Jurisprudentiol– Thursday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income Tax

Sec 37 - Expenditure on replacement of machinery - each machine in a textile mill is independent and benefits derived are enduring in nature - such expenditures cannot be classified either as 'current repairs' or as revenue in nature - Revenue wins major case in Supreme Court

WHETHER a particular expenditure is revenue or capital in nature is indeed an age-old dispute between the Revenue and the assessee. Although the Apex Court ruling in the case of Saravana Textile Mills Pvt Ltd is a landmark decision on this issue but the latest decision goes a step further to obliterate the space of confusion which exists today. In this case the assessee is engaged in the manufacture and sale of cotton yarn. It incurs huge expenditure on replacement of machinery in its plant and claims deduction for the same as revenue expenditure u/s 37. However, the AO disallows it and the same ground has now been upheld by the Supreme Court.

Central Excise

Committee of Commissioners – Law as comprised under Section 35B (2) nowhere requires a detailed order to be passed expressing formation of opinion about the need to file an appeal – Circulation of file with relevant papers among Committee members and assent thereto by members, sufficient to conclude that opinion was formed by Committee – CESTAT

A detailed order need not be issued to arrive at an opinion by the Committee of Commissioners. Further the fact that the assessee has not filed any reply to the miscellaneous applications filed by the Revenue and only oral arguments were advanced to state that there is no formation of opinion about the need to file appeals, shows that the arguments advanced by the appellant that an opinion was not formed are hollow and have no substance.

Customs

Import of automotive lamps assessable for CVD based on Notification No. 2/2006-CE read with Notification 11/2006-CE – Impugned order upheld – Appeal rejected – CESTAT

It may also be noted that when two views are possible in interpreting a notification, the view which is beneficial to the assessee has to be reckoned. This aspect was also highlighted by the TRU in paragraph 2.2 of D.O.F. No. 334/1/2008- TRU dated 29.02.2008.

See our columns Tomorrow for the judgements