2016 (1) TMI 413 - AT - Income Tax

Disallowance of expenditure for replacement cost of remembraining in membrance cell-III - Held that - As decided in assess s own case the attempt to contend that life of membrane would be spread over from 3 to 5 years or that the amount involved for replacement of membrane is huge and, therefore, the departure on the part of the Revenue could be said as justified, in our view, cannot be countenance for two reasons. One is that the amount involved would not make difference for chargability of the tax but the nature of expenditure would be relevant for the chargability of tax. It hardly matters whether the amount is more or less. Further, on the aspect of life of the membrane, nothing is referred to by the A.O. nor by C.I.T. (Appeals) that earlier, such aspect, namely, life of the membrane spread over from 3 to 5 years was not considered or it had missed or otherwise. We find no infirmity in the order of CIT(A) and accordingly delete the addition and in the alternative allow the cost of remembraining in membrance cell-II as revenue expenditure. Decided in favour of the Assessee.

Summary

Issues:
Appeal against deletion of addition of expenditure for replacement of re-membraning cells-II disregarding Supreme Court decision.

Analysis:
1. The appeal was against the deletion of an addition made by the Assessing Officer regarding the replacement cost of re-membraning in membrance cells-II. The Assessing Officer treated the expenditure as capital expenditure due to its nature and volume, adding the difference to the income of the assessee after allowing depreciation. The CIT(A) deleted this addition based on a Co-ordinate Bench decision in the appellant's own case for previous assessment years.

2. The Revenue contended that the deletion was erroneous, citing a Supreme Court decision in a similar case. However, the assessee argued that the issue had been decided in their favor by the Jurisdictional High Court in previous appeals. The Tribunal noted a mistake in the amount mentioned in the grounds of appeal by the Revenue, clarifying the correct figure for the addition.

3. The Tribunal referred to earlier decisions in the assessee's case, where the issue had been decided in their favor. The Tribunal also highlighted the decision of the Jurisdictional High Court, which extensively discussed the application of facts to the Supreme Court decision cited by the Revenue. The Tribunal emphasized the importance of consistency in tax matters and upheld the CIT(A)'s decision to delete the addition.

4. Ultimately, the Tribunal, following the decision of the Jurisdictional High Court in the assessee's case, found no fault in the CIT(A)'s order and deleted the addition. The Tribunal dismissed the Revenue's appeal, affirming the treatment of the cost of remembraning in membrance cell-II as revenue expenditure. The order was pronounced in open court on the specified date.