DCIT, New Delhi V. M/s Bharat Gears Ltd., New Delhi

ITA 1371/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77780 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K MADAN
• Assessee Lawyers: Y KAKKAR; A MISHRA
• Keywords: Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 43B; 142(1); 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-906/DEL/2013 (ASSESSMENT YEAR-2009-10) BHARAT GEARS LTD., 512, SURYA KIRAN BUILDING, 19, K.G.MARG, NEW DELHI PAN-AAACB4860G (APPELLANT) VS ACIT, CENTRAL CIRCLE-II, NEW DELHI. (RESPONDENT) I.T.A .NO.-1371/DEL/2013 (ASSESSMENT YEAR-2009-10) DCIT, CENTRAL CIRCLE-11, NEW DELHI. (APPELLANT) VS BHARAT GEARS LTD., 512, SURYA KIRAN BUILDING, 19, K.G.MARG, NEW DELHI PAN-AAACB4860G (RESPONDENT) APPELLANT BY: SH. M.K.MADAN, CA RESPONDENT BY: SMT. A. MISHRA, CIT DR & Y.KAKKAR, DR ORDER PER DIVA SINGH, JM THESE CROSS APPEALS HAVE BEEN FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER DATED 18.12.2012 OF CIT(A)-XXXI PERTAININ G TO 2009-10 ASSESSMENT YEARS ON THE FOLLOWING GROUNDS RESPECTIVELY:- IN ITA NO-1371/DEL/2013 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX(A) HAS ERRED IN DELETING THE ADDITION OF MADE BY AO 2 I.T.A .NOS.-906 & 1371/DEL/2013 AMOUNTING TO RS.31,76,827/- ON ACCOUNT OF TREATMENT OF EXPENDITURE ON REPAIR OF PLANT AND MACHINERY AS CAPITAL EXPENDITUR E. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL TH E GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEA L. IN ITA NO-906/DEL/2013 1. THAT THE ORDER PASSED BY THE LD. CIT(A)-XXXI IS BA D IN LAW & ON FACTS. 2. (A) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING DIS ALLOWANCE OF RS.1,07,200/- ON ACCOUNT OF LEAVE ENCASHMENT U/S 43 B OF THE INCOME TAX ACT, 1961. (B) THAT THE ASSESSEE CRAVES, LEAVES TO ALTER, AMEN D, VARY, ADD ANY GROUNDS OF APPEAL. 2. RIGHT AT THE OUTSET IT WAS SUBMITTED BY THE LD. AR THAT IN ITA NO- 906/DEL/2013 FILED BY THE ASSESSEE THE AMOUNT MENTI ONED IN GROUND NO-2(A) NEEDS TO BE CORRECTED AS ON ACCOUNT OF A TYPOGRAPHIC ERR OR THE AMOUNT STATED INADVERTENTLY IS RS.1,07,200/- WHEREAS THE CORRECT AMOUNT SHOULD BE RS.10,72,200/-. THE SAID FACT IT WAS SUBMITTED WO ULD BE BORNE OUT FROM PARA 3.2.1 OF THE CIT(A) AND ALSO EVIDENT FROM THE LAST PAGE O F THE ASSESSMENT ORDER WHEREIN THE ADDITION OF THE SAID AMOUNT HAS BEEN MADE BY TH E AO. THE STATEMENT OF THE LD. AR WAS FOUND TO BE CORRECT AND NOT DISPUTED BY THE SR. DR WHO ON PERUSING THE ORDERS CONCURRED WITH THE SUBMISSIONS MADE. A CCORDINGLY THE CORRECTION OF THE AMOUNT MENTIONED IN GROUND 2(A) BY WAY OF TYPOG RAPHIC ERROR IS ALLOWED TO BE CARRIED OUT. 3. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE RETURNED AN INCOME OF RS.9,40,80,294/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 AND THEREAFTER SELECTED FOR SCRUTINY. CONSEQUENTLY NOTICE U/S 143(2) FOLLOWED BY NOTICE U/S 142(1) ALONGWITH THE QUESTIONNAIRE ETC. WERE ISSUED AND CONSIDERING THE ARGUMENTS OF THE ASSESSEE TWO ADDITIONS WERE MADE I N TERMS OF PARA 3.3 AND 4.1 OF THE ASSESSMENT ORDER AMOUNTING TO RS.31,76,827/- AN D RS.10,72,000/- RESPECTIVELY. AS A RESULT OF THIS THE RETURNED INCOME WAS ASSESSE D AT RS,9,83,29,121/-. 