NEXUS ELECTRO STEEL LTD.,CHENNAI vs. ITO CORPORATE WARD 4(2), CHENNAI

आदेश / O R D E R

PER INTURI RAMA RAO, ACCOUNTANT MEMBER

ITA No. 3127/2018 :- 2 -:

‘’1. For that the order of the Learned Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case.

2. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of expenses claimed u/s 37(1) of the Act of Rs. 33,63,374/-.

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Honble Tribunal may be pleased to delete the penalty levied or pass such other orders as the Hon’ble Tribunal may deem fit’’.

The appellant namely Nexus Electro Steel Limited. is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing transformers. The return of income for the AY 2009-10 was filed on 20.08.2010 admitting loss of Rs.8,07,40,149/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Corporate Ward 4(2)

Chennai (hereinafter called “AO”) vide order dated 31.03.2015 passed u/s. 143(3) r/w s. 263 of the Income Tax Act, 1961 (in short ‘the Act’) at total loss of �4,31,21,241/- . While doing so, the AO made disallowance on payment of interest in foreign currency of �1,17,10,257/-, default in payment of TDS �2,23,19,358/-, capital

ITA No. 3127/2018 :- 3 -: expenditure of �33,63,374/- and EPF/ ESI payment not made within the due date u/s.36(1) (va) of the Act �1,72,530/-.

Being aggrieved by the above additions, an appeal was 4. preferred before ld. CIT(A), who vide impugned order deleted the additions on account of payment of interest in foreign currency of �1,17,10,257/-, payment of TDS �2,23,19,358/-, payment of EPF/ ESI �1,72,530/-, and sustained the capital expenditure of �33,63,374/-. Thus, the appeal filed by the assessee came to be partly allowed by the ld. CIT(A).

Aggrieved by that part of the ld. CIT(A) order, which is 5. against assessee-company, the assessee company is in appeal before us.

We heard the rival submissions and perused the material on 6. record. The issue in the present appeal is squarely covered against the assessee in assessee’s own case in for assessment year 2008-09, wherein it was held as follows:-

‘’8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The ld. CIT(Appeals), in his order has observed that the assessee has claimed it as merely extending their manufacturing capacity in respect of already existing of the product, which is being manufactured by the assessee. It has set up new unit at Kasne, Thane District of Maharashtra for manufacturing of same line of products. Even though the new factories can be considered as separate unit, it is nothing but extension of the existing business

ITA No. 3127/2018 :- 4 -: units. With the above observation and by following the decision in the case of CIT v. Rane (Madras) Ltd. (supra), the ld. CIT(Appeals) directed the Assessing Officer to allow the claim of the assessee. In this case, the Assessing Officer has given a specific finding that the assessee has developed a new unit at Bombay and the expenditure incurred was in connection with new unit. This is nothing on record that the expenditure incurred by the assessee was in connection with the extension of existing unit. Even before us, no material was placed on record to show that the expenditure incurred by the assessee was for the purpose of extension of the existing business of the assessee. So far as case law relied on by the ld. CIT(Appeals) is concerned, the Hon’ble Madras High Court has held that the expenditure incurred in setting up new factory vis- à-vis extension of existing unit, expenditure can be considered as revenue expenditure. In this case, there is nothing on record that the new unit set up at Bombay was an extension of business of the assessee. Therefore, for the above reasons, the order passed by the ld. CIT(Appeals) is reversed on this issue and the ground raised by the Revenue is allowed’’.

Respectfully, following the above decision of the Co-ordinate Bench of the Tribunal, we dismiss the appeal filed by the assessee.

In the result, the appeal filed by the assessee stands 7. dismissed.

Order pronounced on 4th day of September, 2019, at Chennai.