ACIT, VIRUDHUNAGAR vs. M/S. MADRAS CEMENTS LTD., RAJAPALAYAM

Let’s first take Revenue’s appeal for the assessment year 1997-98 in I.T.A. No.1111/Mds/2001.

The first issue arises for consideration is 100% depreciation on Fly ash handling system.

We have heard Shri V. Jagadisan, the Ld. representative for the assessee and Sh. Pathlavath Peerya, the Ld. Departmental Representative. It is admitted by both the Ld. representative and the Ld. D.R. that this issue was considered by this Tribunal in the assessee's own case for assessment year 1996-97 in I.T.A. No.872/Mds/2000. This Tribunal by its order dated 26.12.2002, installed Fly ash handling system. This being an air pollution control equipment, this Tribunal found that the assessee is entitled for 100% depreciation. In view of the decision of co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 1996- 97, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

The next issue arises for consideration is cost of construction incurred by the assessee for construction of Vallalar cause way.

Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee-company engaged itself in the business of manufacturing and sale of cement. The factory of the assessee was situated in Vridachalam-Tittagudi Road.

According to the Ld. D.R., Vridachalam-Tittagudi Road was a kutcha road and not fit for transportation of heavy machineries. In order to facilitate the transport of machineries in a smooth way, the assessee appears to have constructed a new road through a small river called Vellar with a span of 400 meters. According to the Ld. D.R., it is not the business of the assessee to construct road or cause way. The business of the assessee is manufacturing of belong to assessee-company. Moreover, according to the Ld. D.R., the cause way brings into existence enduring benefit to the assessee for transporting the machinery, raw material or finished product. The approach road to the company before construction of new road, namely, Vridachalam-Tittagudi road, was only 75 KMs.

On the contrary, Shri V. Jagadisan, the Ld. representative for the assessee, submitted that the assessee’s factory was assessee has to move heavy machineries by road. The weight of each machinery comes to nearly 500 to 600 tons. Each part of machinery was not less than 75 tons. In fact, the machineries are imported and this was transferred to factory from Chennai Port by road. According to the Ld. representative, since the approach road to the factory via Vridachalam-Tittagudi is not proper and it is unfit for construction, in order to facilitate assessee’s movement of machinery and raw material, the assessee has constructed 400 Mts long cause way across Vellar river. In fact, the land for construction of road was purchased from local villagers and the expenditure was incurred by the assessee. According to the Ld. representative, it is a public road. It is meant for use of all the public. The road does not belong to the assessee at all. Even otherwise, by construction of new cause way, according to the Ld. representative, the distance was reduced by 48 KMs. In fact, the road was constructed under the technical supervision and guidance of Government authorities. The railway authorities also cleared the proposal of the assessee for construction of cause way. The property does not belong to the assessee at all. the assessee submitted that the Revenue admits at ground No.2.4 that the cause way does not belong to the assessee-company.

We have considered the rival submissions on either side and perused the relevant material available on record. For the purpose of facilitating the assessee’s movement of machineries, raw material and finished goods, the assessee has constructed 400 Mts long cause way across Vellar river. The assessee claims the expenditure as revenue in nature. However, the Assessing Officer the cause way does not belong to the assessee. It is a road to all the general public across the State. Moreover, the construction of cause way might have incidentally benefitted the local people.

The next ground of appeal is with regard to cost of replacement of Rotor as revenue expenditure.

Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that Rotor is an independent machinery and it is not an integral part of crusher, therefore, the expenditure incurred by the assessee has to be capitalized. the assessee, submitted that the assessee incurred an expenditure of `94,14,000/- towards replacement of Rotor. The CIT(Appeals) inspected the site and found that Rotor is attached to a shaft, which is run by an electric motor in a crusher. According to the Ld. representative, the CIT(Appeals) found that Rotor by itself has no independent existence and does not perform any function per se.

We have considered the rival submissions on either side and perused the relevant material available on record. The main contention of the Ld. D.R. is Rotor is an independent machinery and not an integral part of crusher. The CIT(Appeals), after inspecting the premises of the assessee, found that Rotor is attached to a shaft which is run by an electric motor in a crusher. The CIT(Appeals) further found that Rotor itself cannot do any independent function. When it is attached with crusher, it crushes the limestone. It is not in dispute that replacement of Rotor in the crusher has to be made in frequent intervals. In those Rotor, which was replaced in the crushing machinery is nothing but a part of crusher, therefore, cost of such replacement has to be allowed as revenue in nature. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Now coming to Revenue’s appeal for assessment year 2002- 03 in the only issue arises for consideration is expenditure incurred by the assessee in Railway siding.

Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the expenditure incurred by the assessee in Railway siding was claimed by the assessee as revenue expenditure. According to the Ld. D.R., the conversion of meter guage into broad guage has brought into existence enduring benefit to the assessee, therefore, it is capital in nature. Hence, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee.

On the contrary, Shri V. Jagadisan, the Ld. representative for the assessee, submitted that an identical issue was considered by 1996-97, 1993-94, 1994-95 in 1960 & 2074/Mds/97 and 2152/Mds/97 dated 26.12.2002. This Tribunal found that a similar expenditure is revenue expenditure. Referring to the grounds of appeal raised by the Revenue before this Tribunal as ground No.3, the Ld. representative submitted that merely because an appeal is pending before the High Court that cannot be a reason for taking a different view.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee has incurred expenditure for conversion of meter guage into broad guage electrification of railway line, arranging feeder service and construction of sub-electrical station. Therefore, the expenditure incurred by the assessee might have facilitated the assessee to run the business in a smooth manner. The fact remains that these are public infrastructure meant for railways. Any public along with the assessee may use the very same facilities established by the assessee. It is not the case of the Revenue that the infrastructure created by the assessee exclusively belongs to the assessee.

Both the appeals of the Revenue stand dismissed.

Now coming to the assessee’s appeals for assessment years 1997-98 and 2002-03, the only issue arises for consideration is depreciation claimed by the assessee on the surface minor.

Shri V. Jagadisan, the Ld. representative for the assessee, submitted that in limestone mines, limestone strata are intruded with clay bands. The limestone bands are lying at various degree of clay intrusion. Limestone cannot be mined in a conventional method of drilling and blasting the limestone strata. Blasting of limestone mines would mix up with clay and limestone. The assessee may not be able to get the required quality of limestone. Alternatively, the assessee is using the latest technology of excavating the limestone layer by layer. According to the Ld. representative, surface mining is one of the latest technique which provides for removing the layer by layer avoiding mixing of limestone with clay.

On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that surface miner is nothing but machinery used for excavation of limestone layer by layer. Referring to order of the CIT(Appeals), more particularly at page 4, for the assessment year 2002-03, the Ld. D.R. submitted that the CIT(Appeals) reproduced the depreciation schedule. As

We have considered the rival submissions on either side and perused the relevant material available on record. The function of surface miner, as demonstrated by the Ld. representative for the assessee, is used in excavation of limestone deposits in the mine, layer by layer. It does not control solid waste or it is also not used in recovery of solid waste. The depreciation schedule as per Appendix 1 Part (A) is very clear that only solid waste control equipment which is used for recovery alone is eligible for 100% depreciation. The surface miner is a machine used for excavation in mine, layer by layer. In the case of assessee, it is limestone deposit. This Tribunal is of the considered opinion that it cannot be construed as solid waste control equipment. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.