Dismissed

The Commissioner of Income Tax,Cochin v. M/S.O.E.N.India Ltd.,Cochin

Kerala HC1 Feb 2019ITA/1212/2009

Case brief

AI extract

What is this about?

High Court of Kerala dismissed the Income Tax Appeal. The Court held that the adjustment made by the assessee for small value tools was wrongly understood by the Assessing Officer. Upon proper understanding, the amounts qualify as revenue expenditure. Consequently, the appeal was rejected without interference in the Tribunal's order.

What the court decided

AI extract

The Commissioner of Income Tax,Cochin Vs M/S.O.E.N.India Ltd.,Cochin — Income Tax | Kerala HC (2019)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR. JUSTICE ASHOK MENON

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FRIDAY ,THE 01ST DAY OF FEBRUARY 2019 / 12TH MAGHA, 1940

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ITA.No. 1212 of 2009

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AGAINST THE ORDER/JUDGMENT IN ITA 1307/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 22-02-2007

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APPELLANT/APPELLANT/REVENUE:

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THE COMMISSIONER OF INCOME TAX,COCHIN COCHIN.

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BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX

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RESPONDENT/S:/RESPONDENT/ASSESSEE:

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M/S.O.E.N.INDIA LTD., COCHIN.

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BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS

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THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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K.VINOD CHANDRAN & ASHOK MENON, JJ.

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ITA No.1212 of 2009

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------------------------------------------Dated this the 1^st day of February, 2019

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J U D G M E N T

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Vinod Chandran, J.

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The question raised is as to whether after

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capitalisating the expenses incurred on purchase of

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tools, can the assessee claim depreciation at 100%

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in the very same year in which the purchase was made?

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The Assessing Officer is said to have allowed it, which was sought to be rectified under Section 154 of the Income Tax Act, 1961. The first appellate authority reversed the rectification, which reversal the Income Tax Appellate Tribunal confirmed. The Tribunal agreed with the first appellate authority, insofar as the finding that the tools were small value tools which have a short

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life span of less than one year. There is no benefit of enduring nature and the assessee had capitalized it wrongly.

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The Tribunal also found that in fact

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the assessee should have treated it as revenue expenditure. The learned counsel for the assessee also submits that this was specifically what was done by the assessee. The AO at the first instance wrongly allowed it as a claim of depreciation of 100%. The assessee admits that it had capitalised the amounts spent on small value tools in the very same year. However, noticing the discrepancy, the assessee had reversed it and written off the entire value in the very same year in which they were rendered useless after use in the manufacturing process. The claim in the return was as a revenue expenditure.

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The learned counsel also relies on

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(1990) 182 ITR 493 [Commissioner of Agricultural Income Tax v. Midland Rubber and Produce Co. Ltd.]

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to contend that loss on revaluation of loose tools

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is permissible as an accountancy practice and though a question was raised, this Court had found that such a factual determination need not be interfered with in the appeal to the High Court. The revaluation of loose tools done therein, was found to be as a matter of accountancy procedure or practice and not as an actual expenditure incurred. There was also no depreciation claimed for the same. Here too, the write off was on account of

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the tools being rendered useless after use in the manufacturing process. This necessitates frequent purchase of the said tools for continuous manufacturing process. In the nature of the industry, the same is allowable as a revenue expenditure.

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We find that the adjustment made by the

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assessee was wrongly understood by the AO at the first instance. If it had been properly understood,

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then, the entire amounts would have been allowed as a revenue expenditure. In such circumstances, we

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do not think that there is any cause for interference with the order of the Tribunal. The question framed does not at all arise as one on law. The Income Tax Appeal is, hence, rejected. No order as to costs.

Sd/-

K.VINOD CHANDRAN

JUDGE

Sd/-

ASHOK MENON

JUDGE