IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 10TH NOVEMBER 2009 / 19TH KARTHIKA 1931 ITA.No. 210 of 2009() --------------------- ITA.10/COCH/2000 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- KOCHI REFINERIES LTD., AMBALAMUGHAL, COCHIN. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 10/11/2009,ALONG WITH ITA NO.275 OF 2009 & CONN. CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal Nos.210,275,816,918 & 963 of 2009 .................................................................... Dated this the 10th day of November, 2009. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel appearing for the appellant. The respondent is a Government of India undertaking engaged in petroleum refining at Kochi. In fact, the respondent-company has later merged with another Public Sector Oil Company namely, BPCL. Appeals arise from the orders of the Tribunal for the assessment years 1994-95 to 1998-99. The Supreme Court has held that in order to file appeal against a Public Sector Oil Company under the control of the Central Government, department has to obtain approval from a Committee of Government Secretaries constituted under the judgment of the Supreme Court in ONGC & ANOTHER V. COLLECTOR OF CENTRAL EXCISE reported in JT 1991(4) SC 158. Standing Counsel submitted that since the assessment files are shifted, he has no information about the clearance, if any granted. However, we have heard the case on merits. 2 2. The first question raised is whether the Tribunal was justified in holding that the expenditure incurred for conducting feasibility studies for improvement in the efficiency of the operations of the company is revenue expenditure eligible for deduction under Section 37(1) of the Income Tax Act. Standing Counsel submitted that the feasibility study involved substantial amount and the result would be adoption of new technology and methods for improved efficiency in the running of the company. Therefore, according to him, the expenditure is capital in nature as an enduring benefit is derived by the respondent-company. However, on going through the Tribunal's order, we find that the Tribunal noticed that no new plant or device is established by the company as a result of the feasibility study and so much so, no enduring benefit is achieved by the company. Since the decision of the Tribunal is based on finding on facts, we reject the question raised in the appeal as one of of substantial question of law. 3. The next question raised is also similar in nature and the expenditure involved is the amount spent and accounted as project overheads. The Tribunal has gone through the details of the amount 3 spent and it was found that it is in the nature of salary paid to the employees, traveling allowance, printing, stationery etc. Here again, the department has no dispute that the amount is not actually spent by the assessee. On the other hand, limited dispute raised is whether the expenditure is capital or revenue in nature. On detailed examination, the Tribunal noticed that the expenditure is revenue in nature and so much so, they allowed the claim. Here again, we do not find any substantial question of law arising from the orders of the Tribunal. 4. The last question is with regard to the deduction allowed by the Tribunal under Section 80I of the Income Tax Act in respect of the investment in 20 MW Captive Power Plant. The reason for disallowance is that the Captive Power Plant is part of the industrial unit of the company and it does not constitute a separate industrial undertaking. We are unable to accept the contention of the department because the company is engaged in refining petroleum and if power plant is established, it is certainly a different industrial unit, no matter the power is generated by using the existing industrial facility. It is the finding of the Tribunal that besides utilising the power generated by the 4 Captive Power Plant for the purpose of industry itself, the balance is sold by the company to K.S.E.B. We are in complete agreement with the finding of the Tribunal that the 20 MW Captive Power Plant is a separate industrial unit eligible for deduction under Section 80I of the Act. We do not find any substantial question of law arising from the finding of the Tribunal that the Captive Power Plant is a separate industrial unit. Consequently we dismiss all the appeals filed by the Revenue. Registry will forward a copy of this judgment to the respondent. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms