Aaj Ka Anand Papers Ltd., Pune V. ACIT,Cir-1(1), Pune

ITA 1229/PUN/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0740 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Capital asset; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 234B; 37(1); 194C; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1229/PN/2010 %' ( ')( / ASSESSMENT YEAR : 2005-06 AAJ KA ANAND PAPERS LTD., 365/6, SHIVAJINAGAR, AAJ KA ANAND BLDG., PUNE 411005 PAN : AABCA5435D ....... / APPELLANT ' / V/S. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 02-08-2016 / DATE OF PRONOUNCEMENT : 30-09-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 29-12- 2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS : 2 ITA NO. 1229/PN/2010, A.Y. 2005-06 1) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.LT. (A)-I, PUNE WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION OF RS.39,67,552/- MADE BY THE A.O. HOLDING SUCH REPAIR S AND RENEWALS EXPENDITURE AS 'CAPITAL EXPENDITURE' WHICH IN FACT WAS EXPLAINED AS REVENUE EXPENDITURE CONSIDERING THE NA TURE OF THE BUSINESS OF THE APPELLANT COMPANY AS THAT OF PUBLIC ATION OF NEWS PAPERS WITH THE HELP OF HEAVY-DUTY PRINTING MACHINE RY. THE ADDITION IS UNSUSTAINABLE IN LAW AND IT BE DELETED. 2) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW AND CONSIDERING THE NATURE OF EXPENDITURE INCURRED FOR THE PROTECTION AND PRESERVATION WITHOUT TOUCHING THE CAPITAL ASSET AND ALSO INCURRED FOR CARRYING ON OF THE PRINTING ACTIVITY M ORE EFFICIENTLY AND MORE PROFITABLY AND WAS NOT A EXPENDITURE OF CAPITA L NATURE. THE DEDUCTION BE ALLOWED. 3) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.LT. (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.6,03,579/- OUT OF RS.11,16,588/- MADE BY THE A.O. UNDER S. 40 (A)(I-A) OF THE ACT. THE LD. C.LT. (A) WITHOU T CONSIDERING THE APPLICABILITY OF THE PROVISIONS OF S. 40 (A)(I-A) O F THE ACT TO THE FACTS OF THE CASE AND WITHOUT CONSIDERING THE JUDIC IAL VERDICT OF THE HON'BLE LT.A.T. JAIPUR BENCH, IN THE CASE OF _ JAIPUR VIDYUT VITRAM NIGAM LTD. VS. DEPUTY COMMISSIONER OF INCOME -TAX (2009) 123 TTJ 888 (JAIPUR BENCH) THE COPY OF WHICH WAS SUBMITTED BEFORE HIM SUSTAINED THE ADDITION. THE LD . C.LT. (A) HAS EVEN NOT MADE REFERENCE TO THE JUDGMENT. THE AD DITION SUSTAINED BE DELETED. 4) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.LT. (A) WAS NOT JUSTIFIED IN CONFIRMING THE AD-HOC ADDI TION MADE BY THE A.O. ON ACCOUNT OF CONVEYANCE AND TRAVELING EXPENSES ON THE GROUND OF POSSIBILITY OF EXPENDITURE FOR NON-BU SINESS PURPOSES. THE ADDITIONS SUSTAINED OF RS.29,085/- AND RS.21,02 2/- BE QUASHED. 5) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THOUGH CONTENDED BY THE DEPARTMENT THAT THE ORDER OF THE C .LT. (APPEAL) HAS BEEN DISPATCHED BUT THE SAME HAS NOT YET BEEN R ECEIVED. THE A.O. HAS RECEIVED THE COPY OF THE SAME ON 17TH AUGU ST, 2010 THE COPY OF WHICH HAS BEEN MADE AVAILABLE TO THE ASSESS EE. ON THIS BASIS THE APPEAL HAS BEEN FILED BY THE ASSESSEE. 3 ITA NO. 1229/PN/2010, A.Y. 2005-06 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE ASSESSEE DENIES ITS LIABILITY TO PAY INTEREST U/S. 234-A, 23 4-B AND 234-C OF THE ACT AND IT BE DELETED. 7) THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRINTING AND PUBLISH ING OF NEWS PAPERS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR DECLARING INCOME OF ` 32,35,070/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTIC E U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 27-10-2006. DURING THE COUR SE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 47,45,148/- ON ACCOUNT OF REPAIRS AND MAINTENANCE OF BUILDING, COMPUTERS, VEHICLES ET C. THE ASSESSING OFFICER PARTLY ACCEPTED THE CONTENTIONS OF ASSESSEE AN D ADDED BACK ` 39,67,652/- EXPENDITURE OF REPAIRS AND RENOVATION OF BUILDING BY HOLDING IT TO BE CAPITAL IN NATURE. FURTHER, THE ASSESSING OFFICER MADE DISALLOWANCE OF ` 11,16,588/- U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE HAD CLAIMED EXPENDITURE TOWARDS TRAVELLING AND CONVEYANCE ` 2,90,851/- AND TELEPHONE EXPENSES ` 2,10,221/-. THE ASSESSEE WAS ASKED TO PRODUCE LOGBOOK INDICATING USAGE AND PURPOSE O F TRAVELLING AND TELEPHONE EXPENSES. IN THE ABSENCE OF ANY RECORDS THE ASSESSING OFFICER DISALLOWED 10% OF THE AFORESAID EXPENSES ( ` 29,085/- AND ` 21,022/-) ON ACCOUNT OF NON-BUSINESS EXPENDITURE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 27-12-2007, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPU GNED 4 ITA NO. 1229/PN/2010, A.Y. 2005-06 ORDER UPHELD THE FINDINGS OF ASSESSING OFFICER QUA DISALLOWANCE MADE ON ACCOUNT OF REPAIRS AND MAINTENANCE ` 39,67,652/- AND DISALLOWANCE OF TRAVELLING AND TELEPHONE EXPENSES. HOWEVER, IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA), THE COMMISSIONER OF INCOME TAX (APP EALS) DIRECTED THE ASSESSING OFFICER TO VERIFY TDS AMOUNT OF ` 5,13,009/- DEDUCTED BY THE ASSESSEE AND DEPOSITED WITH THE GOVER NMENT AND ALLOW THE SAME IF IT IS REMITTED TO THE GOVERNMENT ACCOUNT EXC HEQUER ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. IN RESPE CT OF REMAINING AMOUNT ` 6,03,579/-, THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ADDITION. NOW, THE ASSESSEE IS IN SECON D APPEAL BEFORE THE TRIBUNAL ASSAILING THE ADDITIONS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). 4. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE C ONCLUSION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON FLOORING, TILLIN G, MARBLE WORK, MASONRY WORK ETC. IS CAPITAL IN NATURE AND NOT ON A CCOUNT OF CURRENT REPAIRS. THE ASSESSEE HAD CARRIED OUT REPAIRS TO THE BUILDING WHERE PRINTING PRESS WAS INSTALLED. THE EXPENDITURE INCURR ED BY THE ASSESSEE ON CURRENT REPAIRS TO THE BUILDING HAS NOT IN ANY MANNER INCREASED PRODUCTION CAPACITY OR HAS SECURED ADVANTAGE OF ENDURING NATURE TO THE ASSESSEE. NO NEW ASSET HAS COME INTO E XISTENCE. THUS, THE EXPENDITURE ON MAINTENANCE OF THE BUILDING CANNOT BE CLASSIFIED AS CAPITAL EXPENDITURE. EXISTING COLUMN PEDESTALS WERE REPAIR ED AND REINFORCED WHICH WERE DAMAGED OVER THE PERIOD OF TIME DU E TO VIBRATIONS CAUSED BY THE OPERATION OF PRINTING MACHINES. T HE PRINTING MACHINES RUN CONTINUOUSLY FOR 10 TO 12 HOURS A DAY, THE FLOOR WHERE THE MACHINES WERE INSTALLED HAD CRACKED AND HENCE, REQUIR ED URGENT REPAIR. THE LD. AR SUBMITTED THAT THERE HAS BEEN NO INCR EASE IN 5 ITA NO. 1229/PN/2010, A.Y. 2005-06 PRODUCTION CAPACITY OR INCREASE IN REVENUE FROM THE REPA IRS. