DCIT 24(3), MUMBAI V. M/S. GENERAL COMPUTER SERVICES INTERNATIONAL, MUMBAI

ITA 1451/MUM/2011

• Counselvise Citation: 145119914 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: DR K SHIVRAM; RAHUL SARDA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & VIVEK VARMA , J M ITA NO. 1328 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 5 - 0 6 ) DCIT - 24(3), MUMBAI - 51 VS. M/S GENERAL COMPUTER SERVICES, INTERNATIONAL ST. JOHN SCHOOL, S.V.ROAD, DILARAM ESTATE, GOREGAON(W), MUMBAI - 400 062 PAN/GIR NO. : A ABPG 2220 P ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 1451 / MUM/20 1 1 ( ASSESSMENT YEAR :2005 - 0 6 ) DCIT - 24(3), MUMBAI - 51 VS. M/S GENERAL COMPUTER SERVICES, INTERNATIONAL ST. JOHN SCHOOL, S.V.ROAD, DILARAM ES TATE, GOREGAON(W), MUMBAI - 400 062 PAN/GIR NO. : A ABPG 2220 P ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI PAVAN KUMAR BEERLA /ASSESSEE BY : DR. K SHIVRAM & R AHUL SARDA DATE OF HEARING : 1 3 TH NOVEMBER , 201 4 DATE OF PRONOUNCEMENT 19 TH NOVEMBER , 201 4 O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR A.Y 200 5 - 0 6, IN THE MATTER OF ORDER PASSED U/S.143(3) & U/S.271(1)(C) OF THE ACT. ITA NO S . 1328 & 1451 /1 1 2 2. IN ITA NO.1328/MUM/2011 , THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) FOR DELETING ADDITION OF RS.25,45,850/ - BY TREATING THE SAME AS REVENUE EXPENDITURE AS A GAINST ACTION OF THE AO FOR TREATING THE SAME AS CAPITAL EXPENSES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT WHILE PASSING ORDER U/S.143(3), THE AO DISALLOWED THE REPAIR EXPENSES INCURRED ON BUILDING. THE AO OBSERVED THAT THE ASSESSEE HAS CAPITALIZED AN AMOUNT OF RS. 57,00,500/ - AND CLAIMED DEPRECIATION ON THE SAME AND AN AMOUNT OF RS.25,45,850/ - WAS DEBITED UNDER THE HEAD REPAIR IN THE PROFIT AND LOSS ACCOUNT. AS PER THE AO, THESE EXPENSES ARE CAPITAL IN NATURE, THEREF ORE, HE DISALLOWED THE SAME. IN THE FIRST ROUND, THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF THE CIT(A). T HE CIT(A) IN THE SECOND ROUND DELETED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATIONS : - 2.4 I HAVE GONE THROUGH THE CONTENTS O F IMPUGNED ASSESSMENT ORDER. GROUNDS OF APPEAL AND ARGUMENTS & SUBMISSIONS OF THE APPELLANTS AUTHORISED REPRESENTATIVE ALONG WITH THE CASE LAWS RELIED UPON BY HIM ON THIS ISSUE. I FIND THAT THE ASSESSING OFFICER HAS REJECTED THE EXPLANATION OFFERED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS AND TREATED THE WORK OF WATER PROOFING AND RE - PLASTERING WORK, REDOING OF DRAINAGE PLUMBING, WASTE WATER LINE, SOLID WASTE LINE RAIN WATER LINE AND REMOVAL OF OLD PIASTER ETC TO BE CAPITAL IN NATURE AS ACCORDING TO HIM THE APPELLANT COULD HAVE NOT CARRIED OUT THE WORK OF RE - PLASTERING UNTIL AND UNLESS THE OLD PLASTERS HAD BEEN REMOVED. HE OPINED THAT LIKEW I SE OTHER EXPENSES WHICH THE ASSESSEE CLAIMED IN THE GARB OF REPAIRS ARE DIRECTLY CONNECTED WITH THE EXPENDIT URE WHICH THE ASSESSEE HAD CAPITALIZED. THE OTHER REASON GIVEN BY THE ASSESSING OFFICER IS THAT MOST OF THE WORK 15 DONE BY THE SAME CONTRACTORS AND THEREFORE, HE DISALLOWED RS.25,45,850/ - OUT OF RS.88.31,850/ - AND ALLOWED THE DEPRECIATION THEREON BY TREA TING IT TO BE CAP I TAL EXPENDITURE 2.4 I FURTHER FIND THAT THE EXPENSES TREA T ED AS CAPITAL IN NATURE BY THE ASSESSING OFFICER SUCH AS JACKETING OF OLD AND DILAPIDATED PILLARS OF THE BUILDING, REDOINQ OF DRAINAGE IN THE PREMISE, REDOING THE PLUM B ING OF COM PLETE BUILDING, REDOING TILE WATER WASTE LINE OF COMPLETE B UILDING, REDOING THE SOLID WASTE WE LINES OF COMPLETE BUILDI NG, REDOING THE RAIN WATER LINE, REMOVING THE OLD PLASTER AND ITA NO S . 