The Principal Commissioner Of Income Tax (Central), Ahmedabad v. Nirma Limited

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 346 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL),AHMEDABAD VersusNIRMA LIMITED ========================================================== Appearance: M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA andHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 01/08/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. The revenue has preferred this appealunder section 260A of the Income Tax Act, 1961 [for short ‘the Act, 1961’] being aggrieved by the order dated 24.02.2022 passed by the Income Tax AppellateTribunal, “D” Bench, Ahmedabad [for short‘theTribunal’]inITANo.1187/AHD/2013/A.Y.2000-01. 2. Following substantial question of law isproposed: “Whether on the facts and in thecircumstances of the case, and in law,the Appellate Tribunal has erred inholdingtheexpensesofRs.70,28,41,657/- incurred for setting upof Soda Ash Project and Lab FrontedProject as revenue in nature?” 3. It is the case of the revenue that theassessee-Company in the computation ofincome tax treated the expenses of Rs.70,28,41,657/- as revenue expenditure butthe Assessing Officer, while framing theassessment under section 143(3) read withsection 254 of the Act, 1961, consideredthe same as capital expenditure. 4. Being aggrieved, the assessee preferred an Appeal before the CIT (Appeals). The CIT(Appeals) confirmed the order passed bythe Assessing Officer. 5. Being aggrieved, the assessee therefore preferred appeal before the Tribunal who, by the impugned order, reversed the order of the CIT (Appeals) by treating the expenses in question as revenue in nature by relying upon the decision of this Courtin the case of the assessee reported in367 ITR 12(Guj.).in the case of the assessee reported in367 ITR 12(Guj.). 6. The Tribunal, while allowing the appeal filed by the assessee, recorded the findings of fact that the proceedings before the Tribunal was in 3[rd] round of litigation and on the earlier occasion, the Tribunal had set aside the issuepertaining to the claim of the assesseefor Soda Ash Project expenses and Lab Frontend Project expenses as revenueexpenditure as such projects were part ofthe existing business of the assessee. 7. The Tribunal followed the decision of thisCourt reported in 367 ITR 12 in the owncase of the assessee wherein, this Courthas held as under: “9. Having heard the learned counselfor the parties and having perused thedocuments on record, we notice thattheCommissionerofIncome-Tax(Appeals)andtheTribunal concurrently came to the conclusionthat there was interconnection, inter-lacing and inter-dependence of themanagement,financialandadministrative control of variousunits of Nirma Limited. It was on thisground, the Tribunal held that thebusiness in question is continuationof the existing business and not a newbusiness. In this context, thedecision relied on by the authoritiesbelow of this Court in the case ofAlembic Glass Industries Ltd (supra)laid down tests for ascertainingwhether a business was part ofexisting business or the assessee wasstarting a new unit. It was held that merely because the unit was coming toa distant point by itself would notmean that it was a new business. concurrently came to the conclusionthat there was interconnection, inter-lacing and inter-dependence of themanagement,financialandadministrative control of variousunits of Nirma Limited. It was on thisground, the Tribunal held that thebusiness in question is continuationof the existing business and not a newbusiness. In this context, thedecision relied on by the authoritiesbelow of this Court in the case ofAlembic Glass Industries Ltd (supra)laid down tests for ascertainingwhether a business was part ofexisting business or the assessee wasstarting a new unit. It was held that merely because the unit was coming toa distant point by itself would notmean that it was a new business. 10. If the facts as recorded by theCommissioner of Income tax (Appeals)and the Tribunal can be said to haveachieved finality, it would emergethat the assessee through its existingadministrative mechanism started a newfacility for production of soda ashand had also set up facility forproduction of a material called “lab”for its captive consumption for thepurpose of its existing manufacturingbusiness. It is no doubt that theassessee is engaged in the business ofmanufacture of soap and the soda ashand “lab” so produced is used by wayof captive consumption. When suchfacts viewed in light of the findingsof the Commissioner of Income-Tax(Appeals) and the Tribunal, we have noreason to interfere with the ultimateconclusion. Had it been a case ofentirely a new project undertaken bythe assessee as canvassed by thecounsel for the Revenue, a seriousquestion of claiming pre-operativeexpenditure of interest by way ofrevenue expenditure would arise.However, when the authorities belowfound that it was an expansion of theexisting business, applying the testslaid down by this Court in the case ofAlembic Glass Industries Ltd (supra)in view of the decision of the Supreme Court in the case of Dy. CIT v. CoreHealth Care Ltd [2008] 298 ITR 194/167Taxman 206(SC), the fact whether theborrowing is capital or revenueexpenditurewouldbeofnoconsequence.” 8. In view of the above, it cannot be saidthat the Tribunal has committed any errorin allowing the appeal of the assesseeholding that the expenses incurred forsetting up Soda Ash Project and LabFrontend Project are revenue in nature. Weare therefore of the opinion that noquestion of law much less any substantialquestion of law arises proposed orotherwise from the impugned order of theTribunal. The Appeal is accordinglydismissed. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J)