Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-1, Nashik, dated 23-06-2016 for the Assessment Year 2012-13.
Before us, at the outset, Ld. Counsel for the assessee did not press Ground Nos. 3 and 4. Ground No.5 is general in nature. Accordingly, the said ground Nos. 3 to 5 are dismissed as such. That leaves Ground Nos. 1 and 2 for adjudication. Therefore, Ground Nos. 1 and 2 raised by the assessee are extracted here as under :
“”1. The Ld.CIT(A)-1, Nashik erred in holding that expenditure of Rs.17,77,045/- incurred by the appellant on repairs of factory building, walls and platform is capital in nature and thereby confirming the addition made by the Assessing Officer. Your appellant submits that under the facts and in the circumstances of the appellant’s case the Ld.CIT(A) ought to have held that the expenditure of
2 ITA No.1751/PUN/2016 Shri Vipinchandra M. Chokhawala
Rs.17,77,045/- incurred by the appellant on repairs of factory building walls and platform is revenue in nature. 2. The Ld.CIT(A) erred in concluding that the appellant has laid a new wall/platform of different type of place of old wall/platform resulting in new and distinct advantage and hence the expenditure of Rs.17,77,045/- does not fall within the meaning of the term “current repairs.”
Briefly stated relevant facts relating to the above grounds include that
the assessee is an individual and is engaged in the business of
manufacturing and trading of Toor Dal and other pulses and other
commodities, construction of row house and development of estate.
Assessee derives income from salary, house property, business or profession,
share in profit of firm, short term capital gain, other sources and interest.
Assessee filed the return of income on 06-09-2012 declaring total income of
Rs.1,65,52,780/-. Assessee’s case was selected under CASS. In the
assessment proceedings, copies of audit reports, computation of income and
final accounts, ledger, cash/bank accounts of the assessee were scrutinized.
On the verification of the profit and loss account and the balance sheet of
the assessee for the year under consideration, AO noticed that assessee
claimed factory building repair expenses amounting to Rs.17,77,045/- as
allowable deduction. Assessee filed the ledger and vouchers relating to the
said repairs. AO opined that the expenses incurred by the assessee are for
improving the fixed assets. The expenditure is not in the normal course of
business and not a routine type of business expenditure. Eventually, the AO
made addition of Rs.16,25,357 to the total income of the assessee after
allowing depreciation at Rs.1,51,688/- treating the same as capital
expenditure. AO also made other additions too on account of (1) income
from house property at Rs.87,500/-; (2) disallowance of interest u/s.36(i)(ii)
at Rs.6,575/-; (3) non business expenses at Rs.1,00,000/-; and (4) scrap
sale at Rs.75,000/- (on adhoc basis).
3 ITA No.1751/PUN/2016 Shri Vipinchandra M. Chokhawala
In the First Appellate proceedings, the CIT(A) upheld the addition
made by the AO on account of repairs to the factory building. While doing
so, the CIT(A) relied on various judgments and finally concluded that renewal
and installation of entire wall in the building with new platform is not
covered under the expression ‘current repairs’. It is a case of complete
replacement and change. Regarding the other additions, the CIT(A) gave part
relief to the assessee.
The only issue for adjudication before us is whether the AO/CIT(A) are
justified in treating the repair expenses incurred by the assessee on the
factory building is ‘revenue expenditure’ or ‘capital expenditure’.
Ld. Counsel for the assessee submitted that assessee has not created
any new asset. Assessee carried out internal and outer cement plaster, two
coat cement mortar with neeru finish to concrete brick surface, internal and
external painting of compound wall. The expenditure qualifies for ‘current
repairs’ and therefore, the same should be allowed as ‘Revenue expenditure’
instead of ‘Capital expenditure’ held by the AO/CIT(A). In support of his
claim, Ld. Counsel relied on the decision of Mumbai Bench of the Tribunal in
the case of M/s. NRB Bearing Ltd., Vs. ACIT and vice versa in ITA Nos. 672
and 1982/Mum/2011, dated 30-10-2015.
Ld. DR for the Revenue vehemently opposed the arguments of the Ld.
Counsel for the assessee and placed his reliance heavily on the orders of
AO/CIT(A).
After hearing both the sides and on perusing the orders of the Revenue
authorities on this issue, we find the issue has to be decided in favour of the
assessee by virtue of the decision of Mumbai Bench of the Tribunal in the
case of M/s. NRM Bearing Ltd. (supra) where the Tribunal had an occasion
4 ITA No.1751/PUN/2016 Shri Vipinchandra M. Chokhawala
to answer the similar issue. We therefore, proceed to extract the relevant
finding given by the Tribunal and the same reads as under :
“17. Before us, the Ld. Counsel submitted that entire expenditure should be treated as revenue expenditure being current repairs. In support assessee had furnished all the relevant details and bills and none of these expenditures have gone to create any capital asset of enduring nature. All the expenditure incurred was purely for repairs as per the details and submission made before the CIT(A) as incorporated in para 5.2 of the appellate order. The expenditure which has been confirmed by the CIT(A) is on account of construction of a boundary wall however the construction cost of boundary wall was only Rs. 1,63,048/- and that also cannot be held to be capital expenditure but only repairs, because old wall was to be replaced.
On the other hand, Ld. DR strongly relied upon the order of the CIT(A).
After considering the relevant submissions and on perusal of the impugned order, we find that no specific finding with regard to the expenditure aggregating to Rs. 8,78,595/- has been given by the CIT(A) when the cost of construction of boundary wall itself was only Rs. 1,63,048/-, which was the basis for the disallowance by the Ld. CIT(A). Hence, in the interest of justice, we feel that this matter should also be restored back to the file of the AO to decide the issue afresh after calling for the details and examine the nature of the expenditure aggregating Rs. 8,78,595/-. If such expenditure are purely for repairs without creating any capital asset of enduring nature, then such expenditure should be allowed as revenue expenditure. Accordingly, ground no. 5 & 6 are treated as allowed for statistical purposes.”
On going through the above finding and the facts relating to the
present assessee, we concur with the arguments of Ld. Counsel for the
assessee that expenditure on repairs made by the assessee is not for creating
a new asset which has the capacity to yield any revenue. The bills/vouchers
submitted by the assessee before us evidences the nature of repairs and the
same are attributable to ‘Revenue expenses’. Therefore, we reverse the
orders of AO/CIT(A) on this very issue. Accordingly, the Ground Nos.1 and 2
raised by the assessee are allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced on 03rd day of August, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य पुणे Pune; �दनांक Dated : 03rd August, 2018 सतीश
5 ITA No.1751/PUN/2016 Shri Vipinchandra M. Chokhawala
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-1, Nashik 4. The Pr.CIT-1, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” Pune; 5. गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune