Ita v. Saravana

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 6TH DAY OF NOVEMBER 2013/15TH KARTHIKA, 1935 ITA.No. 102 of 2013 -------------------- AGAINST THE ORDER IN ITA 280/2010 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 14-09-2012 ............. APPELLANT/APPELLANT : ----------------------------- COMMISSIONER OF INCOME TAX KOTTAYAM BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENTS : ----------------------------------- MIDAS RUBBER PVT.LTD P JOHN ZACHARIAH BUILDING, KOTTAYAM-686 001. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. Nos. 102 OF 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 6[th] day of October, 2013 Manjula Chellur, C.J. JUDGMENT Heard on admission. This appeal is filed by the revenue aggrieved by the orders of Tribunal dated 14.09.2012for the assessment year 2007-08. 2. The respondent assessee is engaged in the business of manufacturing procured tread rubber. When therewas sudden increase in the expenses, compared to theprevious year, with reference to 90,44,917/- under the head₹“repair and maintenance”, assessee was asked to explain thesudden increase in the expenses. According to the assessee,the sudden increase in the expenses was due to replacing of'Mixing Chamber Assembly', one of the major parts of intermixMachine used for manufacture of rubber compound in theassessee’s establishment. The amount of ₹90,44,917/-includes replacement of rotor shaft assembly of the intermixchamber. On account of replacement of old and worn out ITA No. 102 of 2013 Mixing Chamber Assembly/Rotor Shaft Assembly, the assesseeclaimed it as an amount deductable as 'business expenditure'.The Assessing Officer treated it as a 'capital expenditure' in theassessment which preceeded by a personal visit to the factory ofthe assessee by the Assessing Officer. Aggrieved by the same,the assessee approached CIT (Appeals) and the First appellateauthority did not agree with the assessee’s contention. But theCIT(Appeals) held that the expenditure incurred by the assesseeis a repair expense as the machinery is not replaced but onlyoverhauled and the appeal came to be allowed. 3. Aggrieved by the same, revenue approached theTribunal in I.T.A No.280 of 2010 so far as assessment year2007-08. By a common order, Tribunal disposed of ITANo.467/09 filed by the assessee pertaining to the assessmentyear 2006-07 along with ITA No.280 of 2010. However, we arenot concerned with the assessment year 2006-07, we are onlyconcerned with the assessment year 2007-08 pertaining to ITANo.280 of 2010. The Tribunal after referring to the decision ofSupreme Court inCommissioner of Income Tax v. Saravana ITA No. 102 of 2013 Spinning Mills (P) Ltd.[(2007) 293 ITR 201 SC] held that thefirst appellate authority ultimately opined that in order to explainwhether an expenditure is in the nature of current repair orcapital repair, one has to look into the expenditure with referenceto the establishment. ITA No. 102 of 2013 Spinning Mills (P) Ltd.[(2007) 293 ITR 201 SC] held that thefirst appellate authority ultimately opined that in order to explainwhether an expenditure is in the nature of current repair orcapital repair, one has to look into the expenditure with referenceto the establishment. 4. Tribunal while considering the stand of the assesseeand the revenue referred to a technical report which was placedbefore the Tribunal wherein picture of the intermix machine andthe explanation regarding the function of the unit was shown. Asper the technical report and the detailed explanation, the mixingchamber (chamber assembly) seems to be one of the integralpart of the intermix machine. This chamber assembly is fixed tothe bed plate below the top cylinder. The rotors inside themixing chamber of the internal mixer rotate in opposite directionsthereby the ingredients would getmixed and ultimately rubbercompound is produced which agains has to pass through aconveyor belt in order to have colling of the rubber compound.The chamber assembly has no independent and separate functionunless it is supported with rotars and other parts of the intermix ITA No. 102 of 2013 machine. The rotars inside the mixing chamber of the internalmixer actually mix the mixture, therefore on its own the chamberassembly will not function and has no independent and separatefunction or activity. The raw rubber is injected into the chamberassembly along with other components. After the process ofmixing in the mixing chamber it comes out in the open mill.Therefore, according to the Tribunal, chamber assembly is anintegral part of the intermix machine and opines that the decisionof the Apex Court in Sharavana Spinning Mills has to beunderstood with reference to the actual functioning of the unit.Therefore after referring to the relevant paragraph of SharavanSpinning Mills case that so far as replacement of chamberassembly which is an integral part of intermix machine Tribunalconcluded that it is nothing but a current repair and not a capitalexpenditure. We find no good ground to differ from the opinion ofthe CIT (Appeals) and Tribunal so far as the assessment year2007-08 is concerned with regard to the claim of the assessee.So far as the expenditure incurred on replacement of chamber ITA No. 102 of 2013 -:5:- assembly in the intermix machine, we find no good ground tointerfere with the said opinion of the two appellate authoritieswhich have gone into factual aspect of the matter in order tounderstand the actual functioning of chamber assembly inintermix machine. Accordingly the appeal is dismissed. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge. ttb/07/11