NPR Auto Parts Manufacturing India Pvt. Ltd. Vs ITO (ITAT Bangalore)
Factory Shift ≠ Capital Asset – ITAT Al-lows ₹1.13 Cr as Revenue, Calls Out “Enduring Benefit” Overreach
In NPR Auto Parts Manufacturing India Pvt. Ltd., the Bangalore ITAT examined whether factory shifting expenses (₹1.13 crore) from rented premises to owned premises are capital or revenue in nature.
The Assessing Officer and CIT(A) treated the ex-penses as capital, relying on the “enduring benefit” theory and decisions like Sitalpur Sugar Works.
However, the ITAT disagreed and held:
- The assessee merely relocated existing opera-tions within the same industrial area.
- Expenses were limited to dismantling, transportation, and reinstallation of existing machinery.
- No new asset was created, and the profit-making apparatus remained un-changed.
Relying on Empire Jute Co. Ltd. and Loyal Super Fabrics, the Tribunal clarified:
- Enduring benefit test is not conclusive.
- Real test = whether there is capital field advantage or structural change.
- If expenditure only facilitates business opera-tions, it is revenue in na-ture.
The Tribunal distinguished Sitalpur Sugar Works, noting that case involved fundamental business restructuring, whereas here it was mere relocation.
Practical knockout punch by ITAT:
Even assuming it were capital:
- Allowing depreciation over years would create massive recomputation across multiple AYs.
- The issue is largely timing difference (revenue-neutral over time).
- Hence, insisting on capitalization would cause “herculean compliance burden with no real tax gain.”
FULL TEXT OF THE ORDER OF ITAT BANGALORE
