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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: Appeal by the assessee pertaining to the assessment year 2013-14 against the order of Ld. CIT(A)-2, Indore
[ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] dated 2.8.2017. The assessee has raised following grounds of appeal:
1. That on the facts and in the circumstances of the case the Learned CIT(A) erred in maintaining disallowance of Rs.12,71,650/- as made by A.O. out of Repairs & Maintenance of Building by holding that said amount of expenses as incurred by the assessee are of enduring nature and therefore the same are not considered as revenue expenditure without properly appreciating the facts of the case, and submission made before him.
The assessee reserve its right to add, alter, modify or amend the grounds of appeal as and when required.
2. Facts in brief are that case of the assessee was taken up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 29.10.2015. The A.O. observed that the assessee had claimed expenses of Rs.24,95,156/- as the expenses under the head ‘Repairs & Maintenance’ of the building. The A.O. considering the amount of Rs.12,71,650/- as the expenditure incurred for enduring benefit disallowed the same being capital in nature and also disallowed 10% of the depreciation on the [ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] same and made addition of Rs.12,71,650/-, he further made an adhoc disallowance of Rs.2 lakhs in respect of the expenses incurred under the head ‘Travelling, Repairs & maintenance, sales promotions, demonstration’ on the basis that they are not supported by the self-made vouchers. Against this, the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions partly allowed the appeal, thereby adhoc disallowances of Rs.2 lakhs were deleted and the addition made on account of disallowance of expenditure being in capital nature was sustained.
Now the assessee is in appeal against the sustaining of the disallowance of expenditure of Rs.12,71,650/- in the present appeal. Ld. Counsel for the assessee vehemently argued that the authorities below were not justified in making the addition as the authorities have not pointed out what expenditures were of the enduring benefit. Ld.
[ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] Counsel for the assessee has relied upon the judgement of the Hon'ble Madras High Court rendered in the case of Thiru Arooran Sugars Ltd. Vs. DCIT (2013) 31 Taxmann.com 3 (Madras) and the decision of the coordinate bench in the case of M/s. Aries Exports Pvt. Ltd. Vs. DCIT Circle-3(1) in ITA No.5841/Mum/2012. Further, Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. The submissions of the assessee are as under:
A.1] The assesseee had filed its return of total income for the A.Y. 2013-14 on 30.11.2013 declaring total income at Rs.24471780/-. A.2] The case of the above assessee was selected in scrutiny and assessment order was passed u/s 143(3) on 29.10.2015 wherein total income of the above assessee was assessed at Rs.25816265/-. That while passing the Assessment Order following additions were made to the Total income of the assessee. Sl.No. Particulars Amount 01. Disallowance out of Repairs and Maintenance Expenses 1271650 02. Adhoc disallowance out of various expenses 200000 Less Depreciation allowed on expenses under Repairs & Maintenance 127165 Total addition 1344485 A.3] The Ld. CIT(A) vide his order dt.02.08.2017 has partly allowed the appeal as filed by the assessee by deleting the Adhoc disallowance of Rs.200000/- made by the A.O. but he has maintained the disallowance of Rs.1271650 made by theA.O. in respect of Repairs & Maintenance expenses. A.4] The assessee is in appeal before the Hon'ble Bench against the said disallowance of Rs.1271650/- as made by the A.O. and maintained by the Ld. CIT(A).
[ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] [ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] [ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore]
On the contrary, Ld. D.R. opposed the submissions and supported the orders of the authorities below.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find that the A.O. had disallowed expenditure by observing as under:
“4. During the course of assessment proceedings, it has come to notice that out of total expenses of Rs.24,95,156/- under the head repairs and maintenance of building, the assessee has incurred expenditures under the following two heads:
Amount Head Sl. Spent (INR) No. 1. 379750 False ceiling, tiles, painting, electric work at mezzanine floor of workshop 2. 891900 PCC and RCC work. Total 1271650
4.1 It was brought to the notice of the AR that the above expenses under the above two heads incurred by the assessee are of enduring nature and therefore, the same are not considerable as revenue expenditure. Accordingly, this amount of Rs.12,71,650/- is disallowed and added to the income of the assessee by the assessee is entitled to claim depreciation @ 10% on Rs.12,71,650/-, which works out to Rs.1,27,165/-. Accordingly, the depreciation of Rs.1,27,165/- is allowed while computing the assessed income of the assessee.”
[ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] 6. Further, Ld. CIT(A) sustained this addition by observing as under:
“I have carefully considered the submission of the appellant. However, the fact remains that although these expenses have been claimed in the nature of repairs but as per the appellant itself the said building had become old and the principal that is Tata Motor Ltd. had demanded the renovation of the building. Clearly, there is a difference between the routine repair work and complete renovation of the building. Also false ceiling and other work including putting up of new tiles was done, thereby creating a benefit of enduring nature for the appellant. Thus, by any stretch of imagination these particular repairs works cannot fall in the category of expenditure allowable u/s 37(1) of the Act. The appellant has clearly derived benefit of enduring nature and it’s his own words, the entire premises was “renovated” and “not just repaired”. Hence, I have no hesitation in confirming the addition so made by the A.O. Therefore, this ground of appeal is dismissed”.
7. Both the authorities have not stated as what was the nature of expenditure. Merely on the basis of conjectures have arrived at a conclusion that the expenditure was of the enduring nature. We are not inclined to affirm this casual approach of the authorities below. Therefore, respectfully following the Judgement of the Hon'ble Madras
[ITA 640/Ind/2017] [M/s. SGS Motors Pvt. Ltd., Indore] High Court rendered in the case of Thiru Arooran Sugars Ltd. Vs. DCIT (supra), we hereby direct the A.O. to delete the additions.
In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open court on 04 .04.2019.