2013 (8) TMI 1105 - HC - Income Tax

Summary

Issues involved:
The judgment involves challenges to the impugned common judgment and order of the Income Tax Appellate Tribunal for three appeals related to Assessment Years 2007-08, 2008-09, and 2009-2010, all concerning the treatment of expenditure on purchase of tools and instruments.

Assessment Year 2007-08 (Tax Appeal No.506 of 2013):
The Tribunal dismissed the Revenue's appeal against the deletion of capital expenditure on tools and instruments debited to Profit & Loss account, treating them as consumable items. The Assessing Officer considered the items as part of plant and machinery, leading to a dispute resolved in favor of the assessee by the Tribunal.

Assessment Year 2008-09 (Tax Appeal No.505 of 2013):
The Tribunal allowed the assessee's appeal, overturning the addition made by the Assessing Officer for disallowing revenue expenses claimed in Profit & Loss account for the purchase of tools and instruments.

Assessment Year 2009-2010 (Tax Appeal No.507 of 2013):
The Tribunal upheld the assessee's version, setting aside the order of CIT(Appeals) which confirmed the disallowance of expenditure on purchase of tools and instruments, treating them as revenue expenditures.

The Assessing Officer treated the tools and instruments as capital expenditure, but the CIT(Appeals) and Tribunal considered them as revenue expenditure based on the method of accounting adopted by the assessee. The Tribunal noted the short lifespan of the items and the method of consumption during manufacturing operations, leading to the conclusion that they should be treated as revenue expenditures.

The Tribunal's decision was based on the change in the method of accounting by the assessee, which was not disputed by the Department. The consumption of tools and equipments was rightly treated as revenue expenditure, supported by the judgment of the Punjab and Haryana High Court in a similar case. The Tribunal committed no error in its decision, and no substantial question of law arises in the appeals.

Therefore, the Tax Appeals were dismissed, upholding the Tribunal's decision on the treatment of expenditure on purchase of tools and instruments as revenue expenditures.