COMMISSIONER OF INCOME-TAX PATIALA vs. M/S VISHAL PAPER INDUSTRIES VILL. KHUSROPUR

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 16.1.2013 ITA No. 203 of 2012 The Commissioner of Income Tax, Patiala ......Appellant. vs. M/s Vishal paper Industries .....Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE RITU BAHRI Present: - Ms. Savita Saxena, Advocate for the appellant. ..... Present appeal under Section 260A of the Income Tax Act, 1961 (for short the 'Act') is arising out of an order passed by the Income Tax Appellate Tribunal (for short the 'Tribunal') on 26.3.2012, whereby the expenses claimed by the assessee on account of repair & maintenance were allowed though, earlier such expenses were disallowed for the reason that such expenses are capital expenditure in nature. The appellant has claimed the following substantial question of law:- “In the facts and circumstances of the case, whether the ITAT is justified in deleting the addition of Rs. 45,22,172/- sustained by the CIT (A) out of Rs. 95,00,109/- on account of disallowance of expenditure incurred on purchase of new items ignoring the fact that most of the items purchased by the appellant were new

-2- identifiable assets brought into existence and could not be termed as current repairs.” The Commissioner of Income Tax (Appeals) has found that the expenses under the repair and maintenance account has led to (1) new identifiable assets (2) their installation had increased life of the existing assets beyond their original estimated economic life and (iii) profitability of the concern had substantially increased. Such order was set aside by the Tribunal treating such items as capital expenses by the Commissioner of Income Tax (Appeals). The learned Tribunal held that the issue whether the expenditure is capital or revenue in nature, depends on several tests. No single test is universally applicable and infallible in nature. Each item of such expenses is to be seen and considered in the light of facts of each case and its use. In view of the said fact, the findings recorded by the Commissioner of Income Tax (Appeals) were set aside. Learned Commissioner of Income Tax (Appeals) has found that many items were purchased by the assessee which led to the conclusions as mentioned above. We find that the increase of life by repair and maintenance of the existing assets beyond their original estimated economic life cannot be a ground to return a finding that it was not a case of repair. Repair and maintenance is in fact necessary not only for achieving the optimum utilization of machinery but also if possible to extend its economic life. Therefore, the fact that such installation has increased life beyond their original economic life cannot be a ground to return a finding that the expenses incurred were not for repair and maintenance. Similarly, the ground of increase in the profitability of concern is again a totally alien to determine the nature of the repair and maintenance. Increase in profit would lead to increase in income, which would be separately taxable but could not

-3- be a ground for declining the expenses incurred by the assessee for repair and maintenance. Though the findings returned is that new identifiable assets have been created but the Tribunal has returned a finding that though each of the item is useable independently but that such items have been used for repair and maintenance. With such finding, the expenditure was allowed. In view of the said fact, we find that the findings recorded by the Tribunal are the findings of fact. We do not find any substantial question of law arises for consideration. Dismissed. (HEMANT GUPTA) JUDGE (RITU BAHRI) JUDGE 16.1.2013 preeti