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Case Law Details

Case Name : Spectrum Coal & Power Ltd. Vs ACIT (ITAT Mumbai)
Appeal Number : ITA No. 1295/Mum/2012
Date of Judgement/Order : 03/08/2017
Related Assessment Year : 2000-01
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Spectrum Coal & Power Ltd. Vs ACIT (ITAT Mumbai)

Coal beneficiation has been defined as cost effective and significant step towards improving power plant efficiency and reducing the GHG emissions from the coal fired power plants in India would be to increase the availability of clean beneficiated coals using appropriate beneficiation technologies. In fact, it improves the quality of coal. From the note it is not denied that it is not for the improvement in the coal beneficiating activity for power grade coal. Power grade coal is the existing business of the assessee. This means improvement in the coal beneficiation effects the day to day business of the assessee and improves the operations of the existing business. It does not relate to a new product and, therefore, in our view the case of the assessee is duly covered by the aforesaid finding of the Hon’ble Supreme Court in the case of Alembic Chemical Works Co. Ltd. We also noted that the Supreme Court in the case of Empire Jute Co0. Ltd. vs. CIT 124 ITR 1 (SC) has observed that here may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. Since the expenditure incurred is for the improvement of the existing business and has not created a new business for the assessee, therefore, it will be a revenue expense.

 Held: There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. As, in the instant case coal beneficiation effected day-to-day business of assessee, however, the expenditure incurred was for improvement of the existing business and had not created a new business for the assessee, therefore, was allowable as revenue expense.

2. Extraction of coal and processing thereof tantamounted to production and converting raw coal into beneficiated coal was a manufacturing process, as beneficiated coal is a different marketable product. Accordingly, AO was not justified in disallowing additional depreciation.

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