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISIO N RENDERED BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF C OMMISSIONER OF INCOME TAX VS. RAMARAJU SURGICAL COTTON MILLS & ORS. REPO RTED AS 294 ITR 328 AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS . SARAVANA SPINNING MILLS (P) LTD. REPORTED AS 293 ITR 201. 4.1 IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA) THE LD. AR SUBMITTE D THAT THE PAYEES HAVE DECLARED THE AMOUNT IN THEIR RESPECTIVE RETURN OF INCOME AND HAD PAID TAX. THEREFORE, THE ASSESSEE CANNOT BE HELD TO BE ASSESSEE IN DEFAULT IN VIEW OF RECENT AMENDMENT TO THE PR OVISIONS OF SECTION 200(1) OF THE ACT. THE LD. AR CONTENDED THAT THE ISSUE CAN BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION. 4.2 WITH REGARD TO DISALLOWANCE OF ` 29,085/- ON ACCOUNT OF TRAVELLING EXPENSE AND ` 21,022/- ON ACCOUNT OF TELEPHONE EXPENSES, THE LD. AR SUBMITTED THAT AD HOC DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT THEIR BEING ANY EVIDENCE TO SHOW THAT THE EXPENDITURE WAS INCURRED FOR NON-BUSINESS PURPOSE. 5. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSES SEE HAS INCURRED EXPENDITURE ON MODERNIZATION OF OFFICE. AFTER CONSID ERING SUBMISSIONS OF THE ASSESSEE, THE COMMISSIONER OF INCOME TA X (APPEALS) DIRECTED THE ASSESSING OFFICER TO CONDUCT ENQUIRY TO FIND OUT OF VARIOUS ASPECTS OF THE NATURE OF WORK CARRIED OUT AND ADVANTAG E OF SUCH WORK CONFERRED ON THE ASSESSEE. THE ASSESSING OFFICER AFTER C ONDUCTING THE ENQUIRY FURNISHED HIS REPORT. THE PRINTING MACHINES ARE INS TALLED ON 6 ITA NO. 1229/PN/2010, A.Y. 2005-06 THE GROUND FLOOR OF THE BUILDING AND THE OFFICE OF THE ASSESS EE IS ON THE FIRST FLOOR. ON THE GROUND FLOOR MAINLY MASONRY WORK AND W ATER PROOFING WORK WAS DONE WHEREAS THE MAJOR EXPENDITURE W AS INCURRED IN THE OFFICE ON FIRST FLOOR WHERE FALSE CEILING IN GYPSUM BOARD, TILIN G WITH VITRIFIED TILES AND MARBLE, FITTINGS OF DOOR, WINDOWS, GRILLS AND PLAS TERING WITH POP WAS CARRIED OUT. THE CIVIL WORK CARRIED OUT BY T HE ASSESSEE IN THE OFFICE WAS TO GIVE MODERN LOOK TO THE EXISTING OFFICE, THE REFORE, THE EXPENDITURE INCURRED CANNOT BE TREATED AS REVENUE IN N ATURE. THE LD. DR SUBMITTED THAT THE HON'BLE DELHI HIGH COURT IN THE CAS E OF SURINDER MADAN VS. ASSISTANT COMMISSIONER OF INCOME TAX REPORTED AS 37 TAXMANN.COM 388 HAS HELD THAT EXPENDITURE FOR FIXING MARB LE FLOORING OF ENTIRE FACTORY BUILDING IS NOT ALLOWABLE AS CURRENT REPAIRS. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE IN GROUND NOS. 1 AND 2 OF THE APPEAL HAS ASSAILE D THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDIT ION OF ` 39,67,652/- ON ACCOUNT OF REPAIRS AND RENEWAL TO THE BU ILDING AND CLAIMED AS REVENUE EXPENDITURE. THE EXPENDITURE INCURRED ON RENOVATION AND MAINTENANCE OF THE BUILDING, WHETHER TO BE CONSIDERED AS CURRENT REPAIRS OR REPAIRS HAS TO BE DECIDED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE, THE DETAILS OF EXPENDITURE INCURRED BY ASSESSEE ON THE BUILDING ARE AS UNDER : NO. ITEM DESCRIPTION AMOUNT 1 BREAKING OF EXISTING