MAHARASHTRA FILM STAGE CULTURAL DEVELOPEMENT CORPORATION LTD, MUMBAI V. JCIT 16(1), MUMBAI

ITA 1268/MUM/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4291 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ARUNKUMAR SINGH
• Keywords: Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI JUDICIAL MEMBER ./ I.T.A. NO. 1268 /MUM/201 7 ( / ASSESSMENT YEAR : 201 2 - 13 ) M/S. MAHARASHTRA FILM S TAGE CULTURAL DEVELOPMENT CORPORATION LTD. DADASAHEB PHALKE CHITRANAGARI, FILM CITY, GOREGAON (E) , MUMBAI - 400 0 65 . / VS. JT. CIT - 16(1) MUMBAI. ./ PAN :AA ACM 7646 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MANI JAIN AND SHRI PRATEEK JAIN / RESPONDENT BY : SHRI CHOUDHA RY ARUNKUMAR SINGH - DR / DATE OF HEARING : 07/08 /2018 / DATE OF PRONOUNCEMENT : 1 0 / 10 /2018 / O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIREC TED AGAINST ORDER OF LEARNED CIT - A DATED 24/11/206 AND PERTAINS TO ASSESSMENT YEAR 2012 - 12. T HE GROUNDS OF APPEAL READ AS UNDER : - THE FOLLOWING GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT' S CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX ERRED IN CONFIRMING THE ACTION OF LD. A O IN DISALLOWING A SUM OF RS. 1,48, 87,798 / - ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES CLAIMED AS PER THE GROUNDS STATED IN THE ORDER OR OTHERWISE. 2. THE APPE LLANT CRAVES LEAVES TO ADD, TO AMEND, ALTER, MODIFY AND / OR WITHDRAW ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT PRAYS THIS HON'BLE TRIBUNAL TO DELETE THE ADDITIONS/DISALLOWANCE BY THE LD. A .O AND CONFIRMED BY THE LD. C I T(A). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HA D NOTICED THAT THE ASSESSEE HA D DEBITED RS.380.25 LAKHS UNDER H EAD 'REPAIRS AND MAINTENANCE'. WHEN ASSESSEE WAS ASKED TO JUSTIFY IT , THE ASSESSEE VIDE LETTER DATED 09/2/2015 STAT ED THAT SUCH EXPENSES ARE RECURRING NATURE EXPENSES , HENCE REVENUE EXPENDITURE. SUCH REPAIRS AND MAINTENANCE DOES NOT EN HANCE THE LIFE OF THE ITA NO. 1268 /MUM/201 7 M/S. MAHARSHTRA FILM STAGE CUTURAL DEVELOPMENT CORPN. LTD. 2 ASSETS, HENCE CANNOT BE CAPITALIZED. THIS EXPLANATION OF THE ASSESSEE HA D NOT BEEN ACCEPTED BY ASSESSING OFFICER IN RESPECT OF REPAIRING RE LATED TO EXISTING 76 MAKE - UP ROOMS AMOUNTING TO RS . 1,65,41,993/ - . ACCORDING TO ASSESSING OFFICER THE E XPENSES HAVE BEEN CLAIMED AS REVENUE EXPENSES WHEREAS THESES ARE CAPITAL IN NATURE AS THERE ARE HEAVY REPAIRS WHICH ARE OF ENDURING NATURE AND HE HELD THAT SUCH EXPENSE S IS NOT RECURRING IN NATURE. THE ASSESSING OFFICER FURTHER NOTED THAT THE C OURT DECISIO N S HAD ACCEPTED THE POSITION THAT THERE CAN BE NO EXHAUSTIVE OR UNIVERSAL APPLICATION OF THE CONCEPT OF ENDURING BENEFIT. ACCORDING TO ASSESSING OFFICER SUCH REPAIRING RELATED 76 MAKE - UP ROOMS ARE NOT AT ALL RECURRING IN NATURE, HENCE HE ALLOWED D EPRECIATION @10% AND DISALLOWED AMOUNT OF RS . 1,48,87,79 8 / - AS CAPITAL EXPENDITURE . 3. U PON ASSES SEE'S APPEAL LD . CIT ( A ) CONFI RMED THE ACTION OF THE ASSESSING OFFICE . HE HELD THAT THE MAKE - UP ROOMS HAVE BEEN RENOVATED SUBSTANTI ALLY AS TH ERE IS REPLACEMENT OF URINAL PANS, REMOVAL OF OLD CEMENT CONCRETE, REMOVAL OF PLASTER, REPLACEMENT OF DOORS AND WINDOWS, WATERPROOFING TREATMENT, PROVIDING CEMENT PLASTER ETC. LD. CIT ( A ) FOUND THAT THESE EXPENSES HAVE BEEN INCURRED FOR UP - GRADATION, BY REN OVATING THE EXISTING MAKE - UP ROOMS. LD . CIT - A HELD THAT SUCH UP - GRADATION , REPLACEMENT AND RENOVATION WILL HAVE ENDURING BENEFIT. HE FURTHER HELD THAT IF THERE ARE EXTENSIVE REPAIRS THEY CANNOT BE TREATED AS CURRENT REPAIRS. 