1328 & 1451 /1 1 3 EXTERNAL REPLUMBIN G WORK AND FOR DOING EXTERNAL CHAJJA (TERRACE) WATER WORK CANNOT BE SAID TO GENERATE CAPITAL ASSET OF ENDURING NATURE INDEPENDENTLY. THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THE IMPUGNED EXPENSES AND HAS NOT DISTURBED FIGURES OF THESE EXPENSES . THERE IS NO FINDING OF FACT IN THE IMPUGNED ASSESSME NT ORDER THAT SUCH EXPENSES HAVE NOT BEEN INCURRED FOR THE RESPECTIVE WORK OF THE SAME DESCRIPTION AS CLA IMED. SIMPLY BECAUSE THE ASSESSI NG OFFICER HAS HIS OWN IDEAS ABOUT RE - PLASTERIN G AND PAINTING OF SOME AREAS ETC., THE IMPUGNED ADDITION MADE BY THE ASS ESSING OFFICER WOULD NOT BECOME JUS TIFIED BY TREATING IT AS CAPITAL EXPENDITURE AND PROVI DING DEPRECIATION THEREON. THUS I FIND FORCE IN THE ARG UMENTS AND SUB M ISS I ONS OF THE ID. AUTHORIZED REPRESENTATIVE T H AT THE IMPUGNED EXPENSES COULD HAVE NOT TREATED AS CAPITAL EXPENDITURE IN VIEW OF THE VARIOUS CASE LAWS RELIED UPON BY HIM AND THE CLAIM OF R EVENUE EXPENDITURE COULD HAV E N O T BEEN REJEC TED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER. ACCORDINGLY , IN VIEW OF THE ABOVE DISCUSSION AND IN THE F ACTS AND CIRCUMSTANCES OF THE INSTANT CASE THE IMPUGNED EXPENDITURE IS TREATED AS CURRENT REPAIRS AND ALLOWED AS REVENUE EXPENDITURE THE ASSESSING OFFICER IS DIRECTED TO WITHDRAW THE DEPRECIATION ALLOWED ON THIS ISSUE ACCORDINGLY. 4 . WE HAVE CONSIDERED R IVAL CONTENTIONS, F ROM THE RECORD, WE FOUND THAT ASSESSEE HAS GIVEN COMPLETE LIST OF EXPENDITURE INCURRED ON REPAIRS AND MAINTENANCE ALONG WITH COMPLETE DESCRIPTION OF THE WORK DONE. WE FOUND THAT THE EXPENDITURE WAS INCURRED ON REMOVING OLD PLASTER, REDOI NG OF DRAINAGE SYSTEM, REDOING THE SOLID WASTE WC LINES OF COMPLETE BUILDING, REDOING OF RAIN WATER LINE ETC. LOOKING TO THE NATURE OF THESE EXPENSES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR TREATING THE SAME WAS REVENUE IN NATURE. MERELY B ECAUSE WORK OF REPAIR WAS CARRIED OUT BY THE SAME CONTRACTOR AND THAT EXPENSES CLAIMED AS REPAIR ARE DIRECTLY CONNECTED TO THE EXPENDITURE CAPITALIZED, THE SAME CANNOT BE TREATED AS CAPITAL EXPENDITURE WHEN THE NATURE OF THE EXPENDITURE SO INCURRED CLEARLY INDICATES THE SAME AS REVENUE IN NATURE. AFTER APPLYING VARIOUS PROPOSITION OF LAW LAID DOWN IN JUDICIAL PRONOUNCEMENT S , THE CIT(A) CAME TO THE CONCLUSION THAT EXPENDITURE IN QUESTION WAS REVENUE ITA NO S . 1328 & 1451 /1 1 4 IN NATURE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND, THEREFORE, WE DISMISS THE APPEAL OF THE REVENUE. 5. IN ITA NO.1451/MUM/2011 , THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING THE PENALTY LEVIED U/S.271(1)(C) AMOUNTING TO RS.9,31,590/ - . THE CIT(A) DELETED THE PENALTY ON THE GROUND THAT QUANTUM APPEAL OF THE ASSESSEE HAS ALREADY BEEN ALLOWED. AS WE HAVE UPHELD THE ORDER OF THE CIT(A) FOR TREATING THE EXPENSES AS REVENUE IN NATURE, THE PENALTY SO IMPOSED FOR SUCH DISALLOWANCE HAS NO LEGS TO STAND. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY. 6 . IN THE RESULT, BOTH APPEAL S OF THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 /11/ 201 4 . 19 /11/ 2014 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUN TANT MEMBER MUMBAI ; DATED 19 / 11 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//