DCIT, New Delhi v. M/s. TST Pipes Ltd., Delhi

ITA 3487/DEL/2010 | 2007-2008
Pronouncement Date: 23-12-2010 | Result: Dismissed

Appeal Details

RSA Number 348720114 RSA 2010
Bench Delhi
Appeal Number ITA 3487/DEL/2010
Duration Of Justice 5 month(s) 7 day(s)
Appellant DCIT, New Delhi
Respondent M/s. TST Pipes Ltd., Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 23-12-2010
Date Of Final Hearing 02-11-2010
Next Hearing Date 02-11-2010
Assessment Year 2007-2008
Appeal Filed On 16-07-2010
Judgment Text
I.T.A. NO. 3487/DEL/10 1/4 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER I.T.A. NO. 3487/DEL/2010 ASSESSMENT YEAR : 2007-08 DCIT TST PIPES LTD. CIRCLE-16 2862 BAZAR SIRKIWALAN NEW DELHI. V. HAUZ KAZI DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACT AAACT AAACT AAACT- -- -8800 8800 8800 8800- -- -C CC C APPELLANT BY : SHRI A.K. MONGA SR. DR RESPONDENT BY : SHRI C.S. ANAND ADVOCATE. ORDER PER A.K. GARODIA AM: THIS IS REVENUE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)-XIX NEW DELHI DATED 3.5.200 FOR ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED ONLY ONE GROUND WHICH READS AS UNDER:- THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW BY DECID ING THAT EXPENDITURE INCURRED ON REPLACEMENT OF CAPITAL ASSETS COMPRISING ZINC KETTLES WAS A REVENUE EXPENSES IGNORING THE FACT THAT AT THE TIME OF INITIAL PURCHASE THE ZINC K ETTLES WERE TREATED BY THE ASSESSEE AS CAPITAL GOODS AND THEIR COST WAS CAPITALIZED IN ITS BOOKS OF ACCOUNTS. . I.T.A. NO.3487/DEL/10 2/4 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO. 1 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF `.23 92 114/- UNDER THE HEAD REPAIR & MAINTENANCE OF FACTORY. IT IS FURTHER NOTED BY THE ASSESSING OFFICER T HAT OUT OF THIS EXPENDITURE OF `.6 38 382/- AND EXPENDITURE OF `.6 48 847/- WERE DEBITED AS REPAIR & MAINTENANCE EXPENDITURE ON 2 ND MAY 2006 AND 28.10.2006 RESPECTIVELY FOR REPLACEMENT OF ZINC KETT LES. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE SAME SHOULD NOT B E TREATED AS CAPITAL EXPENDITURE. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE ZINC KETTLES ARE F ABRICATED FOR GALVANIZING THE M.S PIPES. ON INITIAL PURCHASE OF THE SE KETTLES THE COST INCURRED WAS CAPITALZED BUT DURING THE PRODUCTION PR OCESS SOME TIME THESE KETTLES ARE LEAKED AND THEREFORE HAS TO BE DISM ANTLED FOR CARRYING OUT REPAIR WORK IMMEDIATELY WITH A VIEW TO AVOID LOSS OF ZINC LYING IN THE TANK. IT WAS ALSO SUBMITTED THAT BY CARRY ING OUT REPAIR THE KETTLES DO NOT GIVE ADDITIONAL BENEFIT BY WAY OF INC REASE IN PRODUCTION CAPACITY AND THEREFORE THE EXPENDITURE INCURRED ON THE REPAIRS CANNOT BE TREATED AS CAPITAL EXPENDITURE. IT WAS ALSO SUBMITTE D BEFORE THE ASSESSING OFFICER THAT AGAINST THESE EXPENDITURES THE ASSE SSEE LODGED COMPLAINT TO THE INSURANCE COMPANY AND RECOVERED TH E AMOUNT OF ONE KETTLE AND THE SAME WAS CREDITED IN REPAIR & MAINTENA NCE ACCOUNT. THE ASSESSING OFFICER WAS NOT SATISFIED AND HE TREATED EXP ENSES ON ZINC KETTLE AS CAPITAL EXPENDITURE. AFTER ALLOWING OF DEPRECIATION OF `.1 93 085/- @ 15% THE ASSESSING OFFICER MADE NET DISAL LOWANCE OF `.10 74 355/-. BEING AGGRIEVED THE ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE LD CIT (A) WHO HAS DELETED THE DISALLOW ANCE AND NOW THE REVENUE IS IN APPEAL BEFORE US. 4. