2013 (4) TMI 737 - AT - Income Tax

Non Est Return - Claim of deduction u/s 80IA - ITR was filed within prescribed time limit without claim the deduction - Fresh deduction claim in the revised return u/s 139(5) - Deduction not allowed unless return furnished u/s 80AC within the prescribed time limit - CIT(A) allowed the claim of the assessee. HELD THAT - According to Section 139 (1), Revised return can be filed at any time before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier . The Assessee had filed a revised return before expiry of one year from the relevant assessment year and therefore the return filed is a valid return as per the provisions section 139(5). - The contention of the Revenue that, the assessee had not made any claim in its original return filed under section 139(1), no deduction is allowable under section 80IA of the Act, in view of the provisions of section 80AC, has no force. Order of CIT(A) allowing the claim sustained. Recurring Expenditure - replacement of certain machinery - Revenue Expenditure u/s 35(1)(i) - A.O. treated the cost of replacement of certain machinery in its spinning mill, as capital expenditure. Out of the said amount, the Commissioner of Income Tax (Appeals) allowed Rs. 4,23,588/- representing the cost of multi drum filter as revenue expenditure stating that these filters have to be constantly replaced on account of deterioration in filtering capacity. Revenue filed an appeal. HELD THAT - A.O. is directed to allow the cost of replacement of multi drum filter as revenue expenditure. Revenue Appeal Dismissed.

Summary

Issues Involved:
1. Deduction under Section 80IA of the Income Tax Act.
2. Treatment of expenditure on replacement of machinery as capital or revenue expenditure.

Detailed Analysis:

Issue 1: Deduction under Section 80IA of the Income Tax Act

The primary issue revolves around the assessee's claim for deduction under Section 80IA, which was initially denied by the Assessing Officer (AO). The assessee, a private limited company engaged in the manufacture and sale of cotton yarn, polyester, sewing threads, and processed fabrics, filed its original return for the assessment year 2008-09 on 29.9.2008, and subsequently filed a revised return on 16.9.2009. The AO completed the assessment on 31.12.2010, determining the income at Rs. 6,75,24,121/- and disallowed the deduction under Section 80IA on the grounds that the revised return claiming the deduction was filed beyond the due date specified under Section 139(5).

The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's claim, noting that a revised return was filed within the permissible time limit on 31.3.2010, claiming a deduction of Rs. 37,27,928/-. The Department contended that the revised return filed on 15.12.2010 was non-est and beyond the time limit, thus the deduction should not be allowed as per Section 80AC, which mandates that the return claiming the deduction must be filed on or before the due date specified under Section 139(1).

The Tribunal upheld the CIT(A)'s decision, emphasizing that the revised return filed on 31.3.2010 was within the time limit specified under Section 139(5), and thus valid. The Tribunal noted that the assessee had initially filed a return within the due date under Section 139(1) and later filed a revised return within the permissible period, which included the deduction claim under Section 80IA. The Tribunal also clarified that Section 80AC requires the return to be filed within the due date under Section 139(1), but does not specify that the claim must be made in the original return itself. Therefore, the Tribunal found no reason to interfere with the CIT(A)'s order allowing the deduction under Section 80IA.

Issue 2: Treatment of Expenditure on Replacement of Machinery

The second issue pertains to whether the expenditure on the replacement of multi drum filters should be treated as capital or revenue expenditure. The AO disallowed Rs. 2,32,54,110/- representing the cost of replacement of certain machinery, treating it as capital expenditure. However, the CIT(A) allowed Rs. 4,23,588/- of this amount, representing the cost of multi drum filters, as revenue expenditure, stating that these filters need to be constantly replaced due to deterioration in filtering capacity.

The Tribunal upheld the CIT(A)'s decision, agreeing that the multi drum filters are part of the humidification plant and need to be replaced regularly due to wear and tear. This recurring expenditure was deemed to be revenue in nature, as it does not result in an enduring benefit but is necessary for the ongoing operations of the business.

Conclusion

In conclusion, the Tribunal dismissed the Department's appeal, affirming the CIT(A)'s decisions on both issues. The assessee's claim for deduction under Section 80IA was allowed, as the revised return was filed within the permissible time limit, and the expenditure on multi drum filters was correctly treated as revenue expenditure.