THE ACIT, CIRCLE-1, BHAVNAGAR vs. SHREE ELECTROMELTS LTD., BHAVNAGAR

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ITA 2052/AHD/2013Status: DisposedITAT Ahmedabad24 October 2017AY 2009-103 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that expenditure incurred for laying down a new service line for an electricity connection, which remains under the ownership of the electricity board, is revenue in nature. This decision was based on High Court precedents.

What were the facts?

The assessee debited Rs. 44,95,710/- as PGVCL new connection charges, treating it as revenue expenditure. The AO considered it capital expenditure, but the CIT(A) allowed it as revenue expenditure.

What were the issues?

Whether the expenditure incurred for obtaining a new electricity connection, including laying a new transmission line, constitutes capital or revenue expenditure.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, BENCH – “A”, AHMEDABAD

Before: SHRI RAJPAL YADAV & SHRI MANISH BORAD

Hearing: 11/10/2017Pronounced: 24/10/2017

आदेश/O R D E R

Revenue is in appeal before the Tribunal against order of ld.CIT(A)- XX, Ahmedabad dated 2.5.2013 passed for the Asstt.Year 2009-10.

2.

Sole grievance of the Revenue is that the ld.CIT(A) has erred in treating payment of Rs.44,95,710/-made to PGVCL new connection charges as revenue expenditure as against capital expenditure treated by the AO.

3.

Brief facts of the case are that the assessee has filed its return of income electronically declaring income at Rs.40,25,160/-. The assessee has debited an amount of Rs.44,95,710/-. under the head “PGVCL new connection

ITA No.2052/Ahd/2013 2 charges”. In other words, the assessee has applied for new connection to Electricity Board which has granted connection on the condition that the assessee will incur expenditure for laying a new transmit line. The assessee has treated the expenditure as revenue expenditure, whereas the ld.AO treated the same as capital expenditure. On appeal, the ld.CIT(A) has accepted contentions of the assessee on the ground that no new assets came into existence. No doubt the assessee has incurred expenditure for laying down a new service line, but this electric line will be under the ownership of the Electricity Board and not with the assessee. Thus, according to the ld.CIT(A), the expenditure incurred by the assessee deserves to be treated as revenue expenditure. The ld.CIT(A) has made reference to the following case laws:

i) Smt. Prabhavati S. Shah Vs. CIT, 31 ITR 1 (Bom) ii) Parekh Automobiles Vs. ITO, 68 TTJ (Rajkot) 722 iii) ITO (Exemption) Vs. Bajoria Foundation, 254 ITR (AT)

4.

At the outset, the ld.counsel for the assessee submitted that the issue in dispute is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court, in the case of CIT Vs. Excel Industries Ltd., 122 ITR 0995 and Delhi High Court decision in the case of CIT Vs. Saw Pipes Ltd., 300 ITR 0035. The ld.DR was unable to controvert this contention of the assessee. He relied upon the order of the ld.AO.

5.

On due consideration of facts and circumstances of the case, we are of the view that the issue in dispute is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court as well as Delhi High Court. In both decisions, the assessee has incurred expenditure for availing electricity connection, whereby they have paid for laying down overhead line. Hon’ble Courts have upheld that incurrence of such expenditure is in the nature of revenue. The ld.CIT(A) has placed reliance on these decisions, and

ITA No.2052/Ahd/2013 3 thereafter treated the expenditure as revenue in nature. In our opinion, the ld.CIT(A) has rightly construed the position of law laid down by the Hon’ble Courts, and therefore, no interference deserves to be called for in the order of the ld.CIT(A). Accordingly, appeal of the Revenue is dismissed.

6.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 24th October, 2017 at Ahmedabad.

Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

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