COLUMN PEDESTALS WATERPROOFING & TEMPORARY STRUCTURE 1,05,000 2 EXTRA CHARGES FOR RMC & CONCRETE PUMPING 2,25,000 3 MASONRY WORK AND PLASTERING (POP) 3,50,000 FALSE CEILING IN GYPSUM BOARD 4,55,000 7 ITA NO. 1229/PN/2010, A.Y. 2005-06 4 PAINTING 1,50,000 5 DOOR, WINDOWS, GRILLS & RAILING WORK 2,35,000 6 FLOORING, TILLING & MARBLE WORK 20,55,500 7 PLUMBING WORK 3,10,000 8 SUPERVISION AND EXECUTIN CHARGES @ 2% 77,710 9 TOT TAX 4,442 TOTAL 39,67,652 7. DURING THE FIRST APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CALLED FOR REPORT FROM ASSESSING O FFICER ON THE MAINTENANCE/RENOVATION WORK CARRIED OUT BY THE ASSESSE E IN THE BUSINESS PREMISES. AS PER THE REPORT, MAJOR EXPENDITURE WAS INCURRED ON FIRST FLOOR IN RENOVATION AND MODERNIZATION OF THE EXISTIN G OFFICE. THE WORK CARRIED OUT ON THE FIRST FLOOR INCLUDED MASONRY WORK, PLASTERING BY POP, FALSE CEILING, PAINTING, FLOORING, TILING WITH VITRIFIED TILES AND MARBLE, FITTING OF DOOR WINDOWS, GRILLS AND RAILING AND PLUMBING WO RK ETC. THE FLOOR TILING AND MARBLE WORK WAS CARRIED OUT ON T HE TOTAL AREA OF 7000 SQ. FT. OUT OF WHICH 2000 SQ. FT. IS ON THE GROUND FLOOR. RMC IS USED IN THE FOUNDATION OF PRINTING MACHINES ON THE GROUND FLOOR. MASONRY AND PLASTERING WITH POP AND FALSE CEILING OF GYPSUM BOARD IS CARRIED OUT IN AN AREA MEASURING 5000 SQ. FT. ON THE FIRST FLOOR. FROM THE WORK CARRIED OUT BY THE ASSESSEE IT APPEARS THAT THE MODERNIZATION AND RENOVATION CARRIED OUT BY THE ASSESSEE IN THE OFFICE ON FIRST FLOOR IS NOT IN THE NATURE OF CURRENT REPAIRS. THE EXPRESSION CURRENT REPAIRS HAS NOT BEEN DEFINED UNDER THE PROVISIONS OF INCOME TAX ACT. HOWEVER, IN VARIOUS JUDGMENTS RENDERED BY THE HON'BLE HIGH COURT S CURRENT REPAIRS HAS BEEN EXPLAINED. THE HON'BLE BOMBAY HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CHOWGULE AND CO. P VT. LIMITED 8 ITA NO. 1229/PN/2010, A.Y. 2005-06 REPORTED AS 214 ITR 523 HAS EXPLAINED THE EXPRESSION CURRENT REPAIRS AS : CURRENT REPAIRS ' MEANS REPAIRS UNDERTAKEN IN THE NORMAL COURSE OF USER FOR THE PURPOSE OF PRESERVATION, MAINTENANCE OR P ROPER UTILISATION OR FOR RESTORING IT TO ITS ORIGINAL CONDITION. CURR ENT REPAIRS DO NOT MEAN ONLY PETTY REPAIRS OR REPAIRS NECESSITATED BY WEAR AND TEAR DURING THE PARTICULAR YEAR. 8. IN THE CASE OF NEW SHORROCK SPINNING & MANUFACTURING CO. LTD. VS. COMMISSIONER OF INCOME TAX REPORTED AS 30 ITR 338 T HE HON'BLE BOMBAY HIGH COURT HELD : THE EXPRESSION 'CURRENT REPAIRS' USED IN SECTION 1 0(2)(V) [OF THE INCOME TAX ACT, 1922] MEANS EXPENDITURE ON BUILDINGS, MACHINERY, PLANT O R FURNITURE WHICH IS NOT FOR THE PURPOSE OF RENEWAL O R RESTORATION, WHICH IS ONLY FOR THE PURPOSE OF PRESERVING OR MAINTAINING A N ALREADY EXISTING ASSET, WHICH DOES NOT BRING A NEW ASSET INTO EXISTE NCE OR DOES NOT GIVE TO THE ASSESSEE A NEW OR DIFFERENT ADVANTAGE, AND THEY MUST BE REPAIRS WHICH ARE ATTENDED TO AS AND WHEN THE NEED FOR THEM ARISES. THE HON'BLE COURT IN THE SAID CASE HAS LAID DOWN THE TES T TO DETERMINE WHETHER THE EXPENDITURE ON REPAIRS IS REVENUE OR CAPITAL IN NATURE. THE RELEVANT EXTRACT OF THE JUDGMENT READS AS UNDER : 5. THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND IS THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EX PENDITURE FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAINTA IN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITURE IS NOT TO BRIN G A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJECT THE OBTAINING OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION OF 'REPAIRS' BECAUS E IT IS ONLY BY REASON OF THIS DEFINITION OF REPAIRS THAT THE EXPENDITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, THEN OBVIOUSLY SUCH AN EXPENDITURE WOULD NOT BE AN EXPENDITURE OF A REVENUE NATURE BUT IT WOULD BE A CAPITAL EXPENDITURE, AND IT IS CLEAR THAT THE DEDUC TION WHICH THE LEGISLATURE HAS PERMITTED UNDER SECTION 10(2)(V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPENDITURE AND NOT A CAPI TAL EXPENDITURE. THEREFORE, IN GIVING THE MEANING WHICH WE ARE GIVIN G TO THE EXPRESSION 9 ITA NO. 1229/PN/2010, A.Y. 2005-06 'REPAIR' WE ARE ONLY PARAPHRASING THE EXPRESSION TH AT THE EXPENDITURE UNDER CLAUSE (V) OF SECTION 10(2) MUST BE AN EXPEND ITURE OF A REVENUE NATURE AND NOT OF A CAPITAL NATURE. THE HON'BLE APEX COURT IN THE CASE OF BALLIMAL NAVAL KISHORE & ANR. VS. COMMISSIONER OF INCOME TAX REPORTED AS 224 ITR 414 HAS APPROVED AND APPLIED THE RATIO LAID DOWN IN THE CASE OF NE W SHORROCK SPINNING & MANUFACTURING CO. LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA). THE HON'BLE APEX COURT OBSERVED : IN OUR OPINION THE TEST INVOLVED BY CHAGLA C. J., IN NEW SHORROCK SPINNING AND MANUFACTURING CO. LTD. VS. COMMISSIONE R OF INCOME TAX (SUPRA) IS THE MOST APPROPRIATE ONE HAVING REGARD T O THE CONTEXT IN WHICH THE SAID EXPRESSION OCCURS. IT HAS ALSO BEEN FOLLOW ED BY A MAJORITY OF THE HIGH COURTS IN INDIA. WE RESPECTFULLY ACCEPT AND AD OPT THE TEST. 9. THERE IS A DIFFERENCE BETWEEN REPAIRS AND CURRENT REPAIRS. CURRENT REPAIRS MEANS ONLY SUCH REPAIRS AS ARE NECES SITATED BY WEAR AND TEAR OF ASSET IN THE NORMAL COURSE OF BUSINESS, DURING THE RELEVANT PREVIOUS YEAR. WHEREAS, REPAIRS MEANS ACCUMULATED REPAIR S OF SEVERAL YEARS. HOWEVER, ANY EXPENDITURE INCURRED ON RECONSTRUC TION OR MODERNIZATION OF BUILDING OR RENOVATION OR FURNISHING DOES NO T FALL WITHIN THE PURVIEW OF CURRENT REPAIRS. IN THE PRESENT CA SE THE EXPENDITURE INCURRED ON CIVIL WORK CARRIED OUT BY THE ASS ESSEE IN THE OFFICE ON FIRST FLOOR WHICH INVOLVES MODERNIZATION AND IMPROVEME NT IN THE EXISTING STRUCTURE CERTAINLY DOES NOT FALL WITHIN THE AMBIT OF EXPRESSION REPAIRS. THE EXPENDITURE INCURRED ON MODER NIZATION OF OFFICE IS NOT NECESSITATED BY THE WEAR AND TEAR FROM OPER ATION OF PRINTING MACHINES. AT THE SAME TIME REPLACEMENT OF FLOOR T ILES ON THE GROUND FLOOR WHERE THE PRINTING MACHINES ARE INSTALLED ARE IN THE NATURE OF CURRENT REPAIRS. THE TILES/FLOOR WHERE PRINTING M ACHINES ARE FIXED BEAR THE BRUNT OF PRESSURE AND VIBRATION CAUSED B Y WORKING OF MACHINES. THUS, IN OUR CONSIDERED OPINION THE EXPENDITURE INCURRED 10 ITA NO. 1229/PN/2010, A.Y. 2005-06 BY THE ASSESSEE IN REPLACEMENT OF FLOOR TILES ON THE GROUN D FLOOR, MASONRY WORK AND OTHER CIVIL WORK CARRIED OUT ON THE GR OUND FLOOR FALLS WITHIN THE EXPRESSION CURRENT REPAIRS AND HAS TO BE ALLOWED AS REV ENUE EXPENDITURE. IN VIEW OF OUR ABOVE FINDINGS WE DEEM IT AP PROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR COMP UTING THE EXPENDITURE INCURRED ON REPAIRS AND MAINTENANCE OF GROUN D FLOOR AND ALLOW THE SAME. ACCORDINGLY, GROUND NOS. 1 AND 2 RAISED IN THE GROUNDS OF APPEAL ARE PARTLY ALLOWED IN THE AFORESAID TERMS. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE O N THE DECISIONS RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RAMARAJU SURGICAL COTTON MILLS & ORS. (SUPRA) AND COMMISSION ER OF INCOME TAX VS. SARAVANA SPINNING MILLS (P) LTD. (SUPRA). IN OU R CONSIDERED VIEW BOTH THE CASES DOES NOT SUPPORT THE C ASE OF ASSESSEE. IN COMMISSIONER OF INCOME TAX VS. RAMARAJU SURGICAL COTTO N MILLS & ORS. (SUPRA), THE HON'BLE APEX COURT REMITTED THE MATTER BACK TO COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT EXPRESSING ANY OPINION ON MERIT AS REQUISITE DETAILS WERE NOT AVAILABLE ON RECORD. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SARAVANA SPINNING MILLS (P) LTD. (SUPRA) THE HON'BLE SUPREME COURT OF INDIA HELD: 11. AN ALLOWANCE IS GRANTED BY CLAUSE (I) OF SECTI ON 31 IN RESPECT OF AMOUNT EXPENDED ON CURRENT REPAIRS TO MACHINERY, PL ANT OR FURNITURE USED FOR THE PURPOSES OF BUSINESS, IRRESPECTIVE OF WHETHER THE ASSESSEE IS THE OWNER OF THE ASSETS OR HAS ONLY USED THEM. T HE EXPRESSION 'CURRENT REPAIRS' DENOTES REPAIRS WHICH ARE ATTENDED TO WHE N THE NEED FOR THEM ARISES FROM THE VIEWPOINT OF A BUSINESSMAN. THE WOR D 'REPAIR' INVOLVES RENEWAL. HOWEVER, THE WORDS USED IN SECTION 31(I) A RE 'CURRENT REPAIRS'. THE OBJECT BEHIND SECTION 31(I) IS TO PRESERVE AND MAINTAIN THE ASSET AND NOT TO BRING IN A NEW ASSET. IN OUR VIEW, SECTION 3 1(I) LIMITS THE SCOPE OF ALLOWABILITY OF EXPENDITURE AS DEDUCTION IN RESPECT OF REPAIRS MADE TO MACHINERY, PLANT OR FURNITURE BY RESTRICTING IT TO THE CONCEPT OF 'CURRENT REPAIRS'. ALL REPAIRS ARE NOT CURRENT REPAIRS. SECT ION 37(1) ALLOWS CLAIMS FOR EXPENDITURE WHICH ARE NOT OF CAPITAL NATURE. HO WEVER, EVEN SECTION 11 ITA NO. 1229/PN/2010, A.Y. 2005-06 37(1) EXCLUDES THOSE ITEMS OF EXPENDITURE WHICH EXP RESSLY FALL IN SECTIONS 30 TO 36. THE EFFECT IS TO DELIMIT THE SCOPE OF ALL OWABILITY OF DEDUCTIONS FOR REPAIRS TO THE EXTENT PROVIDED FOR IN SECTIONS 30 TO 36. TO DECIDE THE APPLICABILITY OF SECTION 31(I) THE TEST IS NOT WHET HER THE EXPENDITURE IS REVENUE OR CAPITAL IN NATURE, WHICH TEST HAS BEEN W RONGLY APPLIED BY THE HIGH COURT, BUT WHETHER THE EXPENDITURE IS 'CURRENT REPAIRS'. THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURREN T REPAIRS IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO 'PRESERVE AN D MAINTAIN' AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EXPEN DITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. IN FACT, IN THE PRESENT CASE, IN THE BALANCE SHEET THE ASSESSEE , VIZ., M/S. SARAVANA SPINNING MILLS HAS INDICATED THE ABOVE EXPENSE AS A N ITEM INCURRED FOR PURCHASE OF A NEW ASSET. IN OUR VIEW, THE HIGH COUR T HAD ERRED IN PLACING RELIANCE ON THE REPORT OF SITRA IN COMING T O THE CONCLUSION THAT THE TEXTILE MILL IS A PLANT UNDER SECTION 31(I). AS STATED ABOVE, EACH MACHINE IN A SEGMENT