3 I.T.A .NOS.-906 & 1371/DEL/2013 4. THE ASSESSEE CHALLENGED THESE ADDITIONS IN APPEA L BEFORE THE CIT(A) WHO CONFIRMED THE ADDITION OF RS.10,72,000/- AND QUA T HE ADDITION OF RS.31,76,827/- RELIEF WAS GRANTED. AGGRIEVED BY THIS BOTH THE ASS ESSEE AND THE DEPARTMENT ARE IN APPEAL BEFORE THE TRIBUNAL. 5. ADDRESSING FIRST THE FACTS RELEVANT TO THE ISSUE AGITATED BY THE ASSESSEE IN ITS APPEAL, IT IS SEEN THAT ON ACCOUNT OF THE FOLLOWING REASONING THE ADDITION WAS MADE BY THE AO:- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE COMPANY WAS SPECIFICALLY REQUIRED TO FURNISH DETAILS IN RES PECT OF PAYMENTS MADE AN ACCOUNT OF LEAVE ENCASHMENT AND PROVISIONS MADE ON THIS ACCOUNT. COMPLETE DETAILS WERE FILED AND THE SAME HAD BEEN EXAMINED. IT HAS BEEN TAKEN TO NOTICE THAT DURING THE FINANCIAL YEAR SOME OF THE A MOUNT PROVIDED ON THIS ACCOUNT HAD NOT ACTUALLY BEEN PAID. TOTAL AMOUNT I N THIS REGARD DEBITED TO THE BOOKS OF ACCOUNTS IS RS.77.20LACS OUT OF WHICH PAYMENT OF RS.66.48 LACS HAVE BEEN MADE DURING THE RELEVANT FINANCIAL YEAR 2 008-09. THE ASSESSEE COMPANY IN REPLY DATED 25.03.2011, HAS SUBMITTED TH AT IT HAS BEEN ADEQUATELY DISCLOSED IN THE TAX AUDIT REPORT THAT DISALLOWANCE HAS NOT BEEN MADE ON THE BASIS OF DECISION OF KOLKATTA HIGH COURT IN THE CAS E OF EXIDE INDUSTRIES LTD. VS. UOI (292 ITR 470) RELYING UPON THE DECISION OF APEX COURT IN THE CASE OF BHARAT EARTH MOVERS (245 ITR 428). THE REPLY FILED BY THE ASSESSEE COMPANY HAS BEEN EXAMINED AND CONSIDERED. RELIANCE PLACE B Y THE ASSESSEE ON THE JUDGEMENT OF HONBLE KOLKATTA HIGH COURT IN THE CAS E OF EXIDE INDUSTRIES IS OF NO HELP TO THE ASSESSEE AS THE DEPARTMENT HAS FI LED SLP AGAINST HIS DECISION WHICH HAS BEEN ADMITTED BY THE APEX COURT. IT IS PERTINENT TO MENTION HERE THAT LD. COMMISSIONER OF INCOME TAX, C ENTRAL-1, NEW DELHI, IN THE CASE OF THE ASSESSEE COMPANY FOR THE ASSESSME NT YEAR 2008-09, HAD OBSERVED AS UNDER:- IT IS A FACT THAT ASSESSING OFFICE HAD NOT DISALLO WED THE PROVISION OF LEAVE ENCASHMENT AND THIS ACT OF THE ASSESSING OFFI CER WAS ERRONEOUS BECAUSE THE DATE OF THE DECISION OF THE HONBLE SUP REME COURT IS 08.05.2009 AND THE ORDER OF THE ASSESSING OFFICER W AS PASSED MUCH AFTER THIS DATE I.E.20.04.2010. THE ASSESSING OFFI CE WAS DUTY BOUND TO MAKE EFFORTS TO KNOW ABOUT THE FATE OF THE SLP FILE D AGAINST THE JUDGEMENT OF HONBLE HIGH COURT IN THE CASE OF M/S EXIDE INDUSTRIES LIMITED VS UNION OF INDIA (292 ITR 470) WHICH THE A SSESSING OFFICER FAILED TO DO. HENCE THE ORDER PASSED BY THE ASSESS ING OFFICER IS ERRONEOUS ON THIS ACCOUNT. THE ORDER OF THE ASSESS ING OFFICER IS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE.THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO DISALLOW THE CLAIM OF ALLOWA NCE OF PROVISION OF LEAVE ENCASHMENT AND MODIFY THE ASSESSMENT ORDER AC CORDINGLY. 