by Ld.
CIT(A), we remit the same back to the file of Ld. CIT(A) for adjudication.
The corresponding grounds stand allowed for statistical purposes.
5. Disallowance of Prior period electricity charges under normal provisions as well as while computing book profits
5.1 Based on audit objections of TNEB, a demand of Rs.185.42 Lacs was raised which pertained to periods from 2011 to 2013. The assessee contested the same. The assessee, vide letter dated 28-04-2014, determined that the amount of Rs.82.85 Lacs would be payable. Since the demand was raised against the assessee and it crystallized at the 6

time of finalization of accounts, provisions thereof was made in the books of accounts. This payment was made subsequently. The Ld. AO stated that the actual liability was created only on 28-04-2014 and it pertained to AY 2015-16. As on 31-03-2014, it was unascertained liability only and not a crystallized one. Accordingly, the same was disallowed under normal income as well as while computing Book Profits u/s 115JB.
5.2 The Ld. CIT(A) confirmed the stand of Ld. AO on the ground that the demand was raised by TNEB only on 16-04-2014 and therefore, the liability would pertain to financial year 2014-15. Aggrieved, the assessee is in further appeal before us.
5.3 Upon perusal of documents on record, it could be seen that a demand of Rs.185.42 Lacs has been raised against the assessee for excess power drawn during the period from June, 2011 to May, 2013. The said demand has been reduced to Rs.132.06 Lacs and the assessee has been directed to pay the same. The assessee has filed petition with appropriate court in MP No.2 of WP 31255/2014 and Hon’ble High Court granted conditional stay on 28-11-2014 with 30%
deposit out of outstanding demand of Rs.132.06 Lacs. The assessee has deposited the same. It has created provision in the books of account for remaining amount of Rs.82.85 Lacs on the ground that it is ascertained liability. During hearing, Ld. AR has stated that the matter is still sub-judiced before Hon’ble High Court. Considering the same, we restore this issue back to the file of Ld. CIT(A) for fresh adjudication by considering the latest position of demand. The corresponding grounds as raised by the assessee stand allowed for statistical purposes.

चे2ई Chennai; िदनांक Dated : 15-01-2025
DS

आदेशकीHितिलिपअ'ेिषत/Copy of the Order forwarded to :
1. अपीलाथ/Appellant
2. थ/Respondent
3. आयकरआयु;/CIT Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाड@फाईल/GF