HAS AN INDEPENDENT ROLE TO PLA Y IN THE MILL AND THE OUTPUT OF EACH DIVISION IS DIFFERENT FROM THE OTHER 'REPAIR' IMPLIES THE EXISTENCE OF A PART OF THE MACHINE WHICH HAS MALFUN CTION. IF THE ARGUMENT OF THE ASSESSEE HEREIN BEFORE US IS TO BE ACCEPTED IT WOULD RESULT IN ABSURDITY AND IT WOULD MAKE THE PROVISION S OF SECTION 31(I) COMPLETELY REDUNDANT. ACCORDING TO SHRI R. VENKATAR AMAN, LEARNED SENIOR COUNSEL FOR THE ASSESSEE, THE TEXTILE PLANT CONSISTS OF ABOUT 25 MACHINES. ONE OF SUCH MACHINES IS THE RING FRAME. I F THE ARGUMENT OF THE ASSESSEE IS TO BE ACCEPTED, IT WOULD MEAN THAT PERI ODICALLY ONE MACHINE OUT OF 25 WOULD BE REPLACED, AND ON THAT BASIS, FRO M TIME TO TIME, EACH OF THESE 25 MACHINES IN THE TEXTILE PLANT WOULD BE ENT ITLED TO CLAIM ALLOWANCE UNDER SECTION 31(I). IN OUR VIEW, THE ASS ESSING OFFICER WAS RIGHT IN HOLDING THAT EACH MACHINE INCLUDING THE RI NG FRAME WAS AN INDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPEN DENT AND SPECIFIC FUNCTION AND, THEREFORE, THE EXPENDITURE INCURRED F OR REPLACEMENT OF THE NEW MACHINE WOULD NOT COME WITHIN THE MEANING OF TH E WORDS 'CURRENT REPAIRS'. IN THE PRESENT CASE, IT IS NOT THE CASE O F THE ASSESSEE THAT A PART OF THE MACHINE (OUT OF 25 MACHINES) NEEDED REPAIRS. THE ENTIRE MACHINE HAD BEEN REPLACED. THEREFORE, THE EXPENDITURE INCUR RED BY THE ASSESSEE DID NOT FALL WITHIN THE MEANING OF 'CURRENT REPAIRS ' IN SECTION 31(I). THUS, CURRENT REPAIRS IMPLY REPAIRS CARRIED OUT TO PRES ERVE AND MAINTAIN ON ALREADY EXISTING ASSET. RENOVATION AND RENEWA LS ARE NOT PART OF CURRENT REPAIRS. THE SCOPE OF CURRENT REPAIRS CANNOT BE 12 ITA NO. 1229/PN/2010, A.Y. 2005-06 ENLARGED BY INCLUDING ALL SORTS OF RENOVATION, REPAIRS, RENEWA LS WITHIN ITS ORBIT. 11. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED CONFIRMING OF DISALLOWANCE OF ` 6,03,579/- U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE DEDUCTED TAX ON CERTAIN PAYMENTS U/S. 194C AND 194J O F THE ACT AND DEPOSITED THE TDS IN GOVT. EXCHEQUER AFTER THE TIME LIMIT SPECIFIED U/S. 200(1) OF THE ACT HAD ELAPSED. THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ACCEPTED THE GROUND RAISED BY THE ASSE SSEE IN THIS REGARD WITH THE FOLLOWING OBSERVATIONS: 3.3.3 AS MENTIONED EARLIER, UNDER SEC. 40(A)(IA), IT IS ONLY WHERE TAX WAS DEDUCTIBLE IN THE MONTH OF MARCH 2005 AND ALSO DEDU CTED IN THE MONTH OF MARCH 2005, THE PROVISIONS OF SEC. 40(A)(IA) ARE NO T APPLICABLE IF THE TDS IS REMITTED TO THE GOVT. ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR THAT YEAR. IN THE ABOVE CASES, APPARENT LY THE AMOUNTS WERE CREDITED TO THE PAYEES ACCOUNT IN MARCH 2005 AND T HE TAX WAS ALSO DEDUCTED IN MARCH, 2005 AND THE TDS SO MADE WAS REM ITTED TO THE GOVT. ACCOUNT ON OR BEFORE THE DUE DATE FOR FILING THE RE TURN OF INCOME. IN OTHER WORDS, IN THE ABOVE CASES, THE TAX WAS DEDUCTIBLE O N THE AMOUNTS CREDITED/PAID TO THE PAYEES DURING MARCH 2005 AND W AS SO DEDUCTED IN MARCH 2005 AND THE TDS WAS ALSO PAID ON OR BEFORE T HE DUE DATE SPECIFIED U/S. 139(1). THE ASSESSING OFFICER IS, H OWEVER, DIRECTED TO VERIFY WHEN THE SAID AMOUNT OF RS.5,13,009/- WAS CR EDITED/PAID TO THE PAYEES ACCOUNT AND