4 I.T.A .NOS.-906 & 1371/DEL/2013 4.1. KEEPING IN VIEW THE FINDINGS OF THE LD. CIT, C -1, NEW DELHI WHILE COMPLETING THE RE-ASSESSMENT PROCEEDINGS FOR THE AS SESSMENT YEAR 2007-08 AND 2008-09, AMOUNT DEBITED TO THE BOOKS OF ACCOUNT S ON ACCOUNT OF LEAVE ENCASHMENT PAYMENTS AND PROVISIONS WAS DISALLOWED U NDER SECTION 148 AND 263 RESPECTIVELY. THEREFORE, RELYING ON MY OWN ASS ESSMENT COMPLETED AS MENTIONED SUPRA, AN AMOUNT OF RS.10.72 LAC IS CONSI DERED AS NOT ALLOWABLE AND IS ADDED TO THE INCOME OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2009-10. PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE INCOME TAX ACT, 1961 ARE HEREBY INITIATED. 6. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY O N BEHALF OF THE ASSESSEE IT WAS ARGUED THAT THE CLAIM IS DISCLOSED IN THE TAX AUDIT REPORT AND HAS BEEN MADE ON THE BASIS OF THE DECISION OF THE KOLKATA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS UNION OF INDIA 292 ITR 470 (CAL.). RELIAN CE WAS PLACED UPON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE PERTAINING TO 2 008-09 ASSESSMENT YEARS WHEREIN THE FOLLOWING DIRECTION HAD BEEN REPRODUCED :- 3.2.2. IN A WRITTEN AS WELL AS ORAL SUBMISSIONS MADE BEFO RE THE UNDERSIGNED, THE AR HAS DRAWN THE ATTENTION TO THE ORDER OF ITAT FOR ASSESSMENT YEAR 2008-09 IN THE ASSESSEES OWN CASE, WHERE ITAT HAD GIVEN THE FOLLOWING DIRECTIONS TO THE ASSESSING OFFICER:- COMING TO THE DIRECTION OF THE CIT(A) THAT THE AO HAS TO DISALLOW THE CLAIM OF ALLOWANCE OF PROVISION FOR LEAVE ENCASHMEN T, WE VACATE THESE DIRECTIONS IN VIEW OF THE INTERIM ORDERS OF THE HON BLE SUPREME COURT EXTRACTED ABOVE. THE AO IS DIRECTED TO FOLLOW THE DIRECTIONS OF THE HONBLE SUPREME COURT AND DISPOSE OF THE MATTER DE NOVO IN ACCORDANCE WITH LAW, WITHOUT BEING INFLUENCED BY TH E ORDER OF THE CIT. 6.1. IT WAS ALSO CONTENDED THAT THE AO HAS NOT GIVE N EFFECT TO THE ITATS ORDER. 7. CONSIDERING THE SAME THE ISSUE WAS CONCLUDED BY THE CIT(A) IN THE FOLLOWING MANNER:- 3.2.4. I HAVE EXAMINED THE FACTS OF THE CASE AS WELL AS T HE SUBMISSIONS OF THE APPELLANT. WITH DUE RESPECT, I NOTE THAT ITAT HAS NOT EXPRESSED ITS VIEW AS TO WHETHER THE DISALLOWANCE UNDER 43B ON THE ISS UE WAS CALLED FOR OR NOT. ITAT HAS MERELY DIRECTED THE AO TO FOLLOW THE DIRECTIONS OF THE HONBLE SUPREME COURT. 5 I.T.A .NOS.-906 & 1371/DEL/2013 3.2.5. THE DIRECTIONS OF HONBLE SUPREME WHILE ADMITTING D EPARTMENTS SLP AGAINST THE ORDER OF HONBLE KOLKATA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. IS REPRODUCED BELOW:- WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, DURING THE PENDENCY OF CIVIL APPEAL PAY TAX AS IF SECTION 43B(F) IS ON THE STATUES BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE ITS CLAI M IN ITS RETURN. 