ACIT 11(2), MUMBAI V. KANGA & CO., MUMBAI

ITA 140/MUM/2010

• Counselvise Citation: 14019914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 1997-1998
• Appeal Filed On: 07-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B MESON
• Assessee Lawyers: P J PARDIWALA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A BEFORE SHRI SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA NO.140/MUM/10 (ASSESSMENT YEAR : 1997-98) ASST. COMMISSIONER OF INCOME TAX 11(2), AAYKAR BHAVAN, MUMBAI-400 020 VS. M/S. KANGA & CO., READY MONEY MNASION, 1 ST FLOOR, 43, VEER NARIMAN ROAD, MUMBAI-400 001. PAN AAAFK95225E APPELLANT. RESPONDENT. APPELLANT BY : SHRI P.K.B. MESON. RESPONDENT BY : SHRI P.J. PARDIWALA. O R D E R PER SHRI R.K. PANDA : THIS APPEAL FILED BY THE REVENUE IS D IRECTED AGAINST THE ORDER DT.30.10.2009 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI, MUMBAI RELATING TO THE ASSESSMENT YEAR 1997-98. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.14,93,833 ON ACCOUNT OF REPAIRS TREATED BY THE A SSESSING OFFICER AS CAPITAL EXPENDITURE WITHOUT ANALYZING THE NATURE OF EXPENSES CLAIMED BY THE ASSESSEE, AS HAS BEEN DONE BY THE HO NBLE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1993-94 AN D 1994-95. ITA NO.140/MUM//10 - 2 - 2.1 THIS IS THE SECOND ROUND OF LITIGATION BEFORE T HE TRIBUNAL. THE FACTS IN BRIEF ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE PROFESSION OF ADVOCATES, SOLICITORS AND NOTARIES. THE ASSESSEE-FIRM HAD CLA IMED RS.32,94,590 AS REVENUE EXPENSES UNDER THE HEAD REPAIRS AND MAINTENANCE. OUT OF THE ABOVE, THE A.O. TREATED AN AMOUNT OF RS.30,12,570 AS CAPITAL E XPENDITURE WHICH WAS CONFIRMED BY THE LEARNED CIT(A). ON FURTHER APPEAL , THE TRIBUNAL REMANDED THE MATTER TO THE FILE OF ASSESSING OFFICER TO RECO NSIDER THE ISSUE OF REPAIRS AND MAINTENANCE EXPENSES IN THE LIGHT OF THE PRINCIPLES LAID DOWN IN TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASST.YEARS 199 2-93 TO 1996-97. 3. SUBSEQUENTLY, THE A.O. ASKED THE ASSESSEE TO FUR NISH THE DETAILS OF EXPENDITURE WITH COPIES OF BILLS, LEDGER ACCOUNTS, ETC. AFTER VERIFICATION OF THE DETAILS, THE A.O. TREATED AN AMOUNT OF RS.14,93,833 AS CAPITAL IN NATURE, THE DETAILS OF WHICH ARE AS UNDER : SL. NO. NAME OF AGENCY ITEM RS. 1. STERLING DECORATORS LABOUR CHARGES FOR REPAIRS OF PARTITIONS RUNNING COUNTERS, STORAGES, UNDER STORAGES, ABOVE STORAGES, TABLES, MISC. CARPENTRY REPAIR WORK, BEAMS COLUMNS & LEVELING OF EXISTING FLOORS, STAIRCASE, XEROX PRINTER, ABOVE AND UNDER STORAGE IN XEROX ROOM, ETC. 6,12,056.35 MATERIAL USED FOR ABOVE MENTIONED WORK. 5,70,404 .00 2. CHINAI SHAH RANADIVA PROFESSIONAL CHARGES. 3,11,373.00 TOTAL : 14,93,833.35 THE ASSESSING OFFICER, HOWEVER, ALLOWED DEPRECIATIO N ON THE ABOVE. ITA NO.140/MUM//10 - 3 - 4. BEFORE THE LEARNED CIT(A), THE ASSESSEE FURNISHE D THE COPY OF THE ORDER OF THE TRIBUNAL FOR THE ASST. YEARS. 1992-93 TO 199 6-97 AND ARGUED THAT IN VIEW OF THE PRINCIPLES LAID DOWN THEREIN THE EXPENDITURE HAS TO BE TREATED AS REVENUE IN NATURE. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE LEARNED CIT(A) TREATED THE AMOUNT OF RS.14,93,833 AS REVENU E IN NATURE. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVENUE IS IN APPE AL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS ADVANCED BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT (A) AND HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS 1992-93 TO 1996-97. WE HAVE ALSO CONSIDERED THE DECISION O F THE HONBLE BOMBAY HIGH COURT (PANAJI BENCH) IN THE CASE OF CIT VS. H EDE CONSULTANCY (P) LTD. (2002) 258 ITR 380 (BOM) AND AS RELIED ON BY THE LE ARNED COUNSEL FOR THE ASSESSEE TO THE PROPOSITION THAT EXPENDITURE ON CO NVERSION OF GODOWN TAKEN ON LEASE INTO OFFICE PREMISES IS REVENUE EXPENDITURE. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE HAS TREATED THE REPAIR OF LIFT, REPLACEMENT OF SMALLER LIFT BY A LARGER LIFT, REPAIRS OF FLOORING AND MAKING OF LIFT , ETC. AS REVENUE IN NATURE BY FOLLOWING THE DECISION IN THE CASE OF CIT VS. MADRA S AUTO SERVICES PVT. LTD. 233 ITR 468 (SC). THE TRIBUNAL IN THE SAID DECISIO N, HOWEVER, HAS ALSO HELD THAT EXPENDITURE RELATING TO MAKING OF BOOK SHELF I S CAPITAL IN NATURE AND DIRECTED THE A.O. TO ALLOW DEPRECIATION ON THE SAME . FOR THE IMPUGNED ASSESSMENT YEAR, WE FIND FROM THE NATURE OF EXPENSE S INCURRED BY THE ASSESSEE THAT THE SAME IS TOWARDS REPAIRS OF PARTITIONS, RU NNING COUNTERS, STORAGES, UNDER STORAGES, ABOVE STORAGES, TABLES, MISC. CARPENTRY R EPAIR WORK, BEAMS COLUMNS AND LEVELING OF EXISTING FLOORS, STAIRCASE, ETC. F ROM THE ABOVE, WE FIND THE EXPENSES INCLUDE TABLES, STORAGES, UNDER STORAGES, ABOVE STORAGES, ETC WHICH ARE CAPITAL IN NATURE. THEREFORE, THE ENTIRE AMOUNT IN OUR OPINION CANNOT BE ALLOWED ITA NO.140/MUM//10 - 4 - AS REVENUE EXPENDITURE. SINCE THE ASSESSEE HAS NOT GIVEN ANY BIFURCATION OF THE SAME, 20% OF THE ABOVE EXPENSES IN OUR OPINION, SHO ULD BE TREATED AS CAPITAL IN NATURE AND BALANCE 80% SHALL BE TREATED AS REVENUE IN NATURE. THE A.O. IS DIRECTED TO ALLOW DEPRECIATION ON THE CAPITAL EXPEN DITURE. WE HOLD & DIRECT ACCORDINGLY. IN THE RESULT THE REVENUES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.7.2011. SD/- SD/- (D. MANMOHAN) (R.K. PANDA) VICE PRESIDENT ACCO UNTANT MEMBER MUMBAI, DT.08-07-2011. *GPR TRUE COPY COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, MUMBAI. 6. GUARD FILE. BY ORDER DY./ASST.REGISTRAR, ITAT, MUMBAI