M/S RUDRAKSH DETERGENT & CHEMICAL PVT. LTD.,,GANDHIDHAM vs. THE ASSISTANT COMMR. INCOME TAX, GANDHIDHAM CIRCLE,, GANDHIDHAM

The assessee has raised following ground of appeal:- “1. The order appealed against is bad in law. 2. The assessing officer has erred in treating the payment of Rs. 12,27,752/- made to Himalay Construction for repair of internal road in factory as capital in nature. The Id. CIT(A) has erred in confirming the same.”

The only issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by treating the expenses incurred on the repair of internal Road in the factory as capital in nature.

The appeal filed by the assessee is barred by limitation by 6 months. The assessee filed the condonation petition explaining that the issue involved in the present appeal was arising against the rectification order passed by the learned CIT (A) under section 154 of the Act. However the assessee instead of filing the separate appeal against the order of learned CIT (A) passed under section 154 of the Act, has raised the issue in the appeal filed against the order passed under section 250 of the Act, in the appeal filed before the ITAT inadvertently. As such the assessee realized its mistake after passing the order of the ITAT dated 28th of May 2015 where it was held that the ground relating to the disallowance of Rs. 12,27,752/- arising from the order of the learned CIT (A) under section 154 of the Act is not maintainable. Accordingly, the assessee filed fresh appeal before the ITAT against the order of the learned CIT (A) under section 154 of the Act, which caused delay in filing the appeal. The learned AR in support of his contention also filed the affidavit of the director of the assessee company which is placed on record. Accordingly the learned AR prayed before us for the condonation of the delay.

On the other hand, the learned DR considering the reasons for delay in filing the appeal before the ITAT did not object on the admission of the appeal. As such the learner DR left the issue at the discretion of the Tribunal.

We have heard the rival contentions of both the parties and perused the materials available on record. Considering the reasons for the delay in filing the appeal as discussed above, we hold that there was sufficient cause which prevented the assessee from filing the appeal before the ITAT within the time

The assessee in the year under consideration has incurred the expenses for the repairs of the internal Road in the factory premises which was claimed as revenue in nature. The details of such expenses stand as under:- 'Material (black stone, malmo, moram, dust, sand) used for road leveling, soiling Rs.8,79,560/- 'Labour charges received for repairing work at your factory with rolling excavation, removal pressing etc. Rs. 3,48,192/- Total Rs.12,27,752/-

However the AO, considering the raw materials used in the so-called repair expenditure, opined that the life of the road has been enhanced/increased which will provide enduring benefit. Accordingly the AO treated the same as capital in nature and disallowed the same by allowing the depreciation thereon.

Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as under:- “4.2 1 have carefully considered the contention of the appellant and the assessment order. The appellant has submitted the bill issued by Himalay Construction. It is worthwhile to mention the data culled out by the A.O. from the bill. The following quantities have been used by the appellant for this work:- Blackstone 3176 tons Malmo 2162 tons Murrain 1600 tons Sand 70 trips Dust 80 trips 4.3 The quantities are huge and indicate that major and extensive repairs have been carried out to the roads. It is not the contention of the appellant that the entire length of roads in the factory was resurfaced. It appears that part of the roads in the factory were kaccha roads which are now being converted into proper all-weather roads. The quantity used reflects more than normal repairs. 1 therefore agree with the A.O. that new asset has been brought into existence resulting into enduring benefit to the appellant. The appellant's contention is therefore not accepted. This is held to be capital expenditure.”

Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.

The learned AR before us filed a paper book running from pages 1 to 35 and submitted that there was no new asset came into existence of enduring benefit out of such expenditure. The learned AR further claimed that such expenditure was incurred to preserve the existing assets therefore the impugned repair expenses are revenue in nature.

On the other hand the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record before us. The learned CIT (A) disregarded the contention of the assessee by observing that there was the kachha road which was converted into proper road. For this purpose, this expenditure was incurred which was treated by the assessee as revenue in nature.

The question of repair arises with respect to any capital assets which is already in existence. As per the learned CIT (A) there was no such existence of the proper road but the same was constructed in the year under consideration. Thus 1st of all the assessee has to establish based on cogent reason that there was the existence of the road which was repaired in the year under consideration. In our considered view this fact could have been established either from the balance sheet of the assessee or copy of the ledger showing the existence of internal Road in the books of accounts. There could have been other evidences available with the assessee to justify the existence of the road within the factory. But we find that the assessee has not brought any evidence. Assuming, there was no existence of the road in the financial statement of the I.T.A No. 312/Rjt/2015 A.Y. 2010-11 Page No 5 M/s. Rudraksh Detergent & Chemical Pvt. Ltd. vs. ACIT

The learned AR before us has referred many judgments of various Hon’ble courts in support of his contention that repair expenses on the road, though large in size, have to be treated as revenue in nature. To our humble understanding, there is no fixed formula to decide whether the expenditure represents capital or revenue in nature. It all depends upon the facts and circumstances of each case. Therefore we are not inclined to make any reference to those judgments in the given facts and circumstances. It is because the judgment will help us out in deciding the issue once the assessee crosses its primary hurdle by justifying based on documentary evidence that there was the existence of road prior to the incurring of the impugned expenditure in the year under consideration. As the assessee failed to bring any material on record to prove the existence of the road previously, we do not find any infirmity in the order of the authorities below. Hence the ground of appeal of the assessee is dismissed

Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing.

Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the I.T.A No. 312/Rjt/2015 A.Y. 2010-11 Page No 7 M/s. Rudraksh Detergent & Chemical Pvt. Ltd. vs. ACIT

In the result appeal of the assessee is dismissed.