3.2.6. FROM THE ABOVE REMARKS OF THE HONBLE SUPREME COURT , IT IS EVIDENT THAT IT HAS NOT CONSENTED TO OPERATIONALISE THE DEC ISION OF HONBLE KOLKATA HIGH COURT WHICH HAD HELD THE PROVISION AS UNCONSTITUTIONAL. IN DIRECTING M/S EXIDE INDUSTRIES LTD. TO PAY THE T AXES AS IF S. 43B(F) IS ON THE STATUE BOOK, I AM OF THE OPINION THAT SECTIO N 43B(F) IS VERY MUCH EFFECTIVE AS ON DATE. 3.2.7. I AM NOT IN AGREEMENT WITH THE ARS ARGUMENT THAT O NCE THE ASSESSEE ADDS BACK ON HIS OWN THE UNPAID PROVISION AND PAYS TAX, THERE COULD NOT BE ANY FURTHER CLAIM. IF ONE IS TO INTERPRET T HE DIRECTIONS OF THE HONBLE SUPREME COURT, ONE OF THE OPTIONS AVAILABLE TO THE ASSESSEE COULD BE THAT HE PAYS THE TAXES BUT MAKES A CLAIM I N THE COMPUTATION OF INCOME. HOWEVER, IT IS UPTO THE ASSESSEE TO DECIDE WHAT PROCEDURE HE WOULD FOLLOW IN THE MATTER. THAT WOULD BE ONLY A M ATTER OF PROCEDURE. 3.2.8. IN THIS BACKGROUND I HOLD THAT IF ONE GOES BY THE S PIRIT OF SUPREME COURTS REMARKS AS ABOVE, PRIMA FACIE, THE HONBLE SUPREME COURT WAS NOT IN AGREEMENT WITH THE DECISION OF HONBLE HIGH COURT OF KOLKATA,. IN THIS BACKGROUND I UPHOLD AND CONFIRM THE DISALLO WANCE MADE BY THE AO AS THE WORDINGS OF SECTION 43B(F) ARE VERY CLEAR AND THE AMOUNT DEBITED WITHOUT ACTUAL PAYMENT DURING THE YEAR CANN OT BE ALLOWED AS A DEDUCTIONS. 8. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. THE LD. AR INVITING ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES CASE IN ITA NO- 1523/DEL/2011 DATED 21.09.2012 SUBMITTED THAT THE D IRECTION GIVEN BY THE ITAT WHEREIN THE ORDER DATED 08.02.2011 U/S 263 WHICH HA D BEEN UPHELD DESERVES TO BE FOLLOWED AND THE APEX COURT HAS CATEGORICALLY HELD THAT THE ASSESSEE MAY PAY TAX AND THEREAFTER MAKE THE CLAIM IN ITS RETURN WHICH H AS BEEN DONE AS SUCH THE SAME IS ALLOWABLE. 9. THE LD. SR. DR, MS. Y.KAKKAR SUBMITTED THAT THE APEX COURT HAS SIMPLY SAID THAT THE TAX MUST BE PAID AND THE CLAIM MAY B E PUT FORTH. IT DOES NOT MEAN 6 I.T.A .NOS.-906 & 1371/DEL/2013 THAT THE CLAIM HAS TO BE ALLOWED WITHOUT EXAMINATIO N. THE FACTS OF THE ASSESSEES CASE IT WAS SUBMITTED PERTAIN TO 2009-10 ASSESSMENT YEARS AND CURRENTLY WE ARE IN 2014-15 FINANCIAL YEAR AS SUCH IT WAS HER SUBMISSIO N THAT LET THE ISSUE GO BACK DIRECTING THE ASSESSEE TO PLACE FULL FACTS ON RECOR D AND DEMONSTRATE CONSIDERING THE PROVISION WHAT AMOUNT HAS ACTUALLY BEEN PAID. IT WAS HER SUBMISSION THAT DECIDING THE ISSUE WITHOUT REFERENCE TO MATERIAL AN D RELEVANT FACTS WOULD BE OF NO PURPOSE AND THE ISSUE AS SUCH MAY BE RESTORED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THE THAT NO DOUBT THE POSITION ON FACTS WAS INFLUX DURING THE TIME WHEN THE RETURN WAS FILED HOWEVER WITH THE PASSAGE OF TIME THE POSITION ON FACTS QUA THE ISSUE UNDER CONSIDERATION WOULD HAVE CRYSTA LLIZED. CONSIDERATION OF THESE RELEVANT FACTS HEEDING TO THE REQUEST OF THE LD. SR . DR THAT QUA THE PROVISIONS IT IS NECESSARY TO SEE WHAT AMOUNT WAS ACTUALLY PAID AS P ER THE HR