2017 (5) TMI 1315 - HC - Income Tax

Expenses incurred on dismantling, transportation and re-erection and commissioning of the manufacturing units to another location - revenue v/s capital expenditure - Held that - Before us the Revenue has made no grievance of the finding of fact arrived at by the CIT(A) and the Tribunal that the shifting of the plant from Kolhapur to Ankleshwar was on account of agitation of villagers at Chipri, Kolhapur. Thus the shifting of the plant was only for the purpose of manufacturing activity continuing to exist and carrying on its business. The grievance to the finding of fact (concurrent) by the CIT (A) and the Tribunal is being urged by seeking to establish new facts before us, when the same was not even a suggestion made before the Authorities cannot be entertained. In fact except the above, no submission has been urged to indicate why the allowing of expenditure for shifting of the plant as revenue expenditure in the present facts is not sustainable. We find that the view taken by the Tribunal in the present facts is a possible view. Therefore no substantial question of law - Decided against revenue

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding the allowance of expenses incurred on dismantling, transportation, and re-erection of manufacturing units as revenue expenditure for Assessment Year 2007-08 and 2008-09.

Analysis:

1. Common Question of Law:
The appeals raised a common question of law regarding whether the expenses incurred on dismantling, transportation, and re-erection of manufacturing units to another location should be considered revenue in nature.

2. Background and Tribunal's Decision:
The Tribunal's order dismissed the Revenue's appeal for the Assessment Years 2007-08 and 2008-09. The Commissioner of Income Tax Appeals had previously held that the expenditure incurred for shifting the manufacturing plant from one location to another was allowable as revenue expenditure.

3. Reasons for Shifting:
The respondent-assessee had to shift its manufacturing operation due to objections from local residents regarding pollution caused by the plant. This led to agitation, hunger strikes, and damage to property, compelling the assessee to move the plant for business survival.

4. Capital vs. Revenue Expenditure:
The Tribunal disagreed with the Revenue's argument that the expenditure was capital in nature, citing a different fact situation from a previous Supreme Court judgment. The Tribunal referred to a Madras High Court decision where similar expenditure was allowed as revenue.

5. Contentions and Findings:
The Revenue argued that the plant was set up on agricultural land, but this was not supported by any observations in previous orders or the appeal memo. The Tribunal noted that the reason for shifting was the local opposition, and the Revenue did not dispute this fact.

6. Grievance on Finding of Fact:
The Revenue did not challenge the factual finding that the plant was shifted due to the villagers' agitation. The Tribunal held that introducing new facts not raised before the authorities was not permissible, and no substantial question of law arose for consideration.

7. Conclusion:
As the Tribunal's decision was based on the facts and was a possible view, the High Court dismissed both appeals without costs, stating that no substantial question of law was presented for their consideration.

This comprehensive analysis covers the key aspects of the judgment, including the legal arguments, factual background, and the reasoning behind the decision of the High Court.

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