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TMI Blog2015 (8) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year 1994-1995? - CIT(A) allowed claim - Held that:- We are inclined to dismiss the appeal of the Revenue as the first year of claim of assessee was assessment year 1999-2000 and 80IA(2) permits the assessee to claim deduction for any ten years out of first fifteen years. See Velayudhaswamy Spinning Mills (P) Ltd case [2010 (3) TMI 860 - Madras High Court] - Decided in favour of assessee Reopening of assessment challenged - Held that:- Reopening u/s.147 is held to be valid. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has been completed, no action after the expiry of four years from the end of the assessment year can be taken. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment, this proviso will not come to its rescue. Same is applicable to other reasons records for reopening of assessment. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue. - Decided against assessee. Depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 222/2009, ITA Nos. 782/2005 & 177/2009 - - - Dated:- 26-6-2015 - N. R. S. Ganesan, JM And Chandra Poojari, AM,JJ. For the Petitioner : Shri E S Nagendra Prasad, CIT-DR For the Respondent : Shri R Vijayaraghavan, Adv ORDER Per Chandra Poojari, Accountant Member The Department has filed appeals in ITA Nos. 222/09, 374/2004 and 529/06 and the assessee has filed appeals in ITA Nos.177/09 782/2005 are directed against different orders of the Commissioner of Income Tax (Appeals), Large Tax Payer Unit, Chennai. Since certain issues in these appeals are common in nature, these appeals are clubbed, heard together, and disposed of by this common order for the sake of convenience. 2. The first issue in ITA No.222/Mds/2009 for the assessment year 2000-2001 by Revenue is that the Commissioner of Income Tax (Appeals) erred in holding that the expenses incurred on Life Extension Program (LEP) of Thermal Power Station I (TIPS-I) and expenditure on Rejuvenation of Bucket Wheel extractors are allowable as revenue expenditure. 3. The facts of the case are that during the relevant assessment year the assessee had incurred expenditure of D80,27,307/- on rejuvenation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, especially there is increase in the production/power generation capacity of the assessee and therefore, is in the nature of capital. The contention of the Assessing Officer was that this is one time expenditure at the end of life span of the asset with a view to give new life. Therefore, the expenditure did not fall within the meaning of current repairs under section 31(i) of the Act. The Commissioner of Income Tax (Appeals) in his common order for the assessment years 1995-96 to 1997-98 elaborately dealt with various issues and the issue of increase in production capacity and came to the conclusion that there is no increase in production/power generation capacity and placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Saravana Spinning Mills P. Ltd. (supra) held that the expenditure was not incurred in the capital field and allowable as deduction. For better understanding the nature of expenditure incurred, it is necessary to reproduce the technical write-up of TPS-I of LEP at page 62 to 63 and Note on rejuvenation of BWE at page 76 of the paper books, which reads as under: TPS-I: LEP - TECHNICAL WRITE UP Electricity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following components were replaced completely in boilers: 1. Super heaters with their headers and inter connecting pipes. 2. Main steam line. 3. Upriser and Down comer pipes. 4. Economiser and their transfer-pipes. 5. Boiler condenser and de super heater. 6. High pressure valves. 7. Compensators of Air and Gas ducts. 8. Rear side water wall. The following components were replaced partially after inspection; 1. Front water wall and side water walls. 2. Boiler drum internals. 3. Air heaters. 4. Feed water pipe line. 5. Boiler shield plates and hydraulic seal. 6. Lignite pulverizing system. The following equipments were overhauled: 1. Induced and Forced draught fans. 2. Belt feeders 3. Slag conveyors. 4. Ash handling system. Turbine, Generator and Transformer: These major equipments were overhauled with the replacement of worn out parts. Thus the works under LEP of the units of Thermal Power Station-I are comprised of full and partial replacement and overhaul/ repair of main equipments. NOTE ON EXPENDITURE OF REJUVENATION OF BUCKET WHEEL EXCAVATOR (BWE) OF MINE-I CLAIMED AS REVENUE: Rejuvenation of Bucket W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations of the Assessing Officer that there is increase in production capacity appears to be misplaced. 16. In the assessment order, the Assessing Officer himself stated that, if a new plant is to be installed, the cost of such new plant would be about ₹ 4.5 crores per MW and in such case the total project cost would come to ₹ 2700 crores for 600 MW. If that is the case, the expenditure incurred for the replacement of parts of machinery i.e. TPS-I/BWE in all these seven assessment years i.e. 1993-94 to 1999-2000 was about 252 crores and this is not even 10% of the total project cost. 17. Therefore, we should not go by the quantum of expenditure incurred by the assessee in deciding the issue of whether such expenditure is allowable as deduction as current repairs/revenue expenditure or such expenditure is a capital expenditure. 18. When the assessee is claiming the expenditure as allowable deduction under section 31(i) of the Act, what is to be seen is that by way of incurring the expenditure on replacement of parts of machinery, overhauling the machinery whether it was incurred to preserve and maintain an already existing asset or such expenditure was incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pairs in Section 31 of the Income-tax Act, it has been held as follows (page 208):- .......... If an autoleveler is to be repaired then that repair would come within the connotation of the word current repairs because it is a part of the Carding Machine. Even if in a given case, replacement of an Autoleveler could come within the connotation of the word current repairs if the old part is not available in the market. It is a current repair because the Carding Machine remains as an asset without any change even after repair or replacement of the autoleveler. To give an example, a Compressor in an important part of an Air-condition Machine. Repair of the Compressor will come in the connotation of the word current repairs in Section 31 (i) of the said Act because the assessee does not replace the Air-condition Machine. At the highest, he replaces a part of the Air-condition Machine. So is in the case of the picture tube in a Television Set, when the picture tube is replaced the Television Set is not replaced, therefore, such repairs alone can come within the connotation of the word current repairs in Section 31(i) of the said Act as it stood at the material time. They ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inning Mills P. Ltd. (supra), we sustain the order of the Commissioner of Income Tax (Appeals) in allowing the expenditure on replacement/overhauling of TPS-I/BWE as deduction. The grounds raised by the Revenue are dismissed on this issue for all the assessment years from 1993-94 to 1999-2000. Thus, the Tribunal held that the expenditure is revenue in nature and allowed the claim of the assessee. Respectfully, following the above order of the Tribunal, we are inclined to dismiss this ground raised by the Revenue. Accordingly, this ground is dismissed. 6. The next common ground in ITA Nos.222/2009, 374/2004 and 529/2006 is that the Commissioner of Income Tax (Appeals) erred in holding that the assessee is entitled to 100% deduction u/s.80IA, as second year in respect of profits earned in the unit VII of TPS II - Stage II which was commissioned in the previous year 1994-1995. 7. The Commissioner of Income Tax (Appeals) allowed the claim of the assessee u/s.80IA by observing that the assessee has opted assessment year 1999-2000 as first year of commencement and in view of provisions under section 80IA(2), the assessee is permitted to claim deduction for any ten years out of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and not losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment contemplated. It does not all the Revenue to look backward and find out if there is any loss of earlier years and bring forward nationally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. Fiction created in sub-s(5) does not contemplates to bring set off amount notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. There is no dispute that losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The jurisdiction to make reassessment was also questioned. Accordingly, the assessee prayed for dropping of the proceedings for reassessment. The Assessing Officer rejected the claim of the assessee and he treated the expenditure towards purchaser of conveyor belts and accessories amounting to D70 crores as revenue expenditure and instead treating it as capital expenditure allowed depreciation at the rate of 25% thereon. Further, the Assessing Officer has also disallowed the claim of expenditure on account of purchase of loose tools as revenue expenditure and allowed depreciation at the rate of 25% thereon as claimed by the assessee in earlier years. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the same. 11. The ld. Authorised Representative for assessee submitted that assessment was completed u/s.143(3) of the Act and was reopened for the purpose of considering the investment made towards purchase of conveyor belts and accessories claimed as revenue expenditure and also considered investment in loose tools claimed as revenue expenditure. According to the ld. Authorised Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Haryana Acrylic Mfg Co. vs. CIT, 308 ITR 38 (Del). (13) CIT vs. A.V. Thomas exports ltd, 296 ITR 603 Mad. (14) Well Intertrade P. Ltd vs. CIT, 308 ITR 22 (Del) (15) Sitara Diamond P. Ltd vs. DCIT, 345 ITR 91 (Bom) (16) Titanor Components Ltd vs. ACIT, 343 ITR 183 (Bom). 12. On the other hand, the ld. Departmental Representative submitted that assessee has not disclosed fully and truly the facts necessary for the assessment. Hence, reopening is valid in law. The most material part which was argued by the ld.AR is regarding the time lag which is provided in first proviso to section 147 which states that where an assessment u/s sub-section(3) of section 143 has been made for the relevant assessment year, which is 2001-02, in this case, no action shall be taken u/s 147 after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. One has to see as to what 'failure of the assessee' to disclose fully and truly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed all material facts in the returns filed, the revision done only on the basis of some facts without the availability of fresh material would amount to change of opinion which cannot be made a ground for reopening. After arguing on the reasons recorded for the reopening, to substantiate he placed reliance on some