POLICY OF THE ASSESSEE, THE ISSUE IS RESTORED TO THE AO WHO SHALL NECESSARILY TAKE INTO CONSIDERATION THE DECISION OF THE APEX COURT WHEREI N THE SLP IS PENDING. THE AO ACCORDINGLY IS DIRECTED TO CONSIDER THE ISSUE DE NO VO AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 12. ALTHOUGH THE REVENUE HAS RAISED THREE GROUNDS H OWEVER GROUND NO-1 AND 3 THE LD. CIT DR STATED REQUIRE NO ADJUDICATION AND THE SOLE ISSUE AGITATED IS GROUND NO-2. THE RELEVANT FACTS QUA THE SAME, IT I S SEEN ARE ADDRESSED BY THE AO IN PARA 3 TO 3.3. A PERUSAL OF THE SAME SHOWS THA T THE AO CALLED FOR COMPLETE DETAILS IN RESPECT OF THE CLAIM OF RE-CONDITIONING OF PLANT & MACHINERY EXPENSES. IN RESPONSE THERETO THE ASSESSEE SUBMITTED AS PER RECORD LETTER DATED 25.03.2011. CONSIDERING THE SAME (SPECIFIC PARA 6 AND SUB-PARA (A) TO (G) THEREOF) THE AO OBSERVED THAT THE TOTAL AMOUNT ON ACCOUNT OF RE-CON DITIONING OF PLANT & MACHINERY WORKS OUT TO RS.37,37,444/-. ON BEHALF OF THE ASSE SSEE IN THE ASSESSMENT 7 I.T.A .NOS.-906 & 1371/DEL/2013 PROCEEDINGS IT WAS CONTENDED THAT THE EXPENDITURE W AS INCURRED ON ACCOUNT OF CURRENT REPAIRS CONSEQUENTLY NO DISALLOWANCE WAS RE QUIRED TO BE MADE. THE AO WAS OF THE VIEW THAT THE SAID ISSUE HAD BEEN CONSID ERED IN DETAIL AND AT GREAT LENGTH IN 1994-95 ASSESSMENT YEAR WHEREIN THE ADDITION MAD E BY THE AO WHICH WAS DELETED BY THE CIT(A) WAS CONFIRMED BY THE ITAT AND THE SAME HAS BEEN CHALLENGED BEFORE THE HIGH COURT WHERE THE ISSUE WA S PENDING. HE ALLOWED DEPRECIATION AT THE PERMISSIBLE RATE AND HELD THE EXPENDITURE TO BE CAPITAL IN NATURE. 12.1. THE SPECIFIC FINDING IS REPRODUCED HEREUNDER: - 3.2. AS FOR THE EXPENSES OF THE YEAR UNDER ASSESSM ENT IS CONCERNED, THE ASSESSEE HAS FURNISHED DETAILS IN RESPECT OF VARIOU S PLANT AND MACHINERY, DETAILING SCOPE OF WORK DONE, COPIES OF BILLS ETC. VIDE THE REPLY DATED 25.03.2011, THE ASSESSEE HAS TRIED TO EXPLAIN THAT THE IMPUGNED EXPENDITURE WAS OF REVENUE NATURE. IT HAS BEEN ARGUED ON BEHAL F OF THE ASSESSEE THAT THE EXPENDITURE INCURRED IS TO RESTORE THE OPERATIONAL EFFICIENCY OF THE MACHINES AND HENCE, THE SAME IS OF REVENUE IN NATURE. HOWEV ER, AS DISCUSSED ABOVE, ASSESSEES CONTENTION IS NOT ACCEPTED AS THE ISSUE RELATING TO REPAIR OF MACHINES IS BEFORE THE HONBLE JURISDICTIONAL HIGH COURT FOR ASSESSMENT YEAR 1994095. ACCORDINGLY, THE ENTIRE AMOUNT OF EXPENDI TURE OF RS.37,37,444/- IS HELD AS CAPITAL EXPENDITURE AND THE SAME IS HEREBY ADDED IN THE INCOME OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2009-10. HOWEVER AN AMOUNT EQUIVALENT TO 15% OF THE AMOUNT OF RS.37,37,444/- I S ALLOWED ON ACCOUNT OF DEPRECIATION ALLOWANCE TO THE ASSESSEE COMPANY AS P ER INCOME TAX RULES, 1962. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ARE HEREBY INITIATED. 