M/s Sangeet Tools Pvt. Ltd., Ludhiana v. Addl. CIT, Ludhiana

ITA 328/CHANDI/2011 | 2007-2008
Pronouncement Date: 15-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 32821514 RSA 2011
Assessee PAN AABFS3832K
Bench Chandigarh
Appeal Number ITA 328/CHANDI/2011
Duration Of Justice 3 month(s) 17 day(s)
Appellant M/s Sangeet Tools Pvt. Ltd., Ludhiana
Respondent Addl. CIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 15-07-2011
Date Of Final Hearing 05-07-2011
Next Hearing Date 05-07-2011
Assessment Year 2007-2008
Appeal Filed On 28-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.328 /CHD/2011 (ASSESSMENT YEAR : 2007-08) SANGEETA TOOLS PVT. LTD. VS. THE ADDL. CIT CAMPA COLA FACTORY STREET RANGE-V DHANDHARI KALAN LUDHIANA. LUDHIANA. PAN: AABFS3832K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI N.K.SAINI DR O R D E R PER SUSHMA CHOWLA J.M : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(A) DATED 08.02.2011 REL ATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEA L BUT THE ISSUE RAISED IN ALL THE GROUNDS OF APPEAL IS AGAINST THE ADDITION OF RS.3 18 910/- ON ACCOUNT OF MACHINERY REPAIR EXPEND ITURE AND IN THE ALTERNATIVE IN NOT ALLOWING DEPRECIATION AND ADDITI ONAL DEPRECIATION ON THE AFORESAID. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE MANUFACTURING OF HAND TOOLS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE BOOKS OF ACCOUNT WERE EXAMINED AND THE ASSESSING 2 OFFICER NOTED THE ASSESSEE TO HAVE CREDITED CERTAIN BILLS TO THE MACHINERY REPAIR ACCOUNT TOTALING RS.3 18 910/- WHICH WERE N OT ON ACCOUNT OF CURRENT REPAIR AND MAINTENANCE. THE EXPLANATION O F THE ASSESSEE WAS THAT THE SAID AMOUNT WAS INCURRED ON SPARE PARTS WH ICH ARE UTILIZED WHEN THERE IS A BREAK DOWN DURING THE COURSE OF MANUFAC TURING PROCESS. THE ASSESSEE CLAIMED THAT THE SAID SPARE PARTS HAVE TO BE REPLACED FROM TIME TO TIME AND SUCH REPLACEMENT DOES NOT ENHANCE THE C APACITY OF THE SAID PLANT AND HENCE CURRENT REPAIRS. HOWEVER WITHOUT PREJUDICE IT WS CLAIMED BY THE ASSESSEE THAT COST OF SPARE PARTS MA Y BE TAKEN AS CAPITAL EXPENDITURE SUBJECT TO THE CONDITION THAT NO PENAL ACTION U/S 271(1)(C) OF THE ACT IS INITIATED AGAINST THE ASSESSEE; AND DEPR ECIATION AND ADDITIONAL DEPRECIATION AS PERMISSIBLE UNDER THE ACT IS TO BE ALLOWED THEREON. THE ASSESSING OFFICER REJECTING THE REPLY OF THE ASSESS EE BEING GENERAL HELD THAT THE EXPENDITURE INCURRED ON CURRENT REPAIR IS TO BE INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET. THE ASSESSING OFFICER DISALLOWED THE SUM OF RS.3 18 910/-. THE CIT(A) H AS CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(A). THE LEARNED A.R. FOR THE ASSESSEE CLAIMED THAT THE SAID EXPENDITURE WAS CLAIMED AS CURRENT REPAIR UNDER THE HEAD MACHINERY REPAIR ACCOUNT. HOWEVER AN ALTERNATE SUBMISSION WAS MADE THAT THE SAID EXPENDITURE MAY BE TREATED AS CAPITAL EXPENDITURE AND DEPRECIAT ION AND ADDITIONAL DEPRECIATION BE ALLOWED THEREON. THE LEARNED A.R. FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE WRITTEN SUBMISSIO NS FURNISHED BEFORE THE ASSESSING OFFICER AT PAGES 1 AND 2 OF THE PAPER BOOK ALONGWITH PHOTOCOPIES OF THE BILLS AT PAGES 3 TO 6 OF THE PAP ER BOOK. OUR ATTENTION WAS FURTHER DRAWN TO THE OFFER LETTER MADE BEFORE T HE ADDL.CIT PLACED AT PAGE 7 OF THE PAPER BOOK. 3 5. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN CONNECTIO N WITH THE CLAIM OF ASSESSEE THAT CERTAIN EXPENDITURE DEBITED UNDER THE HEAD MACHINERY REPAIR ACCOUNT WAS ON ACCOUNT OF CURRENT REPAIR AN D MAINTENANCE OR NOT. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.3 18 910 /- AS DETAILED HEREUNDER : (A) MANJIT METAL WORKS 791 DATED 19.10.2007 RS. 55 910/- (B) PUNJAB HAMMERS 381 DATED 05.02.2007 RS. 62 3 54/- (C) S.S. APPLICATION PVT.LTD. 309 DATED 5.08.2006 RS. 48 668/- 716 DATED 13.01.2007 RS.1 51 978/- TOTAL RS.3 18 910/- 7. THE EXPLANATION OF THE ASSESSEE VIS--VIS EXPEND ITURE WAS THAT THE ASSESSEE HAD AN ELECTROPLATING PLANT WHERE THE HAND TOOLS MANUFACTURED BY IT WERE ELECTROPLATED. THE ELECTROPLATING PROCE SS INVOLVED THE USE OF CORROSIVE CHEMICALS WHICH IN TURN DESTRUCTED THE S TEAM COILS OF THE ELECTROPLATING PLANT AND HAD TO BE REPLACED TO PRES ERVE AND MAINTAIN THE PLANT IN ITS WORKING ORDER. THE ASSESSEE HAD PURCH ASED THE SAID COILS TOTALING RS.53 760/- AND CLAIMED THE SAME AS ITS CU RRENT REPAIR. FURTHER THE EXPENDITURE OF RS.48 668/- AND RS.1 51 978/- WE RE AGAINST THE PURCHASE OF OIL METRES OF DIFFERENT SIZES WHICH WE RE KEPT BY THE ASSESSEE AS SPARE PARTS IN ORDER TO BE UTILIZED ON BREAK DOWN OF THE MACHINERY. FURTHER EXPENDITURE OF RS.72 636/- WAS FOR THE PURCHASE OF DYE HOLDER WHICH WAS PART OF FORGING HAMMER IN WHI CH THE DYE WAS FITTED TO MANUFACTURE PARTICULAR SIZE OF THE SPANNE R. THE SAID EXPENDITURE WAS ALSO INCURRED ON SPARE PARTS AVAILA BLE WITH THE ASSESSEE. THE SAID SPARE PARTS WERE KEPT BY THE ASSESSEE IN O RDER TO BE USED AT THE 4 TIME OF BREAK DOWN OF THE MACHINERY. THOUGH THE EX PENDITURE WAS CLAIMED AS REVENUE EXPENDITURE BUT DURING THE COURS E OF ASSESSMENT PROCEEDINGS AN ALTERNATE PLEA WAS RAISED TO TREAT THEM AS CAPITAL EXPENDITURE AND ALLOW DEPRECIATION AND ADDITIONAL D EPRECIATION ON THE SAME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WE FIND MERIT IN THE ALTERNATE PLEA RAISED BY THE ASSESSEE AND ACCORDING LY DIRECT THE ASSESSING OFFICER TO TREAT THE ABOVE SAID EXPENDITU RE AS CAPITAL EXPENDITURE. THERE IS NO MERIT IN DISALLOWING THE SAME AND ADDING IT TO THE INCOME OF THE ASSESSEE. HOWEVER THE ASSESSING OFFICER IS FURTHER DIRECTED TO VERIFY THE CLAIM OF DEPRECIATION ON THE SAID ASSETS AND ALLOW THE SAME IN ACCORDANCE WITH LAW. WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN RESPECT OF ADDITIONAL DEPRECIATION WHIC H IS TO BE ALLOWED WHERE THE NEW MACHINERY OR PLANT HAS BEEN ACQUIRED AND INSTALLED AFTER 31 ST DAY OF MARCH 2005 BY THE ASSESSEE IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING. THE AFORESA ID ASSETS WHICH ARE SPARE PARTS AND HAVE NOT BEEN INSTALLED TILL UPTO T HE CLOSE OF THE FINANCIAL YEAR CANNOT BE SAID TO BE ELIGIBLE FOR T HE CLAIM OF ADDITIONAL DEPRECIATION. HENCE THE SAID CLAIM OF THE ASSESSEE IS REJECTED. THUS GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JULY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15 TH JULY 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH 5