The DCIT, Circle-1(1), Baroda V. Jewel Consumer Care Pvt.Ltd., Baroda

ITA 1098/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6047 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Depreciation; Business expenditure; Capital expenditure
• Section: 37(1); 201; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 3.06.10 DRAFTED ON:3.06.2010 ITA NO.1098/AHD/2010 ASSESSMENT YEAR : 2006-2007 THE DCIT, CIR.1(2), AAYKAR BHAVAN, RACE COURSE CIRCLE, BARODA. VS. JEWEL CONSUMER CARE P. LTD., SUBHAG, B-15/16, RAMIN PARK OLD PADRA RD. BARODA. PAN/GIR NO. : AAACJ4911G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI C.K.MISHRA SR. D.R. RESPONDENT BY: SMT.URVASHI SHODHAN A.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)- I, BARODA DATED 18.12.2009. 2. THE GROUND NO.1 TAKEN BY THE REVENUE IN THIS APP EAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.3,26,701/- MADE ON ACCOUNT OF CAPITAL EXPENDITURE IRRESPECTIVE OF THE FACT THAT HUGE EXPENDITURE TOWARDS RENOVATION OF FACTORY - 2 - BUILDING IN VIEW OF THE DECISION IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT 224 ITR 414 (SC) AND THE DECISION OF THE HON.SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS PVT. LTD. (2007) 293 ITR 201 (SC). THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE EXPENDITURE UNDER THE HEAD REPAIR AND MAINTENANCE SHOULD COME WITHIN THE PURVIEW OF 'CURRENT REPAIRS' I.E. THE EXPRESSION USED IN SECTION 31(1) OF THE ACT, AND HENCE, NOT AN ALLOWABLE EXPENDITURE U/S.37(1) OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE , THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS IN CURRED EXPENDITURE OF RS.3,26,701/- ON MARBLE AND TEAK WO OD FOR FLOORING DOORS AND WINDOWS WITH THE OBJECT OF REPAI RING OF FACTORY BUILDING. ACCORDING TO THE LEARNED ASSESSIN G OFFICER, EVEN THOUGH IT IS NOT A CAPITAL EXPENDITURE BUT AS THE SAME TIME AS IT IS NOT IN THE NATURE OF CURRENT REPAIR, THE S AME CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 31(I) OF THE ACT . FURTHER, IN THE OPINION OF THE LEARNED ASSESSING OFFICER AS CUR RENT REPAIRS ARE COVERED BY SECTION 31(I) THE EXPENDITURE ON OTH ER REPAIRS CANNOT BE ALLOWED DEDUCTION UNDER SECTION 37 ALSO A S SECTION 37 COVERS THOSE EXPENDITURES ONLY WHICH ARE NOT IN THE NATURE OF EXPENDITURE WHICH ARE SPECIFIED IN SECTIONS 30 T O 36. THE LEARNED ASSESSING OFFICER THEREFORE, DISALLOWED RS. 3,54,291/- OUT OF REPAIRS AND MAINTENANCE AND ALLOWED DEPRECIA TION IN RESPECT OF THAT AMOUNT TO THE ASSESSEE. - 3 - 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVING THAT THE EXPENDITURE IN QUES TION WAS CLEARLY IN REVENUE FIELD AND NOT IN THE CAPITAL FIE LD DELETED THE ADDITION AFTER ALLOWING ADJUSTMENTS OF DEPRECIATION ALREADY ALLOWED BY THE LEARNED ASSESSING OFFICER. 5. WE THUS, FIND THAT IT IS NOT IN DISPUTE THAT THE EXPENDITURE IN QUESTION WAS NOT OF CAPITAL IN NATURE. THE CASE OF THE REVENUE IS THAT EVEN THOUGH THE EXPENDITURE IS NOT CAPITAL IN NATURE, BUT AS THE EXPENDITURE IS NOT IN THE NATURE OF CURRENT REPAIRS, IT CANNOT BE ALLOWED AS DEDUCTION EITHER U NDER SECTION 31(I) OR SECTION 37(1) OF THE ACT. RELEVANT PROVISI ONS OF SECTION 37(1) IS EXTRACTED AS UNDER:- (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE N ATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHAL L BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. 6. WE THUS FIND ONLY THOSE NATURE OF EXPENDITURES W HICH ARE COVERED UNDER SECTION 30 TO 36 OF THE ACT ARE E XCLUDED FROM THE AMBIT OF SECTION 37 OF THE ACT. IN OTHER W ORDS, THE EXPENDITURE OTHER THAN OF THE NATURE DESCRIBED UNDE R SECTION 30 TO 36 OF THE ACT CAN BE ALLOWED AS DEDUCTION UNDER SECTION 37(1) OF THE ACT PROVIDED OTHER CONDITIONS SPECIFIE D IN SECTION - 4 - 37 LIKE NOT BEING CAPITAL EXPENDITURE OR PERSONAL E XPENDITURE ETC. ARE BEING SATISFIED. THE CASE OF THE REVENUE I S THAT EXPENDITURE OF RS.3,54,291/- IS NOT COVERED BY SEC TIONS 30 TO 36 OF THE ACT AS THE SAME IS NOT OF THE NATURE OF C URRENT REPAIRS. THUS, IN OUR OPINION, THE SAME CAN BE ALLOWED AS DE DUCTION UNDER SECTION 37 OF THE ACT IF OTHER CONDITIONS OF THE SAID SECTION ARE FULFILLED. WE FIND THAT THE ABOVE VIEW ALSO FINDS SUPPORT FROM THE DECISIONS OF THE HON'BLE APEX COUR T IN THE CASE OF DCIT VS. S.T.N. TEXTILE LTD. (2005) 279 ITR 209 (SC), WHEREIN IT WAS HELD AS UNDER:- 5. HAVING PERUSED S. 37 OF THE ACT, WE ARE OF THE VIEW THAT THE HIGH COURT HAS NOT COMMITTED ANY ILLEGALIT Y IN REMITTING THE