3.3. ACCORDINGLY ADDITION ON THIS ACCOUNT IS WORKE D OUT AS UNDER:- AMOUNT OF EXPENDITURE CONSIDERED OF CAPITAL NATURE 3737444/- LESS:-DEPRECIATION ALLOWED @ 15% 560617/- AMOUNT TO BE ADDED IN INCOME OF THE ASSESSEE 317 6827/- 13. AGGRIEVED BY THIS THE ASSESSEE WENT IN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE CIT(A), IT WAS CONTENDED THA T NO DOUBT IN 1994-95 THE HONBLE HIGH COURT HAD CONFIRMED THE ADDITION HOWEV ER IN THE CONSOLIDATED ORDER FOR 1994-95, 2005-06 & 2006-07 THE HONBLE HIGH COU RT HAD ALSO CONFIRMED THE DELETION OF ADDITION MADE BY THE ITAT ON SIMILAR IS SUE AND THE HONBLE HIGH 8 I.T.A .NOS.-906 & 1371/DEL/2013 COURT HAD ALSO INFACT MENTIONED THAT FROM 1995-96 O NWARDS TO 2004-05 ASSESSMENT YEAR, SIMILAR DISALLOWANCE MADE BY THE AO HAD BEEN DELETED BY THE ITAT WHICH HAS BEEN ACCEPTED BY REVENUE. 13.1. IT WOULD BE APPROPRIATE TO EXTRACT THE SUBMIS SIONS ADVANCED FROM PARA 3.1.4 OF THE IMPUGNED ORDER AT THIS STAGE:- THE HONBLE ITAT HAS DISTINGUISHED THE FACTS OF 94 -95 WITH THAT OF SUBSEQUENT YEARS ON THE GROUND THAT IN THAT YEAR MACHINE HAD B ECOME UNFIT FOR PRODUCTION AND BY SUBSEQUENT RECONDITIONING CARRIED OUT IT RES ULTED IN IMPARTING USEFUL LIFE TO AN OLD & UNFIT MACHINE. IT IS FURTHER SUBM ITTED THAT COST OF REPAIR OF THE MACHINE IN THE YEAR 94-95 WAS APPROXIMATELY 80 LAKH S. THE FACTS AS STATED IN 1994-95 ARE DIFFERENT FROM THE CURRENT YEAR IN AS M UCH AS:- 1. THAT NO MACHINE HAD BECOME UNFIT FOR PRODUCTION AND WAS LYING IDLE. 2. THAT THE NATURE OF THE REPAIR CLEARLY DEMONSTRATES THAT EXPENSES CONSIST OF (I) OVERHAULING & REPLACEMENT OF WORN OUT PARTS (U & V AXIS) OF GEAR GRINDING MACHINE-RECTIFYING THE VARIATION I N OUTPUT PROFILE. (II) REPAIRING OF SPINDLE ASSEMBLY OF HMT INTERNAL GRIND ER. (III) REPAIRING OF VALVES OF SL-31 LAPPERS. (IV) SCRAPPING AND ALIGNMENTS. THE EXPENSES WERE INCURRED TO RESTORE THE OPERATION AL EFFICIENCY OF MACHINES AND SMOOTHEN THE FLOW OF PRODUCTION. SOME OF THE WORN OUT PARTS ARE REPLACED. COPIES OF THE BILLS OF REPAIR FILED IN ASSESSMENT PROCEEDINGS ARE ALSO ENCLOSED. ASSESSING OFFICER HAS NOT BROUGHT O UT ANY EVIDENCE ON RECORD TO SAY THAT THE NATURE OF THE REPAIRS AS PER 94-95 IS SAME AS THAT OF YEAR UNDER ASSESSMENT. 13.2. APART FROM THE ABOVE THE ASSESSEE ALSO MADE T HE FOLLOWING SUBMISSIONS:- 3.1.5. HE HAS ALSO SUBMITTED THE COPIES OF THE BIL LS AND VOUCHERS SUPPORTING THE EXPENDITURE INCURRED WHICH WERE FILED BEFORE TH E AO VIDE THERE LETTER DATED 25.03.2011. THE AR STATED THAT FROM THESE FACTS IT WOULD BE CLEAR THAT NO NEW ASSET HAS COME INTO EXISTENCE. EXPENSES HAVE BEEN INCURRED TO RESTORE THE OPERATIONAL EFFICIENCY OF THE MACHINES. NO MACHINE HAS BEEN DISCARDED AND NOR HAD REMAINED IDLE. NO REPAIR HAD BECOME OVERDU E. HE HAS THEREFORE ARGUED ON THE BASIS OF THE ORDER OF ITAT FOR A.Y.20 06-07 AND 2007-08, THAT THE EXPENDITURE IS VERY MUCH OF REVENUE NATURE. 14. CONSIDERING THESE SUBMISSIONS THE CIT(A) CAME T O THE FOLLOWING CONCLUSIONS:- 9 I.T.A .NOS.