M/S. UNICHEM LABORATORIES LTD, MUMBAI v. THE DCIT, CC-33, MUMBAI

ITA 1917/MUM/2007 | 2004-2005
Pronouncement Date: 06-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 191719914 RSA 2007
Assessee PAN AAACU0551B
Bench Mumbai
Appeal Number ITA 1917/MUM/2007
Duration Of Justice 3 year(s) 1 month(s) 1 day(s)
Appellant M/S. UNICHEM LABORATORIES LTD, MUMBAI
Respondent THE DCIT, CC-33, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 06-04-2010
Assessment Year 2004-2005
Appeal Filed On 05-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI R.S.SYAL AM AND SMT.ASHA VIJAYARAGHAVAN JM ITA NO.1917/MUM/2007 : ASST.YEAR 2004-2005 M/S.UNICHEM LABORATORIES LIMITED UNICHEM BHAVAN S.V.ROAD JOGESHWARI (WEST) MUMBAI 400 102. PA NO.AAACU0551B. VS. THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 33 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY : SHRI VIRENDRA OJHA O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON 21.12.2006 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.2 08 003 OUT OF REPAIRS AND MAINTENANCE EXPENSES. THIS DISAL LOWANCE HAS TWO COMPONENTS VIZ. REPAIRS TO PLANT AND MACHINERY OF RS.24 550 AN D TO BUILDING OF RS.1 83 453. THE ASSESSEE CLAIMED REPAIRS TO PLANT AND MACHINERY AMOUNTING TO RS.2 12 24 284. THE ASSESSING OFFICER MADE CERTAIN DISALLOWANCE INTER ALIA A SUM OF RS.24 550 PAID TO M/S.TEAM COMPUTERS PRIVATE LIMITED TOWARDS THE PURCHASE OF A NEW COMPUTER BY TREATING IT AS A CAPITAL EXPENDITURE. I N THE FIRST APPEAL IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT NO NEW COMPUTER WAS PURCHASED BY THE ASSESSEE AS WAS ALLEGED IN THE ASSESSMENT ORDER. IT WAS POINTED OUT THAT THE SAID SUM OF RS.24 550 WAS FOR THE PURCHASE OF 40 GB HARD DISC F OR THE REPLACEMENT OF THE EXISTING HARD DISC. NOT CONVINCED THE LEARNED CIT (A) APPROVED THE VIEW TAKEN BY THE ASSESSING OFFICER. ITA NO.1917/MUM/2007 M/S.UNICHEM LABORATORIES LIMITED. 2 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND IT AS AN UNCONTROVERTED FACT THAT A NEW 40 GB HARD DISC WAS PURCHASED BY THE ASSESSEE FOR ITS COMPUTER. IT IS N OTICED THAT SUCH EXPENDITURE WAS INCURRED FOR THE REPLACEMENT OF THE EXISTING HARD DISC OF THE COMPUTER. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. POLYOLEFINS INDUSTRIES LTD. [(1988) 169 ITR 538 (BOM)] HAS HELD THAT THE EXPENSES INCURRED BY THE ASSESSE E FOR REPLACEMENT OF PETROL ENGINE AND DIESEL ENGINE IN T HE JEEP WERE TO BE ALLOWED AS BUSINESS EXPENDITURE. THE LEARNED DEPARTMENTAL REPR ESENTATIVE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SRI MANGAYARKARASI MILLS P.LTD. [(2009)315 ITR 114 (SC) ] AND CONTENDED THAT THE REPLACEMENT OF MACHINERY BE HELD AS CAPITAL EXPEN DITURE. WE ARE NOT CONVINCED WITH THE SUBMISSION ADVANCED ON BEHALF OF THE REVEN UE FOR THE REASON THAT IN THAT CASE THE ENTIRE TEXTILE MILL MACHINERY WAS CONSIDER ED AS A SINGLE ASSET AND THE REPLACEMENT OF OLD MACHINES WAS CLAIMED AS REPLACEM ENT OF PARTS OF MACHINERY WHICH THE HONBLE SUPREME COURT DISAPPROVED BY HOLD ING THAT THE ENTIRE TEXTILE MILL MACHINERY COULD NOT BE REGARDED AS A SINGLE AS SET. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE INSTANT CASE IS THAT OF THE REPLACEMENT OF SOME PART OF COMPUTER. OBVIOUSLY THE RATIO OF THE HONBLE APEX C OURT JUDGEMENT WILL NOT APPLY HERE. SINCE IT IS REPLACEMENT OF PARTS OF COMPUTER WHICH IS OTHERWISE AN INDEPENDENT UNIT OF ASSET IN ITSELF SUCH REPLACEME NT WOULD BE CONSIDERED AS REVENUE EXPENDITURE. IN VIEW OF THE FACT THAT IT IS NOT THE CASE OF PURCHASE OF A NEW COMPUTER BUT THE REPLACEMENT OF HARD DISC WITH MORE CAPACITY IN OUR CONSIDERED OPINION THE SAID AMOUNT HAS TO BE ALLOWED AS EXPEN DITURE IN FULL. 4. TURNING TO THE SECOND LIMB OF DISALLOWANCE OUT O F BUILDING EXPENSES WE FIND THAT THE ASSESSEE PURCHASED GYPSUM BOARD FALSE CEILING ALONG WITH ACCESSORIES; PAID LABOUR CHARGES ON FIXING OF ALUMINIUM PARTITIO N WINDOWS AND DOORS; AND PAID FOR FLOORING. THE ASSESSING OFFICER TREATED THIS SU M IN TOTAL RS.1 83 453 AS ITA NO.1917/MUM/2007 M/S.UNICHEM LABORATORIES LIMITED. 3 CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION ACCORD INGLY. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE P LACED ON RECORD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN ITS OWN CASE FOR AS SESSMENT YEAR 1995-96 IN ITA NO.5870/MUM/1998 IN WHICH SIMILAR EXPENDITURE HAS B EEN HELD TO BE OF REVENUE NATURE. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 1998-99 AND 1999-2000. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY SINGLE FACTO R DISTINGUISHING THE FACTS OF THE INSTANT CASE FROM THOSE CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. RESPECTFULLY FOLLOWING THE PRECEDENT WE OVER TURN THE IMPUGNED ORDER ON THIS SCORE AS WELL AND ORDER FOR THE DELETION OF ADDITIO N AMOUNTING TO RS.2 08 003. THIS GROUND IS THEREFORE ALLOWED. 6. GROUND NO.2 IS AGAINST THE DEDUCTION U/S.80HHC V IS--VIS DEPB. 7. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THI S GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED BY THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF M/S.TOPMAN EXPORTS VS. ITO [(2009) 318 ITR (AT) 87 (MUMBAI) (SB)] . THE SPECIAL BENCH VIDE ITS ORDER DATED 11.08.2009 HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING THE FACE VALU E OF DEPB AS COVERED UNDER SECTION 28 (IIIB) AND THE PROFIT ON TRANSFER OF DEP B I.E. EXCESS OF SALE PRICE OVER THE FACE VALUE OF DEPB AS FALLING UNDER SECTION 28 (IIID). IT HAS FURTHER BEEN HELD THAT THERE IS NO SCOPE FOR ALLOWING SEPARATE DEDUCT ION FOR INDIVIDUAL EXPENSES CONNECTED WITH THE SALE OF DEPB DUE TO THE SCHEME O F SECTION 80HHC. WE THEREFORE SET ASIDE THE IMPUGNED ORDER ON THIS ISS UE AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION UNDER SECTION 80 HHC IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THE AFORE NOTED CASE. NEEDLESS TO SAY THE ITA NO.1917/MUM/2007 M/S.UNICHEM LABORATORIES LIMITED. 4 ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY O F BEING HEARD BY THE AO IN THE FRESH PROCEEDINGS. 8. THE LAST EFFECTIVE GROUND IS AGAINST DEDUCTION O F GROSS OR NET INTEREST WHILE WORKING OUT THE PROFITS OF THE BUSINESS U/S.80HHC OF THE ACT. THE LEARNED A.R. FAIRLY CONCEDED THAT RECENTLY THE HONBLE BOMBAY HI GH COURT IN AN UNREPORTED JUDGMENT HAS DECIDED THIS ISSUE AGAINST THE ASSES SEE BY HOLDING THAT 90% OF THE GROSS INTEREST IS TO BE REDUCED. IN VIEW OF THE ADM ISSION OF THE LEARNED A.R. WE APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A). THIS GROUND FAILS. 9. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 6 TH DAY OF APRIL 2010. SD/- SD/- ( ASHA VIJAYARAGHAVAN ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 6 TH APRIL 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A) CENTRAL-VIII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.