TMI Blog2019 (10) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... t the equipment was already in existence. No new plant or machinery was purchased by the assessee. The relocation of the existing equipment by any stretch of imagination cannot result in creation of any new asset. At best it could have resulted in efficient running of the plant and machinery. Thus, the expenditure on relocation of existing equipment is revenue in nature. In the result, Ground No.II raised by the assessee is allowed. Treating the entire advance licence as taxable in the assessment under appeal - Year of assessment - HELD THAT:- Considering the decisions rendered in the cases of CIT vs Shoorji Vallabhdas Co. [ 1962 (3) TMI 6 - SUPREME COURT] , Morvi Industries Ltd. [ 1971 (10) TMI 5 - SUPREME COURT] and the provisions of section 28(iv) it is unambiguously clear that it is only to the extent that assessee has derived benefits from the licence during the impugned assessment year and the amount is chargeable to tax. Assessee has stated at the bar that in the subsequent assessment year assessee has offered to tax the amount to the extent benefit is derived under the licence. Hence, the Revenue is not deprived of tax on the benefit derived by assessee fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit of tax effect from ₹ 20 Lakhs to ₹ 50 Lakhs for filing of appeals by the Department before the Tribunal. Thus, without going into merit of the issues raised in the appeal, in view of recent CBDT Circular (supra) the present appeal by the Revenue is dismissed on account of low tax effect. 6. Before parting, we clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeal, with the requisite material to show that the appeal is protected by the exceptions prescribed in Para 10 of the Circular dated 11-07-2018 and its amendment dated 20/08/2018. 6.1 In the result, appeal of the Revenue is dismissed. 7. Now, we shall take the appeal by the assessee for assessment year 2005-06. The assessee in this appeal has raised following ground/additional grounds of appeal:- GROUND-1: 1. On the facts and circumstances of the case and in law the Learned Commissioner of Income-tax (Appeals)-12 [ the CIT(A) ] erred in confirming the action of the Asst. Commissioner of Income Tax, Circle 6(3), Mumbai ( the ACIT ) in treating licence received under Served from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng equipment and no new asset had come into existence. Therefore, the expenditure cannot be held on account of capital account. 8.2 In respect of additional ground of appeal, the Ld. Authorized Representative submitted that assessee was granted licence for import to the tune of ₹ 95,60,000/-. The assessee in the P L Account had credited the amount of ₹ 81,96,366/- i.e. to the extent of benefit claimed in respect of advance licence. The Assessing Officer in assessment proceedings made addition of the difference i.e. ₹ 13,63,634/- (₹ 95,60,000 - ₹ 81,96,366). The ld.Authorized Representative of the assessee submitted that Hon ble Apex Court in the case of CIT vs. Excel Industries Ltd.,358 ITR 295(SC) has held that the benefit under advance licence or Duty Entitlement Pass Book scheme represent only hypothetical income, which cannot be brought to tax by applying section 28(iv) of the Act. Thus, in the light of the above judgment, only to the extent of benefit derived by the assessee on advance licence during the period relevant to the assessment year under appeal can be brought to tax. The ld.Authorized Representative of the assessee stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated ceiling tiles in the laboratory. It is apparent from records that the expenditure was incurred on maintenance of the laboratory caused due to normal wear and tear. No new asset has come into existence, thus, we are of the considered view that the expenditure was in the nature of repairs and maintenance and not on capital account. 11.1 Further, the assessee has claimed expenditure on relocation of existing equipment to new Effluent Treatment Plant under the head repairs and maintenance . The Revenue disallowed aforesaid expenditure on the premise that assessee would have got enduring benefit by relocation of the equipment and hence, the expenditure is capital in nature. We do not concur with the findings of the authorities below. It is not disputed by the Revenue that the equipment was already in existence. No new plant or machinery was purchased by the assessee. The relocation of the existing equipment by any stretch of imagination cannot result in creation of any new asset. At best it could have resulted in efficient running of the plant and machinery. Thus, the expenditure on relocation of existing equipment is revenue in nature. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realization of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the ease. Essentially, the Assessing Officer is required to be pragmatic and not pedantic . Thus in view of the law laid down by the Hon'ble Apex Court, it is unambiguousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The detailed findings given by us therein shall apply mutatis mutandis in the facts of present appeal as well. Accordingly, the additional ground of appeal raised by the assessee in assessment year 2006-07 is allowed in similar terms. 22. In the result, appeal of the assessee is partly allowed. ITA NO.3307/MUM/2013,A.Y.2008-09: 23. The ld. Authorized Representative of the assessee submitted that the assessee in this appeal has raised five grounds. The assessee is not pressing Ground No.1. 23.1 The ground no.2 of the appeal is in respect of addition made on account of benefit derived from the licence. The assessee was issued licence under the scheme for the benefit of ₹ 1,86,35,364/-. During the financial year 2007-08 assessee could not use the licence and hence nil amount was offered to tax in respect of licence benefit. The Assessing Officer made addition of the entire amount. The ld. Authorized Representative of the assessee submitted that the submissions made in assessment year 2005-06 equally apply to the assessment year under appeal. The Ld. Authorized Representative submitted that Ground No.3 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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