-906 & 1371/DEL/2013 3.16. I HAVE EXAMINED THE ISSUE AS DECIDED BY ITAT AND HONBLE HIGH COURT OF DELHI. THE EXPENDITURE INCURRED BY THE AS SESSEE FOR THE CURRENT YEAR UNDER THE ABOVE HEAD IS AS FOLLOWS. THESE DETAILS HAVE BEEN NOTED FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASSESSI NG OFFICER VIDE HIS LETTER DATED 25.03.2011. 1. REPAIR OF GEAR GRINDING MACHINES - TAG 400 RS.2 8,45,732/- 2. REPAIR OF HMT INTERNAL GRINDER - RS.13,650/- 3. REPAIR OF WMW INTERNAL GRINDER - RS.30,385/- 4. REPAIR OF SL-3 LAPPERS - RS.4,65,000/- 5. REPAIR OF BORE GRINDER IG-140 - RS.74,434/- 6. REPAIR OF MICROMATIC GRINDER - RS.2,36,500/- 7. REPAIR OF SKL-2 LAPPER - RS.2,36,500/- TOTAL - RS.37,37,444/- 3.1.7. FROM THE ABOVE IT IS SEEN THAT THE EXPENDITU RE HAS BEEN INCURRED TOWARDS REPAIR OF THE MACHINES. THERE IS NO EVIDEN CE THAT ANY OF THESE MACHINES WERE LYING IDLE OR WERE IN BROKEN-DOWN CON DITION. AR HAS CATEGORICALLY STATED THAT NONE OF THE MACHINES WERE LYING IDLE OR HAD BECOME UNFIT FOR PRODUCTION. IN THESE CIRCUMSTANCES THE F ACTS OF THE CURRENT ASSESSMENT YEAR DO NOT APPEAR TO BE SAME AS THOSE F OR A.Y. 1994-95. AO HAS MADE ADDITIONS MERELY STATING THAT ON THE SIMILAR I SSUE FOR A.Y. 1994-95 ITAT HAS CONFIRMED THE ADDITION AND THE MATTER WAS PENDI NG BEFORE HIGH COURT OF DELHI. HE HAS NOT MENTIONED THAT FOR ALL THE SUBSE QUENT YEARS UPTO 2006-07, ITAT HAS DELETED THE ADDITIONS. 3.1.8. FROM THE FACTS AVAILABLE, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED TOWARDS REPAIR OF MACHINES WAS CAPITAL IN NATURE. THE MAJOR EXPENDITURE FROM AMONG THE LIST OF REPAIRS AT PARA 4.1.6 ABOVE, I.E. RS.28,45,732/- RELATE TO THE REPAIR OF GEAR GRINDIN G MACHINE. OUT OF THIS, RS.17.51 LACS RELATES TO LIVING EXPENSES OF THE REP RESENTATIVE WHO HAD COME FROM USA FOR REPAIRING THE MACHINE AND RS.10,94,662 /- RELATES TO THE SPARES. IT HAS BEEN STATED THAT THE MACHINE HAD STARTED HAV ING VARIATION IN PROFILE WHICH WAS RECTIFIED BY OVERHAULING AND REPLACEMENT OF U AND V AXES WHICH TRACES THE GRINDING WHEEL AS PER THE GRINDING REQUI REMENT OF THE PART TO BE GROUND. THERE IS ALWAYS A THIN LINE BETWEEN WHAT I S CAPITAL EXPENDITURE AND WHAT IS REVENUE EXPENDITURE. IN THE INSTANT CASE, IT IS CLEAR THAT THE MACHINES HAVE BEEN REPAIRED BY SPENDING A CONSIDERABLE AMOUN T. HOWEVER, THE QUANTUM OF THE MONEY SPENT ON REPAIRS ALONE CANNOT BE A GROUND FOR TREATING IT AS CAPITAL EXPENDITURE; WHEN THE EXPENDITURE ITSELF IS IN THE NATURE OF CURRENT REPAIRS. SINCE THE APPELLANT HAS BEEN ABLE TO MAKE OUT A CASE THAT THE FACTS ARE DIFFERENT FOR THE CURRENT ASSESSMENT YEAR AS COMPAR ED TO THAT OF 1994-95, THERE IS NO REASON TO SUSTAIN THIS DISALLOWANCE. 3.1.9. CONSIDERING ABOVE FACTS, I DO NOT FIND ANY M ERIT IN THE DISALLOWANCE MADE BY THE AO. ALL SIMILAR DISALLOWANCES MADE FOR SUBSEQUENT A.YS ON THE GROUND THAT ITAT UPHELD THE DISALLOWANCE OF 1994095 HAVE BEEN DELETED EITHER 10 I.T.A .NOS.