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Income Tax Appellate Tribunal, DELHI BENCHES “F” : DELHI
Before: SHRI N.K. SAINI & SHRI KULDIP SINGH
This appeal by the department against the order dated 23.05.2016 of Ld. CIT(A)-7, New Delhi. The only factual ground raised in this appeal reads as under :
“On the facts and circumstances of the case, the Id. CiT(A) has erred in deleting the addition of Rs.35,65,581/- out of total addition of Rs.49,92,226/- made by Assessing Officer on account of capital expenditure since the assessee company
2 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. could not furnish any document or record to establish the allowability of the expenditure claimed as revenue in nature before assessment proceedings as well as before remand proceedings.”
Facts of the case in brief are that the assessee filed his return of income on 29.09.2011 declaring NIL income. Later on the case was selected for scrutiny. The A.O. asked the assessee as to why the following expenses not be disallowed and added back to income of the assessee.
Date Party Amount Reason Hyva Tractor Running Expense HC1L PEPL JC CMDG 31.08.2010 Regional office 5,58,099/- Capital Expenditure 20.01.2011 State bank 60520 1,00,000/- -do- 23.02.2011 New Golden Tyre 1,18,000/- -do- 07.03.2011 State bank 60520 1,61,000/- -do- PCD Sheikhpura 24.04.2010 CDSS 1,02,500/- -do- 09.06.2010 Regional Office 37,000/- Penalty 09.06.2010 Regional Office 1,42,600/- Capital Expenditure 08.02.2011 Regional Office 2,41,200/- -do- 03.03.2011 Regional Office 1,31,600./- -do- 26.03.2011 Regional Office 1,00,000/- -do- 28.03.2011 Regional Office 70,000/- -do- Machinery Repair & Maintenance PCD- Sheikhpura Project 07.06.2010 Regional Office 1,00,000/- Capital expenditure 06.07.2010 Regional Office 8,67,246/- -do- 29.07.2010 Waliram Taneja Mines P Ltd 4,57,183/- -do- 07.02.2011 Waliram Taneja Mines P Ltd 84,181/- -do- 09.02.2011 RD Wireless Sollutin 85,000/- -do- 12.02.2011 KK Enterprises 1,17,793/- -do- 14.02.2011 Waliram Taneja Mines P.Ltd 5,04,478/- -do-
3 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. 16.03.2011 Lerson & tubro Ltd 4,52,400/- -do- HCIL PEPL JV CMDG 02.04.2010 Waliram Taneja 67,800/- -do- 28.07.2010 Waliram Taneja 81,076/- -do- 12.01.2011 Regional Office 1,50,000/- -do- Regional office 30.04.2010 Ajit Tyres 1,18,997/- -do- Peartree HO- siwan amchine 11.05.2010 Infratech Sollutions 1,11,910/- -do- 12.05.2010 Ramaa machinery 53,025/- -do- Peartree HO Sheikhpura machine 27.04.2010 Entech Engineers 1,05,000/- -do- 11.06.2010 Puzzlon 1,08,403/- -do- 27.07.2010 Puzzlon 2,68,805/- -do- 03.03.2011 Drill Tech 1,75,548/- -do- 15.03.2011 Drill Tech 1,30,771/- -do- 26.03.2011 Puzzlon 5,92,389/- -do- TOTAL 63,94,004/- 2.1 In response, the assessee submitted as under :
3. Copies of bills are being submitted herewith as asked for at point no. 15 of letter dated 01.01.2014 as annexure-3. It is submitted that in the case of CDSS the amount is consolidated sum of numerous small purchases of machinery and vehicle spares procured on day to day basis. It is explained that these expenditures are only revenue expenditures, as all the items of expenditure are purchase of spare parts from the equipment manufacturer or from the open market for preventive maintenance of machinery, vehicle & equipments.
2.2. The A.O. however, did not find merit in the submissions of the assessee and made the disallowance of Rs.49,92,226 by observing as under :
4 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. “The reply of the assessee along with bills submitted was analyzed and except for following expenditures which has assessee has established through necessary bills in nature of revenue expenditure remaining expenditure for Rs.49,92,226/- are treated as capital expenditure on the basis of quantum of expenditure along with details given in the narration to the ledger account, also for the expense of Rs.49,92,226/- the assessee has not furnished any document on record to establish that the said expense are in nature of revenue expenditure the expense are disallowed being capital expenditure & added back to income of the assessee.
Out of above mentioned expense for Rs.63,94,004/- the assessee has established that expense for Rs.14,01,778/- are in nature of revenue expenditure the expense for Rs.49,92,226/- is treated as capital expenditure and disallowed & added back to income of the assessee.
