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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER: These are appeals filed by the assessee directed against different orders of ld. Commissioner of Income Tax (Appeals)-1,
ITA No. 1820 & 1821/2019 :- 2 -:
Madurai, (‘CIT(A)’ for short) dated 30.04.2019 for the Assessment Years 2010-2011 and 2014-2015.
Since, the identical facts and issues are involved in these appeals, we proceed to dispose the same vide this common order.
For the sake of convenience and clarity the facts relevant to the appeal in for assessment year 2010-11 are stated herein.
The Assessee raised the following grounds of appeal:
‘’ 1) The Deputy Commissioner and the .CIT(A) ought to have held that the facts of the case ‘ Renu Sugar Power Co. Ltd. ‘ reported in 298 ITR page 94 is identical to that of your appellant.
2) The Deputy Commissioner and the CIT(A) had relied on the decision in ‘ Saravana Spinning Mills ‘ case which was considered in the Renu Sugar Power Co. Ltd. ‘ case and noted that the facts are entirely different. It is to be noted that no new asset came into existence or no new advantage was obtained. It is incurred to ‘preserve and maintain ‘ the asset that is already in existence. In the invoices too they had stated that they had replaced generator and not wind mill. Generator is only a part of the Wind Mill. Installed capacity is not increased. The replacement has not resulted in increase in capacity of the windmill. If the Productive unit remains the same but a part of it which has become unsuitable for its use is replaced by something which makes it possible for the existing set up to function efficiently, the cost incurred as such replacement would be revenue expenditure (100 ITR page 155).
3) It is obvious that if the expenditure of 92,41,200 I- is to be capitalised then the sum of 16,24,157 I- already credited as income should first be reduced from the total income returned and then this ITA No. 1820 & 1821/2019 :- 3 -: sum should be deducted from the cost of 92,41,200 I-. If this sum of 16,24,157 I- is not deducted from the total income it will amount to double taxation i.e., the insurance claim received once as income and again as it is deducted from the cost to calculate the depreciation allowable. Double Taxation is Unlawful. lhe authorities under the Act are under an obligation to act in accordance with law. If an assessee, under a mistake, misconception or not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. (367 ITR page 498 (SC).
4) A note at the bottom of the letter received from the insurance company made by the staff of your appellant cannot decide the issue whether it is capital expenditure or revenue expenditure.
5) The CIT(A) is under a misconception that the claim of the Authorised representative that the sum of 16,24,157- being the insurance claim should be reduced from the income returned is factually incorrect. It is a fact that the insurance claim of 16,24,157- is credited to the plant and machinery maintenance account. It goes without saying that the insurance claim received is already treated as income in the books of accounts and it is factually correct.
The brief facts of the case are as under:
The appellant namely M/s. Pandian Chemicals Limited is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturer of Chlorate & Generation of power from windmill. The return of income for the AY 2010-2011 was filed on 27.09.2010 disclosing total income of �2,58,83,550/- and the same was revised on 12.10.2010 at total income of �2,44,57,950/-. Against the said return of income, the original assessment was completed u/s.143(3) of the Act vide order
ITA No. 1820 & 1821/2019 :- 4 -: dated 28.03.2013 after making addition on account of expenditure incurred for replacement of windmill holding it to be capital expenditure and disallowance of long term capital loss.
Being aggrieved by the above additions, the assessee-company preferred an appeal before ld. CIT(A) who vide impugned order had confirmed the addition towards cost of windmill replacement holding it to be capital expenditure. Assessee carried the matter to the Tribunal. The Tribunal vide order dated 27.01.2015 in for assessment year 2010-2011 had remitted the matter back to the file of the Assessing Officer for denovo assessment.
Consequent to the order of the Tribunal, the Assessing Officer had passed an order dated 31.03.2016 u/s.143(3) r.w.s. 254 of the Act repeating the addition by citing that new windmill erected is an independent and separate machine and therefore entire cost cannot be allowed as deduction.
Being aggrieved, an appeal was preferred before ld. CIT(A), who vide impugned order considering the functions of the new windmill confirmed the action of the Assessing Officer.
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Being aggrieved, the appellant is in appeal before us in the present appeal. It is contended before us that no asset came into existence and expenditure is incurred only to preserve and maintain the asset that is already in existence. Thus, the decision of Hon'ble Supreme Court in the case of CIT vs. Saravana Spinning Mills (P) Ltd, (2007) 163 Taxman 201 is squarely applicable to the facts of the present case.
On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities.
We heard the rival submissions and perused the material on record. Admittedly, the issue in the present case relates to whether or not the expenditure incurred on the replacement of windmill is capital or revenue. The windmill was damaged and replaced by 250KW new mill. The fact that assessee had received insurance claim against old machine holds to prove that machinery was damaged.
Communication between assessee and M/s. United India Insurance Co.
Ltd clearly establishes that old windmill was totally damaged. Thus, it is case of replacement of old windmill by new one. The windmill is an independent one and can function independently and the expenditure incurred on the new windmill cannot be allowed as revenue expenditure. The ratio decision of Hon'ble Supreme Court in ITA No. 1820 & 1821/2019 :- 6 -: the case of Saravana Spinning Mills (P) Ltd (supra) cannot be applied to the facts of the present case as its relates to the current repair.
Therefore, we do not find any reason to interfere with the orders of the lower authorities.
In the result, the appeal of the assessee in stands dismissed. assessment year 2014-2015 for adjudication.
The return of income for the AY 2014-2015 was filed on 26.09.2014 disclosing total income of �4,61,25,439/- . Against the said return of income, the assessment was completed by Income Tax Officer, Corporate Ward-1, Madurai (herein after referred as Assessing Officer) u/s.143(3) of the Act vide order dated 22.12.2016 at total income of �4,62,39,400/-. While doing so, the Assessing Officer made disallowance of �64,807/- u/s.14A of the Act and pooja expenses of �45,617/-.
Being aggrieved by the above additions, an appeal was preferred before ld. CIT(A). It was contested that no expenditure was actually incurred and therefore disallowance u/s.14A of the Act cannot
ITA No. 1820 & 1821/2019 :- 7 -: be made. However, the ld. CIT(A) confirmed the addition u/s.14A of the Act and deleted pooja expenditure.
Being aggrieved by the order of the CIT(A), the appellant is in appeal before us in the present appeal. It is contended that no expenditure was actually incurred for earning any exempt income placing reliance on the judgment of Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd vs. DCIT, 328 ITR 81 submitted that question of disallowance does not arise.
On the other hand, the ld. Sr. Departmental Representative 16. placed reliance on the orders of lower authorities.
We heard the rival submissions and perused the material on 17. record. Admittedly, assessee company earned exempt income of �1,45,30,718/- during the previous year under consideration. Once exempt income was earned, the provisions of Section 14A of the Act are trigged and the Assessing Officer is duty bound to compute the amount of disallowance in terms of Rule 8D. The Assessing Officer had rightly invoked the provisions of Section 14A of the Act and there is no dispute about the correctness of the amount of disallowance.
Accordingly, we do not find any reason to interfere with the orders of the lower authorities.
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In the result, the 18. year 2014-2015 stands dismissed.
To summarize the result, the appeals of the assessee in & 1821/CHNY/2019 for assessment years 2010-11 and 2014-2015 stand dismissed.
Order pronounced on 5th day of November, 2019, at Chennai.