-906 & 1371/DEL/2013 BY ITAT/HONBLE HIGH COURT AND HAVE REACHED FINALIT Y (SUBJECT TO THE DEPARTMENTS STAND ON THE LATEST DECISION FOR A.Y. 2005-06 AND 2006-07). THE ADDITION MADE BY TREATING THE EXPENDITURE ON REPAIR S AS CAPITAL EXPENDITURE IS, THEREFORE, DELETED. 15. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL 16. LD. CIT DR, MS. A.MISRA PLACING RELIANCE ON THE AO SUBMITTED THAT THE AO RELYING UPON THE FACT THAT THE ISSUE IN 1994-95 ASS ESSMENT YEAR WAS PENDING BEFORE THE JURISDICTIONAL HIGH COURT HAS HELD THE EXPENDIT URE TO BE CAPITAL AS SUCH DISALLOWED THE SAME. 17. LD. AR ON THE OTHER HAND HEAVILY RELYING UPON T HE IMPUGNED ORDER AND THE FACTUAL POSITION THAT APART FROM 1994-95 WHEREIN TH E MACHINE WAS LYING UNFIT FOR PRODUCTION AND BY THE RECONDITIONING CARRIED OUT TH E OLD MACHINERY WAS MADE FIT FOR PRODUCTION AS SUCH SINCE THE MACHINE LYING UNFI T WAS NOT IN USE THE TRIBUNAL AND THE COURT HELD THE EXPENDITURE TO MAKE IT FIT W AS TO BE TAKEN AS CAPITAL EXPENDITURE. REFERRING TO THE FACTS OF THE PRESENT CASE IT WAS ARGUED THE EXPENDITURE IS CATEGORICALLY AND PATENTLY REVENUE E XPENDITURE AND THE MACHINES WERE NOT LYING IDLE AND UNFIT FOR PRODUCTION AND IN FACT THE EXPENDITURE PERTAINS ONLY TO THEIR REPAIRS. ACCORDINGLY THE EXPENDITU RE IT WAS ARGUED HAS RIGHTLY BEEN HELD BY THE CIT(A) AS ALLOWABLE EXPENDITURE FOR REP AIR. 18. THE APPEAL WAS FIXED FOR CLARIFICATION AS QUA T HE EVIDENCE OF EXPENDITURE THE RESPECTIVE STAND WAS FOUND TO HAVE NOT BEEN ADDRESS ED. HOWEVER ON THE DATE OF HEARING THE LD. AR TOOK THE STAND THAT THE EVIDENC E HAS NOT BEEN DOUBTED BY THE AO, CONSEQUENTLY THE DEPARTMENT HAS NOT QUESTIONED THIS, AS THE AO HAS TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE RELYING ON T HE VIEW TAKEN IN 1994-95 AND SINCE THE ISSUE UNDER CHALLENGE WAS WHETHER THE EXP ENDITURE WAS CAPITAL OR REVENUE THE FACTUM OF EXPENDITURE HAVING BEEN INCUR RED HAS NEVER BEEN IN ANY DOUBT. THE SAID POSITION WAS CONCURRED WITH BY THE LD. CIT DR. 11 I.T.A .NOS.-906 & 1371/DEL/2013 19. WE HAVE HARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON A CAREFUL CONSIDERATION THEREOF, WE FIND THAT THERE IS NO SIMILARITY ESTABLISHED BY THE REVENUE WITH THE FACTS TAKEN INTO CONSIDERATION BY THE TRIBUNAL AND THE HONBLE HIGH COURT IN 1994-95 A.YEAR. NOTHING HAS BEEN PLA CED BEFORE US TO SHOW THAT THE MACHINES WERE LYING IDLE OR HAD BECOME UNFIT FO R PRODUCTION AND INFACT NO ARGUMENT IN THAT LINE HAS BEEN ADVANCED BY THE REVE NUE. ACCORDINGLY IN THE AFORE- MENTIONED PECULIAR FACTS AND CIRCUMSTANCES OF THE C ASE WHICH WE HAVE BROUGHT OUT IN DETAIL IN THE EARLIER PART OF THIS ORDER, WE ARE OF THE VIEW THAT THE ARGUMENTS OF THE REVENUE HAVE NO MERIT. BEING SATISFIED BY THE REASONING AND FINDING ARRIVED AT IN THE IMPUGNED ORDER, THE DEPARTMENTAL GROUND IS D ISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH OF JULY 2014. SD/- SD/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:- 18/07/2014 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI