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2026:MHC:772

TCA No. 259 of 2012

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 29-01-2026

CORAM

THE HON'BLE DR.JUSTICE ANITA SUMANTH

AND

THE HON'BLE MR.JUSTICE MUMMINENI SUDHEER KUMAR

TCA No. 259 of 2012

M/s Tamil Nadu Small

Industries, Development Corporation Ltd, Guindy

Industrial Estate, SIDCO Electronic Complex,

Chennai – 600 032.

..Appellant(s)

Vs

1. The Income Tax Officer (OSD)

Circle III (1) Chennai.

2. The Secretary To Government

Small Industries (SIC) Department, Secretariat,

Chennai-9.

[R2 is Suo Motu impleaded vide Order of this

Court dated 03/12/2024 made in TCA.No.259 Of

2012)]

..Respondent(s)

Prayer: Appeal filed under Section 260A of the Income Tax Act, 1961 against

ITA.No.1660/Mds/2008 dated 30.04.2012 for the assessment year 2004-2005

on the file of Income Tax Appellate Tribunal, Chennai ‘A’ Bench.

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TCA No. 259 of 2012

For Appellant(s): Mr.A.S.Sriraman

For Respondent(s): Dr.S.Sathiyanarayanan

Senior Standing Counsel (for R1)

R2 – No appearance

JUDGMENT

(Judgment of the Court was delivered by Dr.Anita Sumanth J.)

The assessee challenges the order of the Income Tax Appellate Tribunal

(‘ITAT’/‘Tribunal’), dated 30.04.2012, for assessment year (AY) 2004 – 2005.

2. We have heard the submissions of Mr.A.S.Sriraman, learned counsel

for the appellant and Dr.S.Sathiyanarayanan, learned Senior Standing Counsel

for the first respondent.

3. The substantial questions of law admitted on 04.02.2013 are as

follows:-

1. Whether the Appellate Tribunal is correct in law in

sustaining the disallowance of expenses incurred amounting to

Rs.1,64,47,348/- in the assessment year 2003-04 and debited to

the profit and loss account in the assessment year 2004-05,

claimed as a deduction in the computation of taxable total income

based on the rejection of the plea for reimbursement of such

expenses by the Government of Tamil Nadu which fact was taken

note of by the Board of Directors as reflected in the minutes

dated 07.09.2004 which was prior to the adoption of the final

accounts of the Appellant for the assessment year 2004-05?

2. Whether the Tribunal is correct in law in rejecting the

alternate plea of issuing appropriate direction for considering

and allowing such expenses in the assessment year 2003-04

based on the wrong perception of their powers in disposing off

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TCA No. 259 of 2012

the appeal before them within the scope of Section 254 of the

Act?

4. The appellant is the Tamil Nadu Small Industries Development

Corporation (SIDCO/assessee/appellant), a Government Company. It was

assigned the maintenance and upkeep of six government properties, at

Ambattur, Guindy, Thuvakudi, Kappalur, Mettur and Trivellore that were

earlier under the control of the State Industries Promotion Corporation of Tamil

Nadu Limited (SIPCOT).

5. Vide G.O.Ms.No.877 dated 01.07.1982, SIDCO was permitted to debit

the government, for staff cost and maintenance expenditure up to a certain

threshold. Clause (iv) of the aforesaid G.O., reads as follows:-

(iv) The staff cost and the maintenance expenditure should not

exceed the percentage worked out with reference to capital cost

of the Industrial Estates and Developed Plot Estates as indicated

below:

1) Staff expenditure : 2%

2) Property tax, Water tax and other miscellaneous

expenditure : 1%

3) Lumpsum provision for maintenance including minor

works : 1%

6. The appellant, in line with the above mandate, had been debiting

expenditure to the extent permitted, in computing taxable income. While so, the

appellant was advised that it was preferable that the expenditure be debited on

actual basis to obviate financial prejudice. Hence, memoranda were submitted

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TCA No. 259 of 2012

to the Board on 27.10.2003 and 10.04.2003 seeking that the Board take

necessary action to consider revising