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER W HEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). . I.T.A. NO.3487/DEL/10 3/4 5. IN POINT NO.18 OF THE SYNOPSIS FILED BY THE LD AR OF THE ASSESSEE IT HAS BEEN SUBMITTED BY THE LD AR OF THE ASSESSEE THAT SI MILAR EXPENDITURE WAS INCURRED BY THE ASSESSEE IN ASSESSMENT YEAR 2006-07 ON REPLACEMENT OF FEW PARTS OF JUTE MILL PLANT. THE EXPENDITURE IN THAT YEAR WAS CLAIMED BY THE ASSESSEE AS REPAIR EXPENSES AND IN THAT YEAR ALSO IT WAS HELD BY THE ASSESSING OFFICER THAT THE SAME I S CAPITAL EXPENDITURE. LD CIT(A) HAS DELETED THE DISALLOWANCE IN THAT YEAR ALSO AND WHEN THE MATTER WAS CARRIED IN APPEAL BY THE REV ENUE BEFORE THE TRIBUNAL THE TRIBUNAL VIDE ITS ORDER DATED 8.12.200 9 IN I.T.NO.3309/DEL/2009 HELD THAT EXPENDITURE IS IN REV ENUE NATURE. IT IS ALSO SUBMITTED THAT THE CLAIM OF THE ASSESSEE IN THE PRES ENT YEAR IS ALSO SIMILAR BECAUSE ZINC KETTLES IS ALSO A PART OF THE P LANT AND THEREFORE IN THE PRESENT YEAR ALSO THE ORDER OF THE LD CIT(A) SHOULD BE CONFIRMED. HE ALSO SUBMITTED A MANUFACTURING PROCESS FO R ERW PIPES AND POINTED OUT THAT ZINC KETTLE IS ONLY A PART OF G ALVANIZING PLANT AND IS NOT A PLANT IN ITSELF. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT A CLEAR FINDING IS GIVEN BY LD CIT(A) IN PARA 7.2 OF HIS ORDER THAT ZINC KETTLE IS O NLY A PART OF MACHINERY WHICH WAS REPLACED AND IT DOES NOT EXIST IND EPENDENTLY. BEFORE US ALSO THE AR OF THE ASSESSEE HAS FURNISHED A COMP LETE CHART OF MANUFACTURING PROCESS BEING CARRIED OUT BY THE ASSESSE E AND IN THE SAME HE HAS GIVEN A PICTURE OF GALVANIZING PLANT AN D IT IS SEEN THAT AS PER THE SAME IT IS NOT AN EQUIPMENT OR PLANT IN ITSE LF. IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2006-07 SIMILAR ISSUE WAS DECI DED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT WHERE SOME PARTS OF THE PLANT WERE REPLACED THE EXPENDITURE I S REVENUE IN NATURE. THE FACTS ARE SIMILAR IN THE PRESENT YEAR ALSO BECAUSE I N THE PRESENT YEAR ALSO ONLY A PART OF GALVANIZING PLANT HAS BEEN PLACED AND IN OUR . I.T.A. NO.3487/DEL/10 4/4 CONSIDERED OPINION IT IS IN THE NATURE OF REPAIR EXP ENSES ALLOWABLE AS REVENUE EXPENDITURE AND HENCE NO INTERFERENCE IS CAL LED FOR IN THE ORDER OF LD CIT(A). THIS GROUND IS REJECTED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . 8. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD DECEM BER 2010. SD/- SD/- (RAJPAL YADAV) (A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 23.12.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. BY ORDER (ITAT NEW DELHI).