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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 ..... f 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 Bucket Wheel Excavtor (BWE) of Mines-I and LEP of TPS-I. According to the Assessing Officer, there was increase in production capacity, he treated the same as Capital Expenditure. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) observed that there is no increase in production capacity, and he allowed the claim of the assessee as revenue expenditure. Against this, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material available on record. In our opinion, this issue is squarely covered in assessee's own case in ITA Nos.219, 220,221, 981, 982/Mds/2009 and others, the Tribunal vide order dated 18.07.2012 observed that 14. We have heard both sides, considered the materials available on record and perused the orders of lower authorities and reliance placed on the case law by the counsels. The assessee is engaged in generation of electricity and minin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, generated in boiler drives steam turbine which coupled with generator generates electric power. Neyveli Thermal Power Station-I (NTPS-I) has an installed capacity of 600MW consisting of six 50MW units and three 100 MW units. The 50 MW units have one boiler each and 100MW units have two boilers each. The entire equipments of 600MW had been supplied, erected and commissioned by M/s. Technoprornexport (TPE), Russia from 1962 to 1970 in three stages on turnkey basis. During the year 1989, the Residual Life Assessment (RLA) studies in two units (units 1 & 9) were carried out by M/s TPE, Russia as approached by NLC since almost all the units had crossed 1.3 lakhs service hours and experiencing frequent failures in high pressure parts due to ageing. The Russian specialists conducted various tests and studied elaborately. Based on the study results, they recommended for operation of the equipment with reduced steam parameters up to the end of 1991 and the possibility of further operation of the equipment at rated steam parameters only after replacement of the corresponding parts and groups. The high pressure parts of boilers namely Super heaters and main steam line are subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) All the six crawler frames with drives assemblies (for 3 tracks) including the mechanical components. (iii) Traverse box of self-aligning track (iv) Tower frame completes including pully mast (v) Bucket wheel boom complete (vi) Discharge Boom complete (vii) Main slewing ball race and main slewing gear box shell (viii) Bucket Wheel Boom hoist winch drum (ix) All the host winch ropes The following non-critical items are replaced: (i) Secondary structures like walk way and stair case for under carriage, turn table, Bucket Wheel boom, discharge boom, intermediate boom and counter weight boom. (ii) Motor foundation and Motor covers for all the drivers. (iii) Cabin and houses. The following components have been repaired: (i) Steering tiller (FST and RST) (ii) Under carriage (iii) Turn table (iv) Counter weight boom and Box (v) Intermediate structure It may be noted that Rejuvenation of Bucket Wheel Excavators involves repairs / replacement of certain critical worn out parts, none of the part is independent nature of working. All the replaced and repaired items are forming part of the single machine called Bucket wheel excavator and in that process the machine is broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring a new asset into existence. The Hon'ble Allahabad High Court in the case of CIT v. Renu Sugar Power Co. Ltd. [298 ITR 94], almost on similar circumstances, following the decision of the Hon'ble Supreme Court in the case of CIT v. Saravana Spinning Mills (P) Ltd. (supra) held that the turbine rotor is a part of the Turbo Generator Set and expenditure incurred by the assessee on replacement of one turbine rotor on account of current repairs is allowable as revenue expenditure. The facts in this case are that the assessee is a captive power plant and had 2 thermal power plant of generating capacity with 67.5 MW each. The assessee claimed expenditure of Rs. 1,05,44,904/- as the cost of the turbine rotor, which was disallowed by the Assessing Officer treating as capital expenditure. It was found by the Tribunal that the turbine rotor was an essential part of turbo generator set and it was not an independent machinery or plant. The turbine rotor of its own independent functioning could not generate electricity. Therefore, it was held that the assessee was entitled to deduction, which was affirmed by the Hon'ble Allahabad High Court. While affirming the order of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject of the expenditure must not be to bring a new asset into existence or to obtain a new advantage." So far as the decision relied upon by the learned standing counsel for the department is concerned, the same is distinguishable on facts. In that case the question whether certain expenditure incurred by the assessee on knives and losses in the material period qualified for capital allowance under section 16(3) of the Finance Act, 1954. On facts it was found that the knives are not parts of the machine. Each knife is a separate tool or implement designed to be used in conjunction with the machine. On these facts it was held that replacement of knives was the capital expenditure. In the case on hand the factual position is quite different. It has been found by the Tribunal as a fact that Turbine Rotor is a part of Turbo Generator Set. The Turbine Rotor does not function independently. It is a part of Turbo Generator Set. In view of the above discussion, we do not find any error in the order of the Tribunal. The Tribunal was justified in holding that the-expenditure by the assessee on the replacement of one Turbine Rotor amounting to Rs. 1,05,44,904/- was on account of current re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the parties and perused the material on record. The issue is squarely covered by the judgment of jurisdictional high court in the case of Velayudhaswamy Spinning Mills (P) Ltd 340 ITR 477 wherein it was observed that "from reading of sub-s (1) of s. 80IA, it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-s (4) i.e. referred to as the eligible business, there shall, in accordance with and subject to the provisions of the sections, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent of the profits and gains derived from such business for ten consecutive assessment years. Deduction is given to eligible business and the same is defined in sub-s. (4). Sub-s(2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised. If it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the years in which the undertaking or the enterprise develops and begins to operate any inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the relevant year. Therefore, loss in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profit of the eligible business as no such mandate is provided in S. 80-IA(5) - CIT vs. TTK Pharma Ltd (Tax Case (Appeal) No.298 of 2004, dt. 23rd Dec., 2009) Followed; CIT vs. Mewar Oil & General Mills Ltd (2004) 186 CTR (Raj) 141; (2004) 271 ITR 311 (Raj) concurred with; Mohan Breweries & Distilleries Ltd vs. Asst. CIT (2008) 114 TTJ (Chennai) 532: (2008) 3 DTR (Chennai) (Trib) 477 affirmed". Being so, 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. This ground of the Revenue is dismissed. 