CHENNAI AUTO AGENCY PVT LTD.,CHENNAI vs. ACIT, CHENNAI

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ITA 1219/CHNY/2014Status: DisposedITAT Chennai04 February 2015AY 2005-064 pages
AI SummaryRemanded

What did the Tribunal hold?

The ITAT set aside the order of the CIT(Appeals) and restored the matter to the file of the Assessing Officer. The tribunal granted the assessee another opportunity to explain the nature of the expenses incurred, specifically to demonstrate they were purely revenue in nature.

What were the facts?

The assessee claimed expenses incurred on repair works in a leased premises as revenue expenditure. The Assessing Officer and CIT(Appeals) disallowed this claim, treating the expenditure as capital in nature by relying on Explanation 1 to Section 32 of the Income-tax Act, 1961, and a Supreme Court decision.

What were the issues?

The key legal issue was whether expenses incurred on repair works in a leased premises should be treated as revenue expenditure or capital expenditure under the Income-tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 32

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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI

Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY

For Respondent: Shri A.V. Sreekanth, JCIT
Hearing: 04.02.2015Pronounced: 04.02.2015

आदेश /O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

1.

The assessee has filed this appeal challenging the order dated 24.2.2014 passed by Ld CIT(Appeals)-1, Chennai and it relates to the assessment year 2005-06.

2.

The Ld Counsel appearing for the assessee submitted that the assessee has carried out repair works in a leased premises and claimed the same as revenue expenditure. The Assessing Officer, Act, 1961 (in short 'the Act') and also on the decision of Hon’ble Supreme Court in the case of M/s Saravana Spinning Mills Private Limited (293 ITR 201)(SC) has taken the view that the said expenditure was capital in nature. Accordingly he disallowed the claim of the assessee. The Ld CIT(Appeals) also confirmed the disallowance so made by fully placing reliance on Explanation 1 to sec. 32 of the Act.

3.

The Ld A.R further submitted that the Explanation 1 to sec.

32 shall apply only if the relevant expenditure is capital in nature.

The ld A.R submitted that the assessee did not incur any capital expenditure, but the expenses incurred were purely revenue in nature, i.e., they have been incurred on repairs only. The Ld A.R, in this regard, has placed reliance on the decision of jurisdictional High Court in the case of CIT Vs. TVS Lean logistic (293 ITR 432) and Thiru Arooran Sugar Ltd (350 ITR 324). The Ld A.R further submitted that the assessee may be given one more opportunity to satisfy the assessing officer as to the nature of expenditure incurred and accordingly prayed that the matter may be set aside to the file of Assessing Officer.

5.

Having heard rival submissions, we are of the view that the assessee should be given one more opportunity to explain the nature of expenses, since the assessee claims that it has carried out only repair work and did not incur any capital expenditure. Accordingly, we set aside the order of Ld CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for fresh examination of the same.

6.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced in the open court after conclusion of hearing on the 4th day of February, 2015 at Chennai.

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