High Court Of Allahabad
CIT, Meerut Vs. Jindal Ployster Ltd.
Section 37(1), 43(1), 254
Pankaj Mithal And Vinod Kumar Misra, JJ.
IT Appeal No. 378 Of 2006
May 31, 2017
ORDER
Vinod Kumar Misra, J. – Commissioner of Income Tax, Meerut and Joint Commissioner of Income Tax, Special Range, Ghaziabad have preferred this appeal under Section 260-A of the Income Tax Act, 1961 against M/S Jindal Ployster Ltd., 19th Km. Hapur Bulandshahr Road, Gulaethi against the judgment and order dated 6.1.2006 passed by the Income Tax Appellate Tribunal in Appeal No. 4020/DEL/2001.
2. On 11.5.2017 after formulating the three substantial questions of law in this appeal the judgment was reserved. The substantial questions of law are as follows:—
“(1) Whether the custom duty paid on the purchase of plant and machinery would be a capital or a revenue expenditure?
(2) Whether the depreciation on the purchase of plant and machinery is admissible on the actual cost of the plant and machinery excluding the custom duty, which was paid subsequent? and
(3) Whether the Income Tax Appellate Tribunal was justified in returning a finding on the question of deduction permissible on account of revenue expenditure even though no such plea was raised before it?”
3. We have heard Sri Subham Agarwal, learned counsel for the department and Sri Rupesh Jain, learned counsel for the assessee, respondent.
4. Our findings on formulated questions of law are as under:
The substantial question of law no. 1 :Whether the custom duty paid on the purchase of plant and machinery would be a capital or a revenue expenditure?
5. Respondent, assessee has imported plant and machinery in the earlier years and availed custom duty exemption thereon, as the assessee unit was 100% export oriented unit under EPCG Scheme. During the relevant previous year assessee company has debonded one of the units of film plant at Nasik from original 100% Export Oriented Unit to EUO system. The amount of custom duty at the rate of 10% of the imported capital goods was paid by the assessee and added to the cost of fixed assets. This amount so paid was Rs. 8,19,44,049/-. The assessee claimed depreciation on the new cost value of the plant by adding the excise duty in it and then alternate assessee claimed exemption as business expenditure. Assessing Officer did not allow either depreciation or allow the claim of assessee as business expenditure. Learned Income Tax Appellate Tribunal accepted the plea of assessee regarding expenditure of Rs. 8,19,44,049/- and returned the finding that assessee is entitled to deduction either by way of depreciation or by way of allowance of entire expenditure, as revenue expenditure as it has been incurred wholly and exclusively for the purpose of business. Since Income Tax Appellate Tribunal has accepted the plea of assessee that the amount of Rs. 8,19,44,049/- can be treated as revenue expenditure, as it has been incurred wholly and exclusively for the purpose of business, as the above mentioned amount was paid as excise duty, as assessee has converted its unit from 100% EOU under EPCG Scheme to DTA Unit and would sell goods in domestic market so this amount was paid for the more profitable business and finding of the tribunal in this regard treating the above amount as revenue expenditure in the alternate cannot be found faulty. Consequently, the first substantial question of law is answered in favour of assessee and against the revenue.
6. The substantial question of law no. 2 : Whether the depreciation on the purchase of plant and machinery is admissible on the actual cost of the plant and machinery excluding the custom duty, which was paid subsequent?
7. Learned counsel for the department submitted that depreciation on the purchase of plant and machinery is admissible on the actual cost of plant and machinery excluding the custom duty, which was paid subsequently. Learned counsel for the appellant submitted that when once actual cost of plant and machinery was determined then it would remain static in subsequent assessment years, as cost of plant and machinery could not be changed subsequently.
8. Learned counsel for the respondent – assessee submitted that this controversy has been laid at rest by the Hon’ble Supreme Court in Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294/60 Taxman 412. Hon’ble Supreme Court has opined in the above case that it is incontrovertible that, under Section 43 (1) read with Section 43 (6), the Officer has to determine the actual cost for all assets, new and old, and the definition in Section 43 (1) only requires that, at the time of doing so, he has to examine whether the actual cost has been fully met out by the assessee or has been met by someone else in whole or in part. The words “has been met” squarely fit into this reading of the section and the use of those words does not restrict the definition in Section 43 (1) to assets acquired in the previous year and moreover, in appeal the representative of the department conceded that the judgment of the Hon’ble Supreme Court in Saharanpur Electric Supply Co. Ltd’s case (supra) was directly on this issue and was in favour of the assessee. So depreciation will be computed on the cost of plant and machinery and in its cost custom duty will also be added. In this regard the reasoning and the finding given by the tribunal is in accordance with law laid down by Hon’ble Apex Court in Saharanpur Electric Supply Co. Ltd’s case (supra).
9. Consequently, the substantial question of no. 2 is answered in favour assessee and against the department.
10. The substantial question of law no. 3: Whether the Income Tax Appellate Tribunal was justified in returning a finding on the question of deduction permissible on account of revenue expenditure even though no such plea was raised before it?
11. In so far as question of law no. 3 is concerned learned counsel for the appellant submitted that finding on the question of deduction is permissible on account of revenue expenditure was not justified, as no such plea was raised before Income Tax Appellate Tribunal.
12. On the other hand, learned counsel for the assessee submitted that Rule 27 of the Income Tax Appeal Rules permits the assessee to support the order of CIT (Appeals) on any grounds that have been decided against him even though he has not appealed against it.
13. A bare reading of Rule 27 manifests that the assessee without having filed any cross appeal or cross objection can support the impugned order on any grounds decided against him.
14. This is contained in the later part of the Rule, which provides that the respondent may support the order appealed against on any of the grounds decided against him. A cursory reading of this part divulges that the respondent can support the impugned order on any of the ground, which were decided against him.
15. In the present case assessee has taken this ground before Commissioner (Appeals) and if he has not further challenged the finding on this ground then as per Rule 27 of the Income Tax Rules assessee can advance his arguments even though he has not filed cross objection against the finding on the assessee against him. So learned ITAT did not commit any mistake in permitting the assessee to support the order of C.I.T. (Appeals) on the ground that have been decided against him. Consequently, this question of law is also decided against the revenue and in favour of the respondent, assessee.
16. Consequently, the appeal is liable to be dismissed.
17. The appeal is, accordingly, dismissed.
[Citation : 397 ITR 282]
