TMI Blog2014 (1) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... nal authority and the cancellation/setting aside becomes final, no interest under section 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order - Following The Commissioner of Income Tax-1, Mumbai Versus M/s. Chika Overseas Pvt. Ltd [2011 (11) TMI 118 - BOMBAY HIGH COURT] – Interest u/s 220 of the act could not be sustained – Order of the CIT(A) set aside – Decided in favour of Assessee. Interest u/s 234B and 234C of the Act – Held that:- Levy of interest u/s 234B and 234C in mandatory in nature - the interest is charged for contravening the provisions of the Act i.e. non-payment of advance tax within the stipulated time - The provision is compensatory in nature inasmuch as the Revenue is deprived of such payment which should not have been made on an earlier date – there was no infirmity in the order of the CIT(A) – Decided against Assessee. - ITA No. 1870/Mds/2012 - - - Dated:- 20-2-2013 - N. S. Saini And Shri Vikas Awasthy,JJ. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer on the expenditure incurred on replacement of machinery; ii) Levy of interest under section 220(2) of the Income Tax Act, 1961; iii) Levy of interest under section 234B 234C of the Act. Ground no. 2 and 3 of the assessee was out-rightly dismissed by the CIT(A). The CIT(A) held that levy of interest under section 220(2) is not appellable. As regards interest under section 234B 234C, it is mandatory. However, with regard to ground no.1, the CIT(A) partly allowed the expenditure as revenue . The CIT(A) directed the Assessing Officer to allow the claim of the assessee to the extent of Rs. 40,17,571/- as revenue expenditure under section 37 of the Act. The balance amount incurred for replacement of machinery was held as capital expenditure, the Assessing Officer was directed to allow depreciation thereon as per the provisions of the Act. Aggrieved against the order of the CIT(A), the assessee has come in second appeal before the Tribunal. 4. Shri K.Ravi, Advocate appearing on behalf of the assessee submitted that the CIT(A) has erred in upholding the findings of the Assessing Officer in disallowing expenditure to the tune of Rs. 5,79,90,214/- inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the levy of interest under section 234B and 234C the learned counsel for the assessee submitted that interest under aforesaid sections cannot be levied unless the same is mentioned in the assessment order. No such interest was charged in the original assessment order, therefore, now interest cannot be charged under section 234B and 234C of the Act. The learned counsel in order to support his contentions relied on the judgement of the Hon ble Allahabad High Court in ITA No.81 of 2002 in the case of CIT Vs. M/s. Deep Awadh Hotels (P) Ltd., decided on 3.8.2011 and the judgement of the Hon ble High Court of Uttarakhand in ITA No.15 of 2006 in the case of CIT Vs. M/s.Dehradun Club Ltd. decided on 14th October, 2011. 7. On the other hand, Shri Anirudh Rai appearing on behalf of the Revenue vehemently supporting the order of the CIT(A) submitted that the replacement of machinery carried out by the assessee has substantially improved the functioning and quality of the machinery. The DR contended that even though the production capacity has remained the same yet, the expenditure incurred on replacement cannot be allowed as revenue expenditure. However, the assessee is entitled to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Jute Company Ltd., Vs. CIT reported as 124 ITR 1(SC) has observed that this test, as the parenthetical clause shows, must yield where there are special circumstances leading to a contrary conclusion. The learned counsel for the assessee pointed out that there is no enduring benefit from the replacement of machinery. The counsel for the assessee has relied on the judgement of the Hon ble Madras High Court in the case of Super Spinning Mills Ltd. (supra) to say that it is essential that there should be a specific finding with regard to enduring nature of the assets or the increase in the production capacity by virtue of replacement of machinery parts. 11. On the other hand, the D.R. relied on the order of the co-ordinate Bench of the Tribunal in the case of Sri Balasubramania Mills Ltd.(supra) and The Kumaran Mills Ltd., (supra). The Tribunal has relied on the judgement of the Hon ble Madras High Court in the case of CIT Vs. Madura Coats reported as 205 Taxman 357 (Madras), wherein it has been held that whether the mill is an integrated whole or not, whether the replacement of machines resulted in increased capacity or not, will have no bearing and when any item belonging t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts value is added to the block. In view of the above, it is submitted that the third substantial question of law is also covered as per the judgment of this Court dated 25.04.2011 in Tax Case (Appeals) Nos. 71 72 of 2008. In view of the said submission made by the learned counsel for the appellant, we hold that the third question of law is also answered in favour of the revenue and against the assessee. In view of the above discussion, we uphold the findings of the CIT(A) on the issue and dismiss this ground of appeal of the assessee. 12. The next issue raised by the assessee is with regard to levy of interest under section 220(2) of the Act. The Assessing Officer vide assessment order dated 21.12.2011 has levied interest under section 220(2) for the period of 35 months from 1.2.2009 to 31.12.2011. 13. The counsel for the assessee has submitted that since the original assessment order was set aside and the Tribunal had remanded the matter back to the Assessing Officer for deciding the issue afresh after taking into consideration the judgement passed by the Hon ble Supreme Court of India, interest under section 220(2) cannot be levied from the date of original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order has been passed by the Assessing Officer, the demand notice period specified under section 220(1) has to be taken into consideration from the date of passing of the fresh assessment order. The assessee is liable to pay demand within thirty days from the service of the demand notice in pursuance of the assessment order dated 21.12.2011. If the assessee fails to pay the amount demanded within the period specified under section 220(1), the assessee is liable to pay interest u/s.220(2) of the Act. On this issue, we do not agree with the findings of CIT(A). Our view is further fortified by the Hon ble Bombay High Court in the case of CIT Vs. Chika Overseas (P) Ltd. (supra) and the judgement of the Hon ble Supreme Court of India in the case of Vikrant Tyres Ltd. (supra). In view of our above finding, this ground of appeal of the assessee is allowed. 17. The third issue in the appeal is with regard to levy of interest under section 234B 234C of the Act. The counsel for the assessee submitted that in the original assessment order no such interest was charged. No reason whatsoever was given for levy of interest under section 234B 234C of the Act by the Assessing Officer. Withou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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