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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SH. O.P. KANT
Date of hearing 26.12.2018 Date of pronouncement 26.12.2018 ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 02/09/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-I, New Delhi [in short the ‘Ld. CIT(A)’] for assessment year 2011-12, raising following grounds:
1. Ld. CIT(Appeals) without giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in confirming the action of Assessing Officer in treating the revenue expenditure of Rs.12,77,450/- incurred by assessee company for repair and maintenance of plant and machinery, as capital expenditure and accordingly is not justified in confirming Rs.11,01,133/- after allowing the depreciation of Rs.1,76,317/-, in the total income of assessee.
2. Assessee has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.
2. The briefly stated facts of the case are that the assessee was engaged in the business of manufacturing and selling glass bulb shall, glass tube and trading of glass bangles. In the assessment completed on 31/01/2014 under section 143(3) of the Income Tax Act, 1961 (in short “the Act”), the Assessing Officer held following items out of the machinery repair and maintenance expenses, as capital expenditure, and after allowing the depreciation of the same, disallowed the balance amount of Rs.11,01,133/-:
Name Bill no./date Description of goods Amount Net Cascate 008/13.04.10 Modutrol Motor longwith Rs.6,63,450/- Automation P. GE Fanuc Make PLC Ltd. System Sandeep 058/15.05.10 N-45, Grade Earth roller Rs.2,60,000/- Mehndiratta & 007/17.06.10 Scrapper Conveyer Rs.1,50,000/- Assciates Industrial 067/11.03.11 IEPL, Air Cooling Plant Rs.1,02,000/- Envorotech Pvt. Ltd. Industrial 069/ IEPL, Air Cooling Plant Rs.1,02,000/- Envirotech Pvt. Ltd. Total Rs.12,77,450/- 2.1 The Ld. CIT(A) also upheld the disallowance holding that items of expenditure are independent machineries and thus capital in nature. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
Though the assessee was notified the date of hearing by way of a notice issued through registered post, however, neither anyone attended on behalf of the assessee nor any adjournment was filed. In view of the non-compliance of the notice for hearing, we were of the opinion that the assessee was not interested in prosecuting the appeal, thus, same was heard ex parte qua the assessee. We have also noted that none attended in the first appellate proceedings before the Ld. CIT(A) despite more than five opportunities granted.
The Ld. DR relied on the finding of the Ld. CIT(A) and submitted that the items of expenditure are clearly in the nature of capital expenditure, and thus the order of the Ld. CIT(A) might be upheld. 5. We have heard the submission of the Ld. DR and perused the order of the authorities below. We find that the expenses in question have been incurred for purchase of machinery. The finding of the Ld. CIT(A) on the issue-in-dispute are reproduced as under : “……………..From the description of the items noted above, it is seen that these are independent machines and same cannot be termed as part of the machines. Therefore, the purchase of these items/machines were capital in nature and the same were rightly treated by the assessing Officer as capital expenditure. The Assessing Officer has allowed depreciation on the purchase of these machines on the basis of the period of usage and after allowing depreciation an amount of Rs. 11,01,133/- was added to the total income of the appellant. Therefore, the disallowance made by the Assessing Officer was justified and same is confirmed.”
The Ld. CIT(A) has concluded that these machineries are independent and cannot be termed as part of any other machines. We note that Hon’ble Supreme Court in the case of CIT Vs. Sarvana Spinning Mills (P) Ltd., (2007) 7 SCC 298 held that each machine may be a part of integrated process of manufacturing of textile mill and is integrally connected with the other machine in the mill for production of the final product, but this interconnection does not take away the independent identity and distinctive function of each machine and thus each machine in a textile mill should be treated independently as such and not as a mere part of an entire composite machinery of the spinning mill. In the instant case, the machineries in question list above in para-2 are evidently having independent identity and capable of functioning distinctly, thus, same cannot be treated as “current repairs” under section 31 of the Act. The order of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly we uphold the same. The grounds of the appeal are accordingly dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 26th December, 2018.