decisions which are kept on record. On the other hand, the ld. Departmental Representative has supported the appellate findings and has also placed reliance on some decisions in favour of the Revenue. In this case assessment was reopened by recording the reason as follows:- (i) During the assessment year 2001-02, the assessee had purchased a conveyor belts and accessories worth of ₹ 70 crores and this was included in the cost of spares claimed and claimed as revenue expenditure. Since the conveyor belts used by the assessee are to be treated as general plant and machinery and depreciation is to be allowed at 25% as against revenue expenditure claimed by assessee. (ii) During the assessment year 2001-02, assessee has purchased loose tools and claimed depreciation @ 100%. Till previous year assessee claimed depreciation on loose tools at 25%. But the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons in writing. The reassessment proceedings u/s 147 are further subject to sections 148,149,150,151,152 and 153. But in the present case, we are required to decide the limited issue regarding the validity of proceedings undertaken after four years of the assessment year in question. The Assessing Officer is required to see if the conditions laid in Explanation 2(c) because in this case the assessment was completed u/s 143(3) are satisfied or not. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or(iii) such income has been made the subjective of excess relief under this Act; or (iv)excessive loss or depreciation allowance or any other allowance under this Act has been computed, the Assessing Officer would have valid cognizance u/s 147 of the Act. The reasons recorded by the Assessing Officer clearly speak for the under assessment of tax hence, the conditions laid above stand fulfilled in so far as re-assessment proceedings are concerned. In so far as the reasons recorded, extracted in the above portion of this order, we are satisfied that the Assessing Officer has 'reason to believe' that income has esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated to be a true and full disclosure. A disclosure can be even false or true. It may be a full disclosure or it may not be a full one. A part disclosure many a times may be misleading one. What is required under the law is a full and true disclosure of all material facts necessary for making assessment for that year. This law was laid down by the Hon'ble Supreme Court in the case of Sri Krishna Pvt. Ltd etc vs ITO Others, 221 ITR 538. The words 'omission or failure to disclose fully and truly all material facts necessary for assessment for that year postulates a failure of the assessee to disclose fully and truly all 'material facts necessary' for his assessment. What facts are 'material' and 'necessary' for assessment will differ from case to case. The material should not only be full but also be true. If some material found in the evidence produced before the Assessing Officer which the Assessing Officer could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. This omission or failure may be either deliberate, or even inadvertent, that is immaterial, but in case there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rescue. Same is applicable to other reasons records for reopening of assessment. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue. 17. The second ground in ITA No. 177/Mds/2009 appeal is that Commissioner of Income Tax (Appeals) ought to have appreciated that loose tools would only partake of the character of consumables in regard to an assessee comparable to the assessee. 17.1 We have heard both the parties and perused the material available on record. In this case, the assessee has been claiming loose tools as capital expenditure and claiming deprecation at 25%. Suddenly in the assessment year under consideration there was a change in the accounting policy without any reason. Even before us, the assessee was not able to furnish any reason for change in accounting policy. In the case of Gujarat Small Scale Industries Corporation Ltd vs. CIT 142 ITR 35(Gujarat HC), wherein held that the Tribunal perfectly justified in taking the view that the jigs and fixtures were part of the plant and machinery. The deduction was claimed on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anating from Contract No.II and reference to all other Contracts including Contract No.I was only to bring out complete facts of the case on record. The provisions of Sec.195 are applicable to each payment made to the non non-residents. Sec.154 would have been applicable only if there was a mistake in order dated 24.12.2004 of the TDS authority inspect of same payments (i.e relating to Contract No.II). However, the impugned order relates to payments emanating from Contract No.I. Since there was no order in relation to payments made under Contract No.I, the question of rectification or reopening or revisiting of earlier order does not arise. Therefore , the he do not find any merit in the assessee's argument that the TDS authority lacked jurisdiction in passing the impugned order. Against this, the assessee preferred an appeal before us. 21 We have heard both the parties and perused the material on record. The ld. Authorised Representative for assessee observed that levy of interest u/s.201(1A) depends on the income computed in the case of recipient as well as date of filing of the return of the recipient. It was brought to our notice that the appeal of the assessee for det ..... X X X X Extracts X X X X X X X X Extracts X X X X
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