Details of Revenue Expenditure being incurred on rollers, seal kits, bus, bolts etc.
5 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. 24.04.2010 CDSS Rs.1,02,500/- 29.07.2010 Waliram Taneja Rs.4,57,183/- 07.02.2011 Waliram Taneja Rs.84,181/- 09.02.2011 RD Wireless Rs.85,000/- 11.05.2010 Infratech Sol Rs.1,11,910/- 12.05.2010 Ramaa Machinery Rs.53,025/- 11.06.2010 Puzzlon Rs. 1,08,403/- 27.07.2010 Puzzlon Rs.2,68,805/- 15.03.2010 Drill Tech Rs.1,30,771/- TOTAL Revenue Expenditure Rs.14,01,778/- Remaining amount as detailed above in nature of capital expenditure to be disallowed & added back to income of the assessee for Rs.49,92,226/- (63,94,004-14,01,778/-)”
Being aggrieved, the assessee carried the matter to the Ld. CIT(A) who sustained the disallowance to the extent of Rs.30,56,645 and allowed relief of Rs.35,65,581 by observing in para 4.3 and 4.4 of the impugned order as under :
“4.3. It is evident from the finding of the AO that disallowance is made on the basis of quantum and non production of documents. It is not the case of the AO that expenditure is not incurred or genuineness of expenditure is in doubt. In any case, disallowing expenditure by treating it as capital in nature cannot be resorted to without examining
6 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. the nature thereof. This exercise has not been done by the AO. Non production of documents does not imply that the expenditure incurred is capital in nature. It is also noted that the appellant was able to provide bills etc. and on this basis, the AO allowed expenditure of Rs. 14,01,778/- as revenue expenditure. In my view, it is not fair and reasonable to disallow the balance expenditure only on the ground of non production of documents. Details of the expenditure incurred were made available by the appellant company and as already stated genuineness of the same is not questioned by the A.O.
4.4. In appellate proceedings, the Ld. AR has furnished bills in support of the expenditure incurred. It is noted that most of the bills are in the nature of repairs & maintenance, spares, batteries, tyres, repairs and related miscellaneous items incurred on plant & machinery and vehicles owned by the appellant company. It is also noted that as per the fixed assets schedule, the opening balance in the Gross block, Plant & machinery and vehicles as on 01.04.2010
7 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. are recorded at Rs.38,65,16,258/- & Rs. 1,97,49,729/- respectively. This indicates that the appellant was required to incur routine expenditure on maintenance of plant & machinery and vehicles etc. utilized in its civil construction business. The Bills/Vouchers produced have been examined. It is seen that there are certain items of expenditure which prima facie are capital in nature. From the details of bills enclosed summarized as Annexure 1, item No. 12 are bills of Rs.8,67,245/- of M/s Larsen & Toubro Ltd. are pertaining to comprehensive repair of machinery. Similarly, item No. 14 is a bill of Rs.4,52,400/- of Larsen & Toubro for supply of an engine. In addition at item No.4, expenditure of Rs.37,000/- has been claimed on account of penalty for overloading. These items of expenditure cannot be treated as revenue account. The other bills, however, are for purchase of tyres, repair & maintenance, conveyor belts and spare parts which is in the nature of revenue expenditure. On examination of the bills produced, it is held that except for expenditure of Rs.
8 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. 13,56,645/- as detailed above which is in the nature of capital expenditure/penalty, the balance is allowable as revenue expenditure. The appellant is allowed consequential relief of Rs.35,65,581/-. This ground of appeal is ruled partly in favour of the appellant.
4. Now the department is in appeal. The Learned D.R. strongly supported the assessment order passed by the A.O. and reiterated the submissions made therein. In his rival submissions, the Learned Counsel for the Assessee supported the impugned order passed by the Ld. CIT(A) and reiterated the submissions made before him.
5. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is noticed that the Ld. CIT(A) categorically stated in para 4.4 of the impugned order that the assessee furnished bills in support of the expenditure incurred, he had examined those bills and found that certain items of expenditure were prima facie capital in nature but all other expenses relating to tyres, repair and maintenance etc., were revenue in nature. He, therefore, considered the expenditure of Rs.13,56,645 in the nature of capital and 9 ITA.No.4333/Del./2016 M/s. Peartree Enterprises Pvt. Ltd., New Delhi. sustained the disallowance to that extent. We, therefore, do not see any valid ground to interfere with the findings of the Ld. CIT(A) because the findings given by the Ld. CIT(A) were not controverted by bringing any cogent material on record. In that view of the matter, we do not see any merit in this appeal of the department.
In the result, appeal of the department is dismissed.
Order pronounced in the open Court 26.10.2017.