Itta/509/2013 Of The Commissioner Of Income Tax-Iv v. M/S Nagarjuna Fertilizers And Chemicals Ltd

HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDHON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.509 of 2013 Date: 25.10.2013 Between: The Commissioner of Income Tax-IV,Hyderabad.. AND M/s Nagarjuna Fertilizers and ChemicalsLimited, Punjagutta, Hyderabad. .....Appellant ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAAND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.509 of 2013 JUDGMENT:(per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is preferred against the judgment and order dated27.05.2011 passed by the learned Tribunal in relation to theassessment year 2006-07 and sought to be admitted on the followingsuggested questions of law: (1) Whether on the facts and in the circumstancesof the case, the order of the Tribunal is not perverse? (2) Whether on the facts and in thecircumstances of the case, the Tribunal is correct in lawin setting aside the order of the CIT passed underSection 263 of the Act? (3) Whether on the facts and in thecircumstances of the case, the Tribunal is correct in lawin holding that the expenditure incurred in replacement ofbi-metallic strip is revenue expenditure? We have heard the learned Counsel for the appellant and havegone through the judgment and order of the learned Tribunal. It appears from the record that the Commissioner of IncomeTax (Appeals) in exercise of his direction under Section 263 of theIncome Tax Act, 1961 (for short ‘the Act’) has upset the order of theAssessment Authority. The whole question in this matter is whether the cost ofreplacement of bi-metallic stripper, an integral part of the machinery,can be treated to be a revenue expenditure or capital expenditure. The Assessing Officer is of the view that it is a revenueexpenditure as it is a part and parcel of the manufacturing process ofthe assessee. However, the Commissioner of Income Tax reversedthe said finding on the premise that it is not part and parcel of themanufacturing process and hence it is a capital expenditure anddepreciation was allowed. We are of the view, as rightly concluded by the learned Tribunal, that when the Assessing Officer adopts oneof the courses permissible in law or where two views are possibleand the Assessing Officer has taken one view with which theCommissioner of Income Tax does not agree, it could not be treatedas erroneous order, prejudicial to the interests of Revenue. In anyview of the matter, we find that both the Assessing Officer and thelearned Tribunal found on fact that the aforesaid bi-metallic stripper isan integral part of the plant and has got no independent function so asto qualify as a separate asset and, therefore, the same is allowableas revenue expenditure. This fact-finding is based on materials andas such it cannot be termed to be perverse. The independent functioning of any machine can be deducedfrom the fact that it produces some independent products and it hadbeen the utility in the manufacturing process as a whole, meaningthereby the installation of machine has got enduring benefit. It is notso in this case. Under the aforesaid circumstances, we do not find any elementof law involved for admission of this appeal. Accordingly, the appeal is dismissed. Miscellaneouspetitions, if any pending, shall stand disposed of. No order as tocosts. ___________________ K.J. SENGUPTA, CJ _________________ SANJAY KUMAR, J 25.10.2013 Gsn