MATTER TO THE TRIBUNAL. SEC. 37 OF TH E ACT DEALS WITH ANY EXPENDITURE NOT BEING AN EXPENDITURE OF THE NATURE DESCRIBED UNDER SS. 30 TO 36 OF THE ACT, AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR P ERSONAL EXPENDITURE OF THE ASSESSEE, LAID DOWN OR EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF THE BUSINE SS OR PROFESSION. SUCH EXPENSES SHALL BE ALLOWED IN COMPU TING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND G AINS OF BUSINESS'. IN VIEW OF THE FINDING OF THE HIGH CO URT IT CANNOT BE DISPUTED THAT THE EXPENDITURE INCURRED IN REPLACING THE ELECTRIC PANEL IS NOT AN EXPENDITURE CONTEMPLATED BY S. 31 OF THE ACT AS 'CURRENT REPAIR S'. THE QUESTION AS TO WHETHER IT IS IN THE NATURE OF C APITAL EXPENDITURE HAS NOT BEEN ANSWERED BY THE HIGH COURT . THE QUESTION, THEREFORE, ARISES WHETHER IT IS AN EXPENDITURE OF THE NATURE CONTEMPLATED BY S. 37 OF THE IT ACT. THE HIGH COURT HAS, IN ITS DISCRETION, REMITTE D BOTH THESE QUESTIONS TO THE TRIBUNAL FOR FRESH CONSIDERA TION. - 5 - 7. WE FURTHER OBSERVE THAT IT IS NOT IN DISPUTE IN THE INSTANT CASE THAT THE EXPENDITURE IN QUESTION WAS NOT FOR A CQUIRING ANY NEW ASSET AND WAS NOT PERSONAL EXPENDITURE AND IT I S ALSO NOT IN DISPUTE THAT THE SAME WAS LAID OUT OR EXPENDED F OR THE PURPOSES OF BUSINESS ONLY. THUS, IN OUR CONSIDERED VIEW, CONDITIONS OF SECTION 37 WERE FULFILLED AND SATISFI ED. THUS, IN OUR CONSIDERED VIEW, THE EXPENDITURE IN QUESTION IS ALLOWABLE UNDER SECTION 37 OF THE ACT. WE THEREFORE, UPHOLD T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 8. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.2,94,570/- ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE FOR THE TRIP TO PAKISTAN BY THE CHAIRMAN AND MANAGING DIRECTOR OF THE ASSESSEE COMPANY AS THE ASSESSEE HAS FAILED TO PROVE EXPENDITURE EXCLUSIVELY FOR BUSINESS PURPOSE. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAS NEITHER ANY BUSINESS RELATION IN PAKISTAN NOR IT COULD PROCURE ANY BUSINESS FROM THE SAID TRIP. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE , THE UNDISPUTED FACTS ARE THAT THE ASSESSEE COMPANY HAS INCURRED EXPENDITURE OF RS.2,94,650/- ON FOREIGN TRAVEL TO P AKISTAN UNDER THE AEGIS OF FICCI. IT WAS EXPLAINED TO THE L EARNED ASSESSING OFFICER THAT THE SAID TRIP WAS UNDERTAKEN TO - 6 - INVESTIGATE POSSIBILITY OF EXPORT OF TOOTHBRUSH TO PAKISTAN. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSE E HAD NO BUSINESS RELATION IN PAKISTAN EITHER BEFORE THE TRI P NOR COULD PROVIDE ANY BUSINESS AFTER THE TRIP, AND THEREFORE, HE OPINED THAT THE TRIP WAS NOT EXCLUSIVELY FOR THE BUSINESS PURPOSES. HE THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.2,94,650/-. 10. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT THE EXPLANATION OF THE A SSESSEE REGARDING THE BUSINESS NECESSITY OF THE FOREIGN VIS IT WAS PLAUSIBLE AND NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED ASSESSING OFFICER TO SHOW THAT THE TRIP WAS UNDERTAKEN FOR SOME NON BUSINESS PURPOSES. OBSERVIN G AS ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) DELETED THE ADDITION IN QUESTION. 11. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANU FACTURE OF TOOTHBRUSHES. WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE VISIT TO PAK ISTAN WAS FOR SOME OTHER PURPOSES THAN THE BUSINESS OF THE ASSESS EE. FURTHER, IF THE ARGUMENT OF THE LEARNED ASSESSING O FFICER IS ACCEPTED THEN THE SAME WILL IMPLY THAT WHEN AN ASSE SSEE DOES NOT HAVE ANY PRIOR BUSINESS IN A COUNTRY AND HIS TR IP TO THAT COUNTRY ALSO REMAINS UNSUCCESSFUL THEN SUCH BUSINES S TRIP WILL BE TREATED AS NON BUSINESS EXPENDITURE OF THE ASSES SEE. - 7 - OBVIOUSLY, SUCH AN INTERPRETATION CANNOT BE ACCEPTE D. WE THEREFORE, DO NOT FIND ANY FORCE IN THIS GROUND OF APPEAL OF THE REVENUE. THEREFORE, THE SAME IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 11 TH DAY OF JUNE, 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, BA RODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 03.06.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 07.06.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 07.06.2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 07.06.2010 ----------- -------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 08.06.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 11.06.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 11.06.2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- ---- -----------------