DATAMATICS FAINANCIAL SERVICES LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 1470/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9026 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 23-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Keywords: Business income; Depreciation; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) DATAMATICS FINANCIAL SERVICES LTD., PLOT NO.A 16/17, MIDC PART-B, CROSS LANE MAROL, ANDHERI MUMBAI-400093 PAN: AAACD2538D . APPELLANT VS DCIT 8(1), 2 ND FL. AAYAKAR BHAVAN, M K ROAD. MUMBAI-400020 RESPONDENT APPELLANT BY : SHRI SATISH R MODY RESPONDENT BY : SHRI R S SRIVASTA VA. O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A) DATED 11.12.2009 FOR THE ASSESSMENT YEARS 2004-05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO, ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS.7,75,000/0 BY THE AO, SINCE IT ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 2 IS CONTRARY TO THE FACTS OF THE CASE AND ARE NOT AS PER THE APPLICABLE PROVISIONS OF THE IT ACT, 1961; 2. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION ON LET OUT AND RESIDENTIAL PROPERTY OF RS.3,46,528/- AND THE ADDI TION OF NOTIONAL RENT OF RS.1,54,688/- BY THE AO, WHIC H IS CONTRARY TO THE FACTS OF THE CASE AND IS NOT AS PER THE APPLICABLE PROVISIONS OF THE ACT; 3. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.15,18,344/- ON ACCOUNT OF EXPENDITURE INCURRE D ON REPAIRS OF BUILDING MADE BY THE AO, WHICH IS CONTRARY TO THE FACTS OF THE CASE AND IS NOT AS PE R THE APPLICABLE PROVISIONS OF THE ACT; 4. THE LD. CIT(A) ERRED IN CONFIRMING TAXING OF REVENUE EXPENDITURE AS CAPITAL EXPENDITURE BY THE A O OF RS.68,859, SINCE IT IS CONTRARY TO THE FACTS OF THE CASE AND IS NOT AS PER THE APPLICABLE PROVISIONS OF THE ACT 3. GROUNDS OF APPEAL NO.1, REGARDING THE DISALLOWAN CE MADE BY THE AO, ON ACCOUNT OF BAD DEBTS AMOUNTING T O RS.7,75,000/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED AN AM OUNT OF RS.7,75,000/- IN THE PROFIT AND LOSS ACCOUNTS IN RE SPECT OF THE BAD DEBTS WRITTEN OFF. ACCORDINGLY, THE AO ISSUED S HOW CAUSE NOTICE CALLING UPON THE ASSESSEE TO FURNISH THE DET AILS REGARDING THE BAD DEBTS WRITTEN OFF. THE ASSESSEE VIDE LETTER DATED 4.08.2006 SUBMITTED THAT THE ASSESSEE DURING THE YEAR HAS WRITTEN OFF A N INTER CORPORATE DEPOSIT OF RS.7,75,500/- WHICH THE ASSESSEE HAD PLACED WITH M/S PITTIE CEMENT LTD. THE ICD ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 3 HAD BEEN PLACED SEVERAL YEARS BACK. FOR THE PAST S EVERAL YEAS, THE ASSESSEE HAD BEEN UNABLE TO RECOVER THE P RINCIPAL AMOUNT FROM THE SAID PARTY. ULTIMATELY, THE SAID C OMPANY HAS GONE INTO LIQUIDATION. CONSEQUENTLY, THE ASSESSEE H AS WRITTEN OFF THE PRINCIPAL AMOUNT AS IT IS NO LONGER RECOVER ABLE. THE AO DID NOT ACCEPT THE CONTENTION AND EXPLANATION OF TH E ASSESSEE AND HELD THAT THE ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING, THEREFORE, THE LOAN WRITTEN OFF CANNOT BE ALLOWED AS DEDUCTION U/S 36(I)(VII) OF THE ACT. AS FAR AS TH E ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE BAD DEBT WRITTE N OFF SHOULD BE ALLOWED AS DEDUCTION U/S 37(1) AS BUSINESSES EXP ENDITURE. THE AO HELD THAT THE CLAIM U/S 37(1) CAN BE ALLOWE D ONLY AN EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCL USIVELY FOR THE PURPOSES OF BUSINESS. THE LOAN ADVANCED BY TH E ASSESSEE TO M/S PITTIE CEMENT LTD. IS NOT WHOLLY A ND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. ACCORDING LY, THE AO DISALLOWED THE CLAIM OF THE BAD DEBTS AND MADE AN A DDITION OF RS.7,75,000/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADD ITION MADE BY THE AO. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 4 5. BEFORE US, THE LEARNED AR OF THE ASSESSEE HA SUBMITTED THAT AS PER THE MEMORANDUM OF