TMI Blog2014 (12) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 - BOMBAY HIGH COURT] - the AO was not justified in computing the disallowance by invoking the provisions of Rule 8D of the I.T. Rules, 1962 - the AO has observed that during the financial year, the assessee has received dividend income of ₹ 19,31,316/- and Long Term Capital Gain on the sale of Equity shares which is exempt under the IT Act - The AO has observed that the assessee has not given details as to when shares were acquired and what was the source of financing cost of acquisition of shares, etc. in earlier years and current year - the assessee has earned exempt income, therefore the expenditure related to earning of such income would be disallowable in terms of the provisions of section 14A of the Act - disallowance of ₹ 2,05,481/- is restricted to disallowance of ₹ 1 lac – Decided partly in favour of assessee. - ITA No (s) 1446/Ahd/2010, No.183/Ahd/10, 3183/Ahd/2010 - - - Dated:- 30-10-2014 - Shri Anil Chaturvedi And Shri Kul Bharat,JJ. For the Petitioner : Shri Roopchand Sr. DR For the Respondent : Shri Bhavin Marfatia,AR ORDER Per Shri Kul Bharat, Judicial Member : The Revenue and the Assessee both have challenged the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove grounds as may be deemed necessary. Relief claimed in appeal The order of the CIT(Appeals) to the above extent may be set aside and that of the Assessing Officer be restored. 3. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 02/09/2008, thereby the Assessing Officer (AO in short) made disallowance/additions on account of repairs and maintenance to plant machinery treated as revenue in nature instead of capital in nature and addition made invoking provisions of section 14A and also disallowances of ₹ 3,14,275/- u/s.80IA(4) of the Act. 4. First ground is against the deletion of addition amounting to ₹ 23,64,019/- made on account of the capital expenditure. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the addition. He submitted that the ld.CIT(A) has wrongly applied the judgement of Hon ble Apex court rendered in the case of CIT vs. Saravana Spinning Mills Pvt.Ltd. reported at (2007) 293 ITR 201(SC). He submitted that the expenditure is incurred for enduring benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come in the connotation of the word current repairs in section 31(i) of the said Act because the assessee does not replace the Air-Condition Machine. At the highest, he replaces a part of the air-condition machine. So is the case of the picture tube in a television set, when the picture tube is replaced the television set is not replaced, therefore, such repairs alone can come within the connotation of the word current repairs in section 31(i) of the said Act as it stood at the material time. They are effected to preserve and maintain the asset, viz, air-conditioner or carding machine. 4.3.1. Hence, judicial opinion is quite clearly articulated to the effect that replacement of one or more part(s) of capital asset would constitute revenue expenditure and not capital expenditure. If preservation of the capital asset entails replacement of worn-out parts, such expenses would be revenue in nature. 4.3.2 So far as item no.(1) above is concerned in respect of ₹ 3,11,405/-, it is seen that the expenses were incurred on purchase of band knives for use in splitting machine. The nature of the items indicates that it is a spare part which requires frequent replacement. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred on removing roller jam. For AY 2006-07 in ITA No.1105/A/2010 in the case of the Assessee on similar issue addition was deleted. Refer paper book page no.161 to 165, particularly page no.164-165. 3 2,21,126 83 -88 The expenses are incurred for repairing of Oil Gap Dial Guage for Calendar Machine. This is also called Thickness Guage. This guage is used to measure the gap between 2 rollers. Consumpton of material, control and monitoring of sheet thickness is possible due to this guage. The expenses are incurred on routine repairs and does not create any new asset nor increase the productive capacity. The expenses are mainly on replacement of worn out parts. 4 4,60,308 89 -89 The expenses are incurred on spares of furnace. The expenses are incurred mainly on replacement of shares used to measure the furnace temperature, excess temperature, zone temperature, detect flame, measure and control of conveyor speed, etc. The expenses mainly on account of consumables and therefore not capital in nature. Utility of each and every part is mentioned on pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition. 7.1. On the contrary, ld.counsel for the assessee submitted that the issue has already been decided by the Tribunal (ITAT D Bench Ahmedabad) in favour of assessee in the case of group-concern M/s. Aluminium Ltd.- Revenue s appeal for AY 2007-08 in ITA No.1106/Ahd/2010 dated 25/10/2012. He drew our attention towards page Nos.175 to 180 of the paper-book. 8. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that in this case also, the ld.CIT(A) in para-6 of his order has given an elaborate finding and followed the decision(s) of the Coordinate Bench (ITAT Mumbai Bench) rendered in case of West Coast Paper Mills vs. ACIT (103 ITD 19) and ITAT Chennai Bench rendered in the case of Mohan Breweries Distilleries Ltd. vs. ACIT (114 TTJ 532) and other case-laws. Therefore, we do not any infirmity in the finding of the ld.CIT(A), same is hereby upheld. 9. As a result, Revenue s appeal is dismissed. 10. Now, we take up the Assessee s Cross-Objection No.183/Ahd/2010 for AY 2007-08 (arising out of ITA No.1446/Ahd/2010 - AY 2007-08), wherein following grounds have been raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration, the assessee has received dividend income of ₹ 19,31,316/- and Long Term Capital Gain on the sale of Equity shares which is exempt under the IT Act. The AO has observed that the assessee has not given details as to when shares were acquired and what was the source of financing cost of acquisition of shares, etc. in earlier years and current year. It is not disputed that the assessee has earned exempt income, therefore the expenditure related to earning of such income would be disallowable in terms of the provisions of section 14A of the Act. 12.1. After considering the totality of the facts of the case, a reasonable view has to be taken and disallowance of ₹ 2,05,481/- is restricted to disallowance of ₹ 1 lac. Thus, this ground of assessee s cross objection is partly allowed. 13. Ground No.2 is against in charging the interest u/s.234B and 234D of the IT Act, 1961. This issue is consequential in nature. 14. Ground No.3 is general in nature needs no independent adjudication. 15. As a result, assessee s cross objection is partly allowed. 16. Last, we take up the assessee s appeal in ITA No.3183/Ahd/2010 for AY 2000-01. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to Annexure F which is not filed before the undersigned. In any case the Settlement Commission has not passed the final order agreeing with the contentions of the appellant. There is no note in the return for AY 00-01 which would provide a clarification to the AO about the proceedings before the Settlement Commission. In my humble view thus the AO was justified in rejecting the application u/s 154 on the ground that there is no mistake apparent from record. 17.1. The ld.counsel for the assessee has placed on record the order dated 28/05/2007 of the Income Tax Settlement Commission (Additional Bench) Mumbai Bench in Settlement Application Nos.10/B/030/1999- 2000/IT, 10/B/001/2000-2001/IT and 10/B/022/2000-2011/IT in the case of assessee. Therefore, after considering the totality of the facts, we are of the considered view that the claim of the assessee is required to be verified at the level of AO. If the AO finds that the contention of the assessee is correct as per the order of the Income-tax Settlement Commission, then the AO is directed to rectify the mistake by exercising his power vested u/s.154 of the Act. Thus, the appeal of the assessee is allowed for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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