IN WHICH MONTH THE TAX WAS DEDU CTIBLE AT SOURCE UNDER CHAPTER XVII-B AND IF THE TAX WAS DEDUCTIBLE IN MARCH 2005 UNDER CHAPTER XVII-B, THE DEDUCTION MAY BE ALLOWED IF THE TDS ON THE SAID AMOUNT OF RS.5,13,009/- IS REMITTED TO THE GOVT. A/ C ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME. 3.2.4 IN RESPECT OF OTHER AMOUNTS ON WHICH TAX WAS DEDUCTED IN THE EARLIER MONTHS I.E. PRIOR TO MARCH 2005, TO ESCAPE THE RIGORS OF SEC. 40(A)(IA), THE APPELLANT SHOULD REMIT THE TDS INTO THE GOVT. A/C ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR I.E. 31 ST MARCH 2005. BUT AS SEEN FROM THE DETAILS MENTIONED IN THE ASSESSMENT O RDER AND WHICH WERE NOT DISPUTED BY THE APPELLANT, THE AMOUNTS WERE REM ITTED TO THE GOVT. A/C ONLY AFTER THE LAST DAY OF THE PREVIOUS YEAR I. E. AFTER 31/03/2005 AND THEREFORE, THE SAID AMOUNTS ARE CLEARLY HIT BY THE PROVISIONS OF SEC. 40(A)(IA). IN ALL THESE CASES AGGREGATING TO RS.6, 03,579/-, WHERE TDS 13 ITA NO. 1229/PN/2010, A.Y. 2005-06 WAS MADE DURING THE YEAR PRIOR TO MARCH 2005, THE C ONTENTION OF THE APPELLANT THAT NO DISALLOWANCE IS WARRANTED SINCE T HE TDS AMOUNTS WERE REMITTED ON OR BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME IS NOT LEGALLY SUSTAINABLE. 12. THE LD. AR HAS NOT BEEN ABLE TO SHOW ANY INFIRMITY IN TH E FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE. THE LD. AR HAS CONTENDED THAT THE PAYEES HAVE DECLARED THE AMOUNT IN THEIR RESPECTIVE RETURN OF INCOME AND PAID THE TAX. HOWEVER, NO MATERIAL H AS BEEN PLACED ON RECORD IN SUPPORT OF CONTENTIONS MADE BY THE LD. AR. WE DO NOT FIND ANY MERIT IN THE GROUND NO. 3 RAISED BY THE ASSE SSEE. ACCORDINGLY, THE SAME IS DISMISSED. 13. IN GROUND NO. 4 THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE AD HO C DISALLOWANCE OF TRAVELLING EXPENSES ` 29,085/- AND TELEPHONE EXPENSES ` 21,022/-. THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 2,90,851/- ON ACCOUNT OF TRAVELLING AND ` 2,10,221/- ON ACCOUNT OF TELEPHONE EXPENSES. THE AUTHORITIES BELOW MADE DISALLOWANCE ONLY ON PRESUMPTION THAT THE POSSIBILITY OF USAGE OF CONVEYANCE AN D TELEPHONE FOR NON-BUSINESS PURPOSE CANNOT BE RULED OUT. HOWEVER, THERE IS NOTHING ON RECORD TO SHOW THAT THE CONVEYANCE AND TE LEPHONE WERE USED FOR PURPOSE OTHER THAN BUSINESS. THE PAYMENTS M ADE FOR CONVEYANCE AND TELEPHONE CHARGES HAVE NOT BEEN DISPU TED BY THE REVENUE. THE DISALLOWANCE HAS BEEN MADE MERELY ON THE BASIS OF ASSUMPTIONS. ACCORDINGLY, GROUND NO. 4 RAISED IN THE APPE AL BY ASSESSEE IS ALLOWED. 14. THE GROUND NOS. 5 AND 7 IN THE APPEAL OF THE ASSESSEE ARE GENERA L IN NATURE AND HENCE, NEED NO ADJUDICATION. 14 ITA NO. 1229/PN/2010, A.Y. 2005-06 15. THE GROUND NO. 6 IN APPEAL RELATES TO CHARGING OF INTE REST U/S. 234A, 234B AND 234C OF THE ACT. SINCE, CHARGING OF INTEREST U/S. 234A, 234B AND 234C IS MANDATORY AND CONSEQUENTIAL, THEREFORE , GROUND NO. 6 IN THE APPEAL OF ASSESSEE IS DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 30 TH DAY OF SEPTEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH SEPTEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, PUNE 4. ' / THE CIT-I, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE