What did the Tribunal hold?

The Tribunal, following its own earlier decisions, restored the issue to the Assessing Officer. The AO was directed to allow depreciation on the disallowed portion of the expenditure as per law.

The assessee claimed expenses under 'Repairs and Maintenance' as revenue expenditure. The Assessing Officer rejected this claim and made an addition of Rs. 2 crores, treating a portion of the expenses as capital in nature. The CIT(A) partly allowed the appeal, directing the AO to allow depreciation.

What were the issues?

Whether expenses claimed under 'Repairs and Maintenance' are revenue or capital in nature, and the consequential allowability of depreciation on the disallowed portion.

M.P.Tourism Development… vs ACIT | s.143(3) | ITAT Indore 2018

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI KUL BHARAT & SHRI MANISH BORAD

For Appellant: Shri S.S. Deshpande, A.R

For Respondent: Shri R.S. Ambedkar, Sr.D.R

Hearing: 13.11.2018Pronounced: 06.12.2018

आदेश / O R D E R

PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of

the CIT(A)-I, Bhopal dated 30.3.2017 pertaining to the

assessment year 2012-13. The assessee has raised

following grounds of appeal:-

Briefly stated facts are that the assessee had filed

original income, wherein it has declared income at

Rs.1,64,05,599/-, however this return was revised on

30.3.2014 declaring income at Rs.2,16,24,804/-. The case

of the assessee was picked up for scrutiny assessment and

the assessment u/s 143(3) of the Income Tax Act, 1961

(hereinafter called as ‘the Act’) was framed. The A.O. while

framing the assessment rejected the claim of the assessee

that expenses incurred under the head ‘Repairs and

Maintenace’ are of the revenue nature. Accordingly, he

made addition of Rs.2 crores in this respect.

Aggrieved by this, the assessee preferred an appeal

before Ld. CIT(A). Ld. CIT(A) vide impugned order partly

allowed the appeal directing the assessing officer to allow

depreciation as per law. However, aggrieved by the order,

the assessee is in appeal. Ground Nos.1 & 3 are against

confirming the disallowance of Rs.2 crores. Ld. Counsel for

the assessee vehemently argued that Ld. CIT(A) was not

justified in confirming the additions. He submitted that

the expenses are of the revenue nature.

4. On the contrary, Ld. D.R. supported the order of the

Ld. CIT(A) stating that the issue is covered by the decision

of the Tribunal in earlier assessment years.

We have heard the rival submissions, perused the

materials available on records and gone through the orders

of the authorities below. Ld. CIT(A) in para Nos.5, 6 & 7 of

his order has decided the issue by observing as under:

We find that in the case of the assessee this Tribunal

in ITA Nos.685/Ind/2016 dated 28.2.2017 has decided the

issue by observing as under:

Replying to the above, the learned CIT DR strongly supported the order of the Assessing Officer which was confirmed by the learned CIT(A) by passing the impugned order. However, he could not controvert this factual situation that by the order dated 8.9.2016 of ITAT, Indore Bench, for the assessment year 2009-10, the issue has been restored to the file of the Assessing Officer with the following directions :- “14. The first ground taken by the assessee is that the learned CIT(A) was not justified in confirming the action of the Assessing Officer that the sum of Rs.1,31,81,008/- out of total expenditure of Rs.2,36,51,306/- claimed on account of building repairs, other repairs & garden maintenance are of capital nature and disallowable. 15. The Assessing Officer noticed that the assessee company had claimed expenses on buildings repair and maintenance amounting to Rs.1,67,33,389/-.The Assessing Officer noted that the assessee had included expenses of capital nature in the repairs and maintenance expenses. these expenses. However, the Assessing Officer made the addition. On appeal, the learned CIT(A) following the decision of the CIT(A) for the assessment year 2007-08 the Assessing Officer disallowed 48.12% of the expenditure treating the same as capital in nature and added back the same to the total income of the assessee. On appeal, the learned CIT(A) considering the fact that the CIT(A) and the Tribunal had confirmed similar disallowance in the earlier years, confirmed the disallowance made by the Assessing Officer. Now the assessee is before us. 16. We have heard both the sides. We find that the Tribunal has confirmed the similar disallowance in the earlier years in the case of the assessee itself. We, therefore, find no flaw in the order of the learned CIT(A) and confirm the same. This ground is, therefore, rejected. 17. The next ground relates to confirmation of depreciation by the learned CIT(A) on Rs.1,13,81,008/- in case the said amount is treated as an expenditure 18. We have heard both the sides. We find that when the learned CIT(A) is justified in treating the expenditure of Rs.2,36,51,306/- as building repairs, other repairs and garden maintenance as capital in nature, therefore, the assessee is entitled to depreciation as per law. We, therefore, set aside the orders of the authorities below and restore this issue to the file of the Assessing Officer to decide the same as per law after giving the assessee an opportunity of being heard.”

In view of the above, we are of the view that that learned CIT DR could not controvert the factual situation that the impugned disallowance of building repairs, garden and others has been restricted to 48.12% of the total expenditure for the assessment year 2007-08, 2009-10 and 2010-11 and for the assessment year 2009-10 the cross objection of the assessee challenging the part disallowance of 48.12% has been rejected by the Tribunal and the issue has been restored to the file of the Assessing Officer for the limited purpose, by observing that the assessee is entitled to depreciation on the amount of part disallowance as per the provisions of the Act and thus the issue has been

restored to the file of the Assessing Officer to decide the same afresh after affording due opportunity of hearing to the assessee. Respectfully following the order of the coordinate Bench of the Tribunal dated 8.9.2016 (supra) in the assessee’s own case for the assessment year 2009-10, the issue is restored to the file of the Assessing Officer for the limited purpose with the direction that the assessee is entitled to depreciation as per law on the amount of disallowance and the Assessing Officer is directed to calculate and allow the same as per the facts, circumstances and provisions of the Act. 8. In the result, the appeal of the assessee is partly disallowed by upholding the disallowance of 48.12% of total impugned expenditure and partly allowed for statistical purposes on the issue of allowability of depreciation on the amount of disallowance.

There is no change in the facts and circumstances in

the present case. The Ld. CIT(A) has followed the decision

of the Tribunal. Therefore, we do not see any infirmity in

the order of the Ld. CIT(A) and the same is hereby affirmed.

Ground Nos.1 & 3 of the assessee are dismissed.

Ground No.2 is in respect of charging of interest u/s

234B of the Act. This being consequential, no argument

was addressed. We therefore, dismiss the same.

Ground No.4 is general in nature and needs no

separate adjudication.

10. In the result, the appeal filed by the assessee is

dismissed.

Order was pronounced in the open court on 06.12.2018.

Sd/- Sd/-

(MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER

Indore; �दनांक Dated : 06/12/2018 VG/SPS

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore

M.P.TOURISM DEVELOPMENT CORPORATION, BHOPAL,BHOPAL vs. ASSISTANT COMMISSIONER OF INCOME TAX 2 (1), BHOPAL

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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