CIT Vs. BHARAT ALUMUNIUM CO. LTD.

JUDGEMENT

(1.) ALL these appeals are filed by the Commissioner of Income Tax against the same assessee, viz., Bharat Aluminum Company Ltd. There are various common issues, which have arisen in these appeals relating to different Assessment Years. It is for this reason all these cases were grouped together, though the arguments were heard specifically on all the issues involved in these appeals. We now proceed to discuss and decide these issues one by one.

(2.) ITA No. 532 of 2006 We may mentions at the outset that some of the issues raised in this appeal as well as other connected appeals have already been decided in ITA No. 1018 of 2005. Leaving those issues aside, the learned Counsel for the parties accepted the position that the questions that survive for consideration in this appeal on which notice was issued, is as under: 1) Whether the Income Tax Appellate Tribunal was correct in law in allowing the amount of Rs. 3.76 Crores (wrongly written by ITAT as 3.76 lacs) being capital expenditure not represented by any assets to the assessee? 2) Whether the Income Tax Appellate Tribunal was correct in law in treating the amount of Rs. 3.76 Crores as revenue expenditure?

(3.) THE genesis of this claim is found in the following facts: In the relevant years, the assessee was a Government sector undertaking (which has since been disinvested). It had entered into an arrangement with another public sector corporation, viz., National Thermal Power Corporation (NTPC). The NTPC had its power plant at Korba. The assessee also put up its power plant at that place for generation of electricity for its aluminum plaint. It did not create separate facilities for coal handling, demineralization unit for water, facility for using HED and HFO Oils including creating system for coal carrying etc. Since the expenditure for creating these systems were huge, it was thought, as a matter of business prudence, to share the above facilities available with NTPC at Korba. It was decided to contribute a sum of Rs. 22.68 Crores to NTPC as its share of capital expenditure for sharing common facilities created by NTPC at Korba. The above infrastructure facilities were created on the land belonging to NTPC and ownership and title of the same vested with NTPC. On the aforesaid sum of Rs. 3.76 Crores contributed by the assessee, the assessee had claimed depreciation till the Assessment Year 1991 -92. However, the assessee decided to change the accounting policy and to write off the balance expenditure of Rs. 15.07 Crores over a period of five years, i.e., at the rate of Rs. 3.76 Crore per year. This was necessitated because of the suggestion and direction given by the Comptroller and Auditor General (CAG) to the assessee to follow the guidelines stipulated by the Institute of Chartered Accounts of India (ICAI) under the guidance Note No. 10. The assessee accordingly received clarification from the ICAI for amortizing the balance expenditure of Rs. 15.07 Crores and to claim the same over a period of five years.