4. AGAINST THE ABOVE ORDER ASS ESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE HAS INCURRED EXPENDITURE ON REPAIRS AND RENOVATION IN ITS EXISTING P REMI S ES. 76 EXISTING MAKE - UP ROOMS HAVE BEEN REPAIRED AND RENOVATED. FROM THIS IT IS E VIDENT THAT NO NEW ASSET HAS COME INTO EXISTENCE. THE EXISTING MAKE - UP ROOMS HAVE BEEN RENOVATED. THE AUTHORITIES BELOW HAVE FOUND THAT THE REPAIRS ARE SUBSTANTIAL, THAT THEY RESULT IN ENDURING BENEFIT AND THAT THEY ARE NOT CURRENT REPAIRS. ITA NO. 1268 /MUM/201 7 M/S. MAHARSHTRA FILM STAGE CUTURAL DEVELOPMENT CORPN. LTD. 3 5.1. WE FIND THA T AS NOTED HEREINABOVE NO NEW ASSET HAS COME INTO EXISTENCE. W HAT THE ASSESSEE HAS DONE IS THAT EXISTING MAKE - UP ROOMS HAVE BEEN RENOVATED . T HIS INCLUDED REPLACEMENT OF URINAL PANS , REMOVAL OF PLASTER, REPLACEMENT OF DOORS AND W INDOWS, WATERPROOFING TREA TMENT ETC . IN OUR CONSIDERED OPINION THESE EXPENDITURE CANNOT BE SAID TO BE CAPITAL IN NATURE AND HENCE THEY ARE DULY QUALIFIED FOR REVENUE EXPENDITURE. WE DRAW SUPPORT FROM FOLLOWING CASE LAWS IN THIS REGARD. 5.2. HON BLE J URISDICTIONAL HIGH COURT IN THE CASE OF C IT VS . OXFORD UNIVERSITY P RESS ( 108 ITR 166 ) HAS EXPOUNDED THAT THE TEST FOR JUDGING THE NATURE OF CAPITAL OR REVENUE EXPENDITURE IS TO SEE WHETHER AS A RESULT OF EXPENDITURE WHAT IS BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY EXISTIN G ASSET OR WHETHER AS A RESULT OF EXPENDITURE A NEW ASSET OR A NEW ADVANTAGE IS BEING BROUGHT INTO EXISTENCE. THE MERE QUANTUM OF EXPENDITURE IS NOT BY ITSELF DECISIVE OF THE QUESTION WHETHER IT IS IN THE NATURE OF REVENUE OR CAPITAL. SIMPLY BECAUSE OF REP AIR THE LIFE OF BUILDING WAS PROLONGED FOR AT LEAST 15 YEARS AND IT COULD NOT BE SAID THAT THE EXPENDITURE WAS IN THE NATURE OF CAPITAL EXPENDITURE. 5.3. F URTHERMORE , WE NOTE THAT HON'BLE APEX COURT IN THE CASE OF CIT VS. KALYANJI MAVJI AND CO . (122 ITR 49) , HAS HELD THAT COST ON REPAIRS WHICH ARE NOT CURRENT REPAIRS CAN BE ALLOWED UNDER SECTION 37 (1) . SECTION 30 AND 31 ARE NOT A BAR IN THIS REGARD. F ROM THE ABOVE CASE LAW IT IS APPARENT THAT EXPENDITURE ON REPAIRS ALTHOUGH PROLONGING THE LIFE AND INCREASIN G DURABILITY OF THE ASSET IS NOT NECESSARILY OF CAPITAL NATURE. H ENCE , IN OUR CONSIDERED OPINION EXPENDITURE INCURRED BY THE ASSESSEE WITH REGARD TO REPAIRING / RENOVATING OF EXISTING MAKE - UP ROOMS HAVE TO BE ALLOWED AS DEDUCTION AS REVENUE EXPENDITURE , AS THEY CANNOT BE TREATED AS CAPITAL EXPENDITURE MEANT FOR BRINGING INTO EXISTENCE A NEW ASSET O R A NEW ADVANTAGE , AND THEY ARE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE . 5.4. IN THE RESULT THE ASSESSEE'S APPEAL STANDS ALLOW ED . ITA NO. 1268 /MUM/201 7 M/S. MAHARSHTRA FILM STAGE CUTURAL DEVELOPMENT CORPN. LTD. 4 ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2018. SD/ - SD/ - ( RAMLAL NEGI ) ( SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/ 10 /201 8 JV, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / IT AT, MUMBAI . ITA NO. 1268 /MUM/201 7 M/S. MAHARSHTRA FILM STAGE CUTURAL DEVELOPMENT CORPN. LTD. 5 DATE INITIALS INITIAL 1. DRAFT DICTATED ON - DICTATION SHEETS ATTACHED/DIRECT ON PC 9/10/18 2. DRAFT PLACED BEFORE AUTHOR 9/10/18 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO THE SR.PS 6. KEPT FOR PRONOUNCEMENT 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE A.R. FOR SIGNATURE OF THE ORDER 9. DATE OF DISPATCH OF THE ORDER