ASHOK KUMAR JAIN,NEW DELHI vs. ITO WARD 30(5), NEW DELHI

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ITA 396/DEL/2023Status: DisposedITAT Delhi31 March 2023AY 2018-194 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the expenditure on replacing old bulbs/tube lights with LED lights and other routine repairs were consumable in nature and not capital expenditure. The assessee did not contest the disallowance of advertisement expenses.

What were the facts?

The assessee claimed expenditure on repair and maintenance of electrical equipment and installation, and also claimed advertisement expenses paid to overseas entities. The Assessing Officer treated the electrical expenditure as capital expenditure and disallowed it, and also disallowed the advertisement expenses under Section 40(a)(i).

What were the issues?

Whether expenditure on replacement of electrical fittings like LED lights constitutes capital expenditure, and whether advertisement expenses paid to overseas entities are disallowable under Section 40(a)(i).

Which sections of the Income-tax Act were involved?

Section 40(a)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI

Before: SHRI SAKTIJIT DEY

For Appellant: Shri J.P. Jain, Adv
For Respondent: Shri Om Prakash, Sr. DR
Hearing: 28.03.2023Pronounced: 31.03.2023

This is an appeal by the assessee against the order dated 20.12.2022 passed by National Faceless Appeal Centre (NFAC), New Delhi pertaining to assessment year 2018-19.

2.

The dispute in the present is confined to the following two disallowances:

i) Expenditure on repair and maintenance of electrical equipment and installation : Rs.12,80,215; & ii) Disallowance under Section 40(a)(i) of the Act on account of payment made to overseas entities towards advertisement expenses : Rs.3,62,220

3.

At the time of hearing, learned counsel appearing for the assessee, on instructions, did not contest the disallowance of Rs.3,62,220 made under Section 40(a)(i) of the Act. Accordingly, assessee’s ground on the issue is treated as not pressed, hence, dismissed.

4.

As regards, disallowance of Rs.12,80,215, briefly, the facts are, in course of assessment proceedings the Assessing Officer, while verifying the financial statement noticed that the assessee has debited an amount of Rs.12,80,215 towards expenses on electrical instruments.

5.

After verifying the details, he found that the major part of the expenditure was towards purchase and installation of LED lights in his hotel “Airport Motel”.

6.

Being of the view that by incurring the expenditure, the assessee has acquired capital assets with enduring benefits, the Assessing Officer treated it as capital expenditure and disallowed the same.

Though, the assessee contested disallowance before learned Commissioner (Appeals), however, he was unsuccessful.

7.

I have considered rival submissions and perused the material available on record.

8.

As could be seen from the facts on record, out of the total expenditure of Rs.12,80,215 claimed by the assessee, an amount of Rs.8,15,000 was for installation of LED lights and rest of the amount was for other routine expenses.

9.

From the facts and material placed before me, it is observed that the assessee has replaced old bulbs/tube lights with new LED lights.

Some other expenditure was incurred for regular repair and replacement. Thus, from the nature of expenditure incurred, it is evident that they are in the nature of consumables and not for acquiring any assets of enduring nature. I am of the view, replacement of old tube light with LED lights cannot be treated as capital expenditure. Therefore, I do not find any reason to sustain the disallowance made by the Assessing Officer. Accordingly, I delete the disallowance of Rs.12,80,215. The ground is partly allowed.

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