Commissioner Of Income Taxchennai v. M/S.southern Petrochemicalindustries Corpn. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.07.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A) Nos.1039 to 1042 of 2007and M.P.Nos.1 of 2007 Commissioner of Income TaxChennai. ..Appellant inall T.Cs./Appellant Vs. M/s.Southern PetrochemicalIndustries Corpn. Ltd.,97, Main Road, Guindy, Chennai...Respondent inall T.Cs./Respondents Appeals under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'B' Bench dated27.1.2006 in ITA Nos.1256, 1337, 1337 and 1257/Mds/2001 for the assessmentyears 1993-94 to 1996-97. TC(A).No.1039 of 2007 : Against the order of the Commissioner of Income Tax (Appeals) V,Chennai 34 dated 23.05.2001 in ITA.No.101/1996-97 against order dated20.03.96 in PAN/GI.No. for the assessment year 1993-94 of theDeputy Commissioner of Income Tax, Special Range VI, Chennai - 34. TC(A).No.1040 of 2007 : Against the order of the Commissioner of Income Tax (Appeals) V,Chennnai - 34, dated 23.05.2001 in ITA.No.523/1997-98 against the orderdated 12.12.97 in PAN/GI.No. for the Assessment year 1995-96 ofthe Deputy Commissioner of Income Tax, Special Range VI, Chennai - 34. https://hcservices.ecourts.gov.in/hcservices/ Against the order of the Commissioner of Income Tax (Appeals) V,Chennnai - 34, dated 23.05.2001 in ITA.No.46/1999-2000 against the orderdated 12.03.99 in PAN/GI.No. for the Assessment year 1996-97 ofthe Joint Commissioner of Income Tax, Special Range VI, Chennai - 34. TC(A).No.1040 of 2007 : Against the order of the Commissioner of Income Tax (Appeals) V,Chennnai - 34, dated 30.05.2001 in ITA.No.477/1996-97 against the orderdated 11.12.96 in PAN/GI.No. for the Assessment year 1994-95 ofthe Deputy Commissioner of Income Tax, Special Range VI, Chennai - 34. For Appellant: Mr.J.Naresh Kumar Stg.Counsel for ITJ U D G M E N T (Delivered by P.D.DINAKARAN,J.) The above tax case appeals are directed against the common order ofthe Income Tax Appellate Tribunal dated 27.1.2006 made in ITA Nos.1256,1257, 1337 and 1338/Mds/2001, raising the substantial questions of law,viz., "(i) Whether in the facts and circumstances of the case, theTribunal was right in holding that the expenditure for issue ofdebentures and fixed deposits is a revenue expenditure ? (ii) Whether in the facts and circumstances of the case, theTribunal was right in holding that stand by assets which are notput to use during the relevant year are entitled to depreciation?" under the following facts and circumstances of the case. 2. The assessment years involved in these appeals are 1993-94 to1996-97 respectively, during which the assessee claimed deduction ofexpenditure incurred on issue of debentures and collection of fixeddeposits as a revenue expenditure. The assessing officer disallowed theclaim, as also the depreciation on stand by machinery. Aggrieved by theassessment orders, the assessee filed appeals before the Commissioner ofIncome-tax (Appeals), who allowed the same following the earlier orders,which, on appeals at the instance of the Revenue, was confirmed by theAppellate Tribunal. Hence, the present tax case appeals raising thesubstantial questions of law referred to above. https://hcservices.ecourts.gov.in/hcservices/ 3. It is fairly submitted by the learned standing counsel appearingfor the Revenue that the issues raised in these tax case appeals arecovered against the Revenue by the earlier decision of this Court in theassessee's own case for the assessment years 1985-86 and 1986-87 in T.C.(A) Nos.74 and 75 of 2003 by judgment dated 29.01.2007. https://hcservices.ecourts.gov.in/hcservices/ 3. It is fairly submitted by the learned standing counsel appearingfor the Revenue that the issues raised in these tax case appeals arecovered against the Revenue by the earlier decision of this Court in theassessee's own case for the assessment years 1985-86 and 1986-87 in T.C.(A) Nos.74 and 75 of 2003 by judgment dated 29.01.2007. 4.1. With respect to the first issue, this Court, in T.C.(A) Nos.74and 75 of 2003, after referring to the decision of the Apex Court in IndiaCements Ltd. v. C.I.T. (60 ITR 52), the decision of the Bombay High Courtin C.I.T. v. Mahindra Ugine and Steel Co. Ltd. (250 ITR 696) and thedecision of this Court in C.I.T. v. Investment Trust of India Ltd. (264ITR 506), held that the expenses relating to obtaining fixed deposits areclosely linked with the business requirement of the assessee and hence,such expenses are allowable expenses. 4.2. That apart, the same Division Bench of this Court in a recentdecision in Commissioner of Income-tax v. South India Corporation(Agencies) Ltd. [(2007) 290 I.T.R. 217], while deciding the questionwhether the Tribunal was right in holding that 60 per cent of the expensesincurred on partly convertible debentures had to be allowed as deduction,after referring to the decision of the Apex Court in India Cements Ltd. v.C.I.T. (60 ITR 52), referred supra, and the decision of the Delhi HighCourt in C.I.T. v. Thirani Chemicals Ltd. [(2007) 290 ITR 196], held thatthe Tribunal correctly held that the disallowance of 60 per cent ofdebenture expenses was without any basis and the Assessing Officer waswrong in treating part of the expenditure as capital expenditure and thus,the entire expenditure was deductible. 4.3. In view of the above settled propositions of law, we hold thatthe expenditure incurred on issue of debentures and collection of fixeddeposits are revenue expenditure. 5.1. With regard to the second issue, this Court in the samejudgment, viz., in the assessee's own case in T.C.(A) Nos.74 and 75 of2003, dated 29.01.2007, referred supra, referred to the followingdecisions:-(i)CIT v. Viswanatha Bhaskar Sathe (5 ITR 621) (Bom.);(ii) Liquidators of Pursa Ltd. v. Commissioner of Income-tax(Appeals) (25 ITR 265) (SC); and(iii)C.I.T. v. Vayithri Plantations Ltd. (128 ITR 675)(Mad.) and held that the assessee is entitled to depreciation on spare partswhich are standby items even though they were not taken for use during theaccounting year. 5.2. In view of the above, we hold that the stand by assets which arenot put to use during the relevant year are entitled to depreciation. Since the issues had already been decided by this Court in theassessee's own case in T.C.(A) Nos.74 and 75 of 2003 by judgment dated29.01.2007, we find no error or illegality in the order of the Tribunal.Accordingly, finding no substantial question of law arises forconsideration, the tax case appeals are dismissed. Consequently,connected miscellaneous petitions are also dismissed. Sd/Asst.Registrar /true copy/ sra Sub Asst.Registrar To 1.The Assistant Registrar,Income Tax Appellate Tribunal"D" Bench, Madras. 2.The Commissioner of Income-Tax (Appeals), Chennai. 3.The Deputy Commissioner of Income-tax, Special Range-VI, Chennai. 4. Income-Tax Appellate TribunalRajaji Bhavan, III Floor,Besant Nagar, Chennai - 90. ASM(CO)RVL 30.07.2007 https://hcservices.ecourts.gov.in/hcservices/