9. The first ground in ITA No. 177/2009 filed by the assessee challenging the reopening of assessment. 10. The facts of the case are the assessee filed its return of income for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the expiry of four years from the end of relevant assessment year is exercisable only if the income chargeable to tax has escaped assessment for such assessment year, by reason for the failure on the part of the assessee. According to the ld. Authorised Representative for assessee there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. According to him, the proviso of 147 will not apply and consequently the re-assessment cannot be initiated after a period of 4 years from the end of the assessment year. The ld. Authorised Representative for assessee submitted that the Assessing Officer raised three issues for reopening of assessment, which were duly considered by the Assessing Officer before framing assessment u/s.143(3) of the Act. He drew our attention to the letter of the Assessing Officer dated 21.11.2002 asking the assessee to furnish the details which is placed on record at paper book page No.9 in the course of original assessment. The ld. Authorised Representative for assessee submitted that the assessee furnished all the details vide its reply dated 7.12.2002. The Assessing Officer passed original ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure 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 omission to disclose the material facts then subject to the other conditions jurisdiction to reopen is attracted. Further, the ld. Departmental Representative relied on the judgment of Kerala High Court in the case of CIT vs. Smt. R. Sunanda Bai 344 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eprecation at the rate of 10% u/s.32. Since the assessee company is only lessee of the property depreciation claimed on leased property has to be withdrawn." It is a settled law that on the basis of material, prima facie, available before the Assessing Officer, opined that income chargeable to tax has escaped assessment can be formed. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. In case the Assessing Officer has a cause or justification to know or suppose that income has escaped assessment, action u/s 148 can be taken. But obviously, there should be relevant material on which a reasonable man could have formed a requisite belief. Whether this material(s) would conclusively prove the escapement of income is not the concern at that particular stage. So what is required is the subjective satisfaction of the Assessing Officer based on objective material evidence. In the given case, assessment was completed on 28.03.2003. The reason was recorded as discussed above. The argument of the ld.AR is that u/s 147 in case the assessment order is completed u/s 143(3), as has been done in this case, no action could be taken after the expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on the basis of mere change of opinion, which cannot be, per se a reason to reopen the case. The Act has not given power to the Assessing Officer to review but has only given power to re-assess. There is a conceptual difference between the two aspects as the Assessing Officer has no power at all to review the assessment. The reassessment, as stated above, has to be based on fulfillment of certain pre-conditions but the concept 'change of opinion' has to be taken into consideration otherwise it may give unbridled power to an Assessing Officer to reopen any and every assessment order which would simply amount to a review. The concept 'change of opinion' is an in-built test to check the abuse of power by the Assessing Officer. So, now only when the Assessing Officer has a tangible material to base his conclusion that there is an escapement of income from assessment and the reasons recorded have a link with the formation of his belief, he has the power u/s 147 of the Act. 15. Now 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its policy and claimed it as revenue expenditure without any reason. In our opinion, the assessee cannot change the accounting policy suddenly and that reason for change of accounting policy has not brought to the notice of the Assessing Officer. Further, it is also to be noted that situation which warrant change of accounting policy is not substantiated. As per Explanation 2 of Section147 it is very clear that due to excessive claim of the assessee, the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income Tax (Appeals) to show as to how this fact was fully and truly disclosed before the assessing authority and that there was not failure on the part of assessee, especially when it has been claiming it as part of plant & machinery and suddenly it decides to claim it as revenue expenditure. Hence, the Commissioner of Income Tax (Appeals) considered the action of the Assessing Officer is fully covered by the provisions of Explanation 1 to Section 147 of the Income Tax Act which reads as under: "Production before the Assessing Officer of accounts books or other evidence from which material evidence could with due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax(A) in this case followed the above judgment. Being so, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). This ground of the assessee is rejected. 18 The next ground in ITA No.782/2005 is with regard failure to deduct tax at source on payments made under the supply contract. 19 The facts of the case relates to the jurisdiction of the Income Tax Officer, TDS Ward-I, Cuddalore (TDS authority) in passing the impugned order. The assessee has stated that the TDS authority had considered the issue of deductibility of tax at source in respect of payments made to Ansaldo flowing from all the four contracts mentioned above while passing the order dated 24.12.2004 u/s.201 of Income Tax Act. According to the assessee, since the TDS authority had already applied his mind to all the four contracts as far as the issue of TDS was concerned, he could not have reopening the issue again and count not have passed the impugned order dated 18.02.2005. It has also stated that there was no provision for reopening the TDS proceedings under Chapter XVII of Income Tax Act similar to Sections 147/148 in respect of assessment proceedings. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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