High Court Of Madras
CIT vs. Thiagarajar Mills Ltd.
Section 37(1), 80HHC
Asst. Year 1997-98, 1998-99, 1999-2000
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) Nos. 446, 830 & 831 of 2007
11th June, 2007
Counsel Appeared :
J. Narayanaswamy, for the Appellant
JUDGMENT
P.P.S. Janarthana Raja, J. :
Tax Case (Appeal) No. 446 of 2007 is filed under s. 260A of the IT Act, 1961 by the Revenue, against the order of the Tribunal, Chennai Bench ‘C’ in ITA No. 1565/Mds/2004, dt. 21st April, 2006 for the asst. yr. 1999-2000, raising the following substantial questions of law :
“1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that excise duty and sales-tax do not form part of the turnover, for the purpose of calculation of deduction under s. 80HHC ?
2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that additional liability on account of purchase of plant and machinery, which arose due exchange fluctuation has to be treated as revenue expenditure ?”
Tax Case (Appeal) Nos. 830 and 831 of 2007 are filed under s. 260A of the IT Act, 1961, by the Revenue, against the order of the Tribunal, Bench ‘C’, Chennai in ITA Nos. 1673 & 1674/Mds/2003 dt. 23rd Nov., 2005 for the asst. yrs. 1997-98 and 1998-99 respectively, raising the following substantial questions of law :
“1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that excise duty, sales tax and conversion charges do not form part of the turnover, for the purpose of calculation of deduction under s. 80HHC ?
2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that additional liability on account of purchase of plant and machinery, which arose due exchange fluctuation has to be treated as revenue expenditure ?” 2. The facts leading to the above substantial questions of law are as under : The assessee is a company incorporated under the Companies Act. The relevant assessment years are 1999-2000, 1997-1998 and 1998-1999 and the corresponding accounting years ended on 31st March, 1999, 31st March, 1997 and 31st March, 1998 respectively. For the said assessment years, the assessee filed Returns of income and the AO completed the assessments and restricted the benefit under s. 80HHC of the IT Act (“Act” in short) by including excise duty, sales tax and conversion charges to the total turnover. Further, the assessee claimed a portion of additional liability on account of purchase of plant and machinery, which arose due to exchange fluctuation, as revenue expenditure. The AO disallowed the same and treated the additional liability as capital expenditure. Aggrieved by the orders, the assessee filed appeals before the CIT(A). The CIT(A) held that the excise duty, sales- tax and conversion charges are not includible in the total turnover for the purpose of s. 80HHC of the Act. Further, the CIT(A) held that the additional liability on account of plant and machinery which arose due to exchange fluctuation has to be treated as revenue expenditure. Aggrieved, the Revenue filed appeals to the Income-tax Appellate Tribunal (“Tribunal” in short). The Tribunal dismissed the appeals and confirmed the orders of the CIT(A). Hence the present appeals by the Revenue.
Learned standing counsel appearing for the Revenue fairly stated that the issue in respect of question No. 1 in both the tax cases, stand covered by the Supreme Court’s judgment in the case of CIT vs. Lakshmi Machine Works (2007) 210 CTR (SC) 1 : (2007) 290 ITR 667 (SC). Hence, in respect of question No. 1 in both the tax cases, no substantial questions of law arise for consideration of this Court. In respect of question No. 2 in both the tax cases, it is seen that the Tribunal followed the assessee’s own case relating to the earlier asst. yr. 1995-96 and held as follows :
“It transpires that this issue, on identical facts, has been decided in favour of the assessee by this Tribunal in ITA No. 1778/Mad/1998 in assessee’s own case for the asst. yr. 1995-96. In this decision, the Tribunal had placed reliance on Hon’ble Madras High Court decision in Lakshmi Card Clothing Manufacturing Co. (P) Ltd. vs. CIT (1984) 149 ITR 716 (Mad) wherein it was held that additional liability arising out of devaluation can be taken to be of the same character as of the original receipt or the original liability and it cannot be taken to be having a different character. Adhering to the doctrine of binding precedents, we uphold the order of the CIT(A) treating the liability on exchange fluctuation of machinery which was claimed as replacement in earlier year as revenue expenditure.” It is seen that the Tribunal consistently following the issue in favour of the assessee for the earlier assessment years, by relying on this Court judgment in the case of Lakshmi Card Clothing Manufacturing Co. (P) Ltd. vs. CIT (supra). The Revenue is unable to bring to our notice any compelling reason to take a different view and also there is no detail as to whether the Revenue has preferred any appeal against the earlier Tribunal orders or not. In view of the same, we do not find any error or legal infirmity in the orders of the Tribunal so as to warrant interference. Under the circumstances, no substantial questions of law arise for consideration of this Court in respect of question No. 2 in both the tax cases.
5. In the result, no substantial questions of law arise for consideration of this Court and accordingly, the tax cases are dismissed. Consequently, Misc. Petn. No. 1 of 2007 in Tax Case (Appeal) No. 831 of 2007 is closed. No costs.
[Citation : 296 ITR 717]
