PANDIAN CHEMICALS LIMITED, MADURAI v. DCIT CIRCLE 2, MADURAI

ITA 1820/CHNY/2019 | 2010-2011
Pronouncement Date: 05-11-2019 | Result: Dismissed

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Appeal Details

RSA Number 182021714 RSA 2019
Assessee PAN AABCP6618D
Bench Chennai
Appeal Number ITA 1820/CHNY/2019
Duration Of Justice 4 month(s) 23 day(s)
Appellant PANDIAN CHEMICALS LIMITED, MADURAI
Respondent DCIT CIRCLE 2, MADURAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-11-2019
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 05-11-2019
Last Hearing Date 26-09-2019
First Hearing Date 26-09-2019
Assessment Year 2010-2011
Appeal Filed On 12-06-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE SHRI GEORGE MATHAN JUDICIAL MEMBER AND SHRI INTURI RAMA RAO ACCOUNTANT MEMBER ./I.T.A. NOS.1820 & 1821/CHNY/2019 ! ' / ASSESSMENT YEARS : 2010-2011 & 2014-2015. M/S. PANDIAN CHEMICALS LIMITED NO.17-A VALLABHAI ROAD CHOKKIKULAM MADURAI 625 002. [PAN AABCP 6618D] VS. THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 2 MADURAI. ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. S. CHANDRASEKARAN C.A. &' # $ % /RESPONDENT BY : SHRI. ARUNRAJ IRS JCIT. ( ) $ * /DATE OF HEARING : 26-09-2019 + '! $ * /DATE OF PRONOUNCEMENT : 05-11-2019 / O R D E R PER INTURI RAMA RAO ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AG AINST 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. 2. SINCE THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE APPEAL IN ITA NO.1820/CHNY/2019 FOR ASSESSMENT YEAR 2010-11 ARE STATED HEREIN. 4. 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. L TD. REPORTED IN 298 ITR PAGE 94 IS IDENTICAL TO THAT OF YOUR APPELL ANT. 2) THE DEPUTY COMMISSIONER AND THE CIT(A) HAD RELIE D 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 A SSET CAME INTO EXISTENCE OR NO NEW ADVANTAGE WAS OBTAINED. IT IS I NCURRED 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 MIL L. INSTALLED CAPACITY IS NOT INCREASED. THE REPLACEMENT HAS NOT RESULTED IN INCREASE IN CAPACITY OF THE WINDMILL. IF THE PRODUCTIVE UNIT RE MAINS 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 2 00 I- IS TO BE CAPITALISED THEN THE SUM OF 16 24 157 I- ALREADY CR EDITED AS INCOME SHOULD FIRST BE REDUCED FROM THE TOTAL INCOME RETUR NED 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 AUTHORI TIES UNDER THE ACT ARE UNDER AN OBLIGATION TO ACT IN ACCORDANCE WITH L AW. IF AN ASSESSEE UNDER A MISTAKE MISCONCEPTION OR NOT BEING PROPERL Y INSTRUCTED IS OVER ASSESSED THE AUTHORITIES UNDER THE ACT ARE RE QUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLE CTED. (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 EXPEND ITURE. 5) THE CIT(A) IS UNDER A MISCONCEPTION THAT THE CLA IM OF THE AUTHORISED REPRESENTATIVE THAT THE SUM OF 16 24 157 - BEING THE INSURANCE CLAIM SHOULD BE REDUCED FROM THE INCOME R ETURNED IS FACTUALLY INCORRECT. IT IS A FACT THAT THE INSURANC E CLAIM OF 16 24 157- IS CREDITED TO THE PLANT AND MACHINERY MAINTENANCE ACC OUNT. IT GOES WITHOUT SAYING THAT THE INSURANCE CLAIM RECEIVED IS ALREADY TREATED AS INCOME IN THE BOOKS OF ACCOUNTS AND IT IS FACTUALLY CORRECT. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. PANDIAN CHEMICALS LIMITE D IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTUR ER OF CHLORATE & GENERATION OF POWER FROM WINDMILL. THE RETURN OF IN COME FOR THE AY 2010-2011 WAS FILED ON 27.09.2010 DISCLOSING TOT AL INCOME OF H2 58 83 550/- AND THE SAME WAS REVISED ON 12.10.20 10 AT TOTAL INCOME OF H2 44 57 950/-. AGAINST THE SAID RETURN O F 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 O F EXPENDITURE INCURRED FOR REPLACEMENT OF WINDMILL HOLDING IT T O BE CAPITAL EXPENDITURE AND DISALLOWANCE OF LONG TERM CAPITAL LOSS. 6. BEING AGGRIEVED BY THE ABOVE ADDITIONS THE A SSESSEE-COMPANY PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO VIDE IMPU GNED ORDER HAD CONFIRMED THE ADDITION TOWARDS COST OF WINDMILL RE PLACEMENT HOLDING IT TO BE CAPITAL EXPENDITURE. ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 27.01.201 5 IN ITA NO.2613/MDS/2014 FOR ASSESSMENT YEAR 2010-2011 HAD REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R DENOVO ASSESSMENT. CONSEQUENT TO THE ORDER OF THE TRIBUNAL THE ASSES SING 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 ENT IRE COST CANNOT BE ALLOWED AS DEDUCTION. 7. BEING AGGRIEVED AN APPEAL WAS PREFERRED BE FORE LD. CIT(A) WHO VIDE IMPUGNED ORDER CONSIDERING THE FUNCTIONS O F THE NEW WINDMILL CONFIRMED THE ACTION OF THE ASSESSING OFFI CER. ITA NO. 1820 & 1821/2019 :- 5 -: 8. BEING AGGRIEVED THE APPELLANT IS IN APPE AL BEFORE US IN THE PRESENT APPEAL. IT IS CONTENDED BEFORE US THAT NO A SSET CAME INTO EXISTENCE AND EXPENDITURE IS INCURRED ONLY TO PRE SERVE AND MAINTAIN THE ASSET THAT IS ALREADY IN EXISTENCE. THUS THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPIN NING MILLS (P) LTD (2007) 163 TAXMAN 201 IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9. ON THE OTHER HAND THE LD. SR. DEPARTME NTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF LOW ER AUTHORITIES. 10. WE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. ADMITTEDLY THE ISSUE IN THE PRESENT CAS E RELATES TO WHETHER OR NOT THE EXPENDITURE INCURRED ON THE REPLACEMENT OF WINDMILL IS CAPITAL OR REVENUE. THE WINDMILL WAS DAMAGED AND R EPLACED BY 250KW NEW MILL. THE FACT THAT ASSESSEE HAD RECEIVE D INSURANCE CLAIM AGAINST OLD MACHINE HOLDS TO PROVE THAT MACHINERY W AS DAMAGED. COMMUNICATION BETWEEN ASSESSEE AND M/S. UNITED INDI A INSURANCE CO. LTD CLEARLY ESTABLISHES THAT OLD WINDMILL WAS TOT ALLY DAMAGED. THUS IT IS CASE OF REPLACEMENT OF OLD WINDMILL BY NEW O NE. THE WINDMILL IS AN INDEPENDENT ONE AND CAN FUNCTION INDEPENDENTLY A ND 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. 11. IN THE RESULT THE APPEAL OF THE ASSESSE E IN ITA NO.1820/CHNY/2019 STANDS DISMISSED. 12. NOW WE TAKE UP ITA NO.1821/CHNY/201 9 FOR ASSESSMENT YEAR 2014-2015 FOR ADJUDICATION. 13. THE RETURN OF INCOME FOR THE AY 2014-2015 WAS FILE D ON 26.09.2014 DISCLOSING TOTAL INCOME OF H4 61 25 43 9/- . AGAINST THE SAID RETURN OF INCOME THE ASSESSMENT WAS COMPLETED BY INCOME TAX OFFICER CORPORATE WARD-1 MADURAI (HEREIN AFTER RE FERRED AS ASSESSING OFFICER) U/S.143(3) OF THE ACT VIDE ORDER DATED 2 2.12.2016 AT TOTAL INCOME OF H4 62 39 400/-. WHILE DOING SO THE ASSE SSING OFFICER MADE DISALLOWANCE OF H64 807/- U/S.14A OF THE ACT AND P OOJA EXPENSES OF H45 617/-. 14. BEING AGGRIEVED BY THE ABOVE ADDITIONS AN APPEAL W AS PREFERRED BEFORE LD. CIT(A). IT WAS CONTESTED THA T NO EXPENDITURE WAS ACTUALLY INCURRED AND THEREFORE DISALLOWANCE U/S.14 A OF THE ACT CANNOT ITA NO. 1820 & 1821/2019 :- 7 -: BE MADE. HOWEVER THE LD. CIT(A) CONFIRMED THE AD DITION U/S.14A OF THE ACT AND DELETED POOJA EXPENDITURE. 15. BEING AGGRIEVED BY THE ORDER OF THE CIT(A) THE AP PELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS C ONTENDED THAT NO EXPENDITURE WAS ACTUALLY INCURRED FOR EARNING ANY EXEMPT INCOME PLACING RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD VS. DC IT 328 ITR 81 SUBMITTED THAT QUESTION OF DISALLOWANCE DOES NOT A RISE. 16. ON THE OTHER HAND THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 17. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY ASSESSEE COMPANY EARNED EXEMP T INCOME OF H1 45 30 718/- DURING THE PREVIOUS YEAR UNDER CONS IDERATION. ONCE EXEMPT INCOME WAS EARNED THE PROVISIONS OF SECTION 14A OF THE ACT ARE TRIGGED AND THE ASSESSING OFFICER IS DUTY BOU ND TO COMPUTE THE AMOUNT OF DISALLOWANCE IN TERMS OF RULE 8D. THE A SSESSING OFFICER HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 14A O F THE ACT AND THERE IS NO DISPUTE ABOUT THE CORRECTNESS OF THE AMOUNT OF DISALLOWANCE. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFER E WITH THE ORDERS OF THE LOWER AUTHORITIES. ITA NO. 1820 & 1821/2019 :- 8 -: 18. IN THE RESULT THE ITA NO.1821/CHNY/2019 FOR ASSESS MENT YEAR 2014-2015 STANDS DISMISSED. 19. TO SUMMARIZE THE RESULT THE APPEALS OF T HE ASSESSEE IN ITA NOS. 1820 & 1821/CHNY/2019 FOR ASSESSMENT YEARS 201 0-11 AND 2014-2015 STAND DISMISSED. ORDER PRONOUNCED ON 5 TH DAY OF NOVEMBER 2019 AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER -) / CHENNAI . / DATED: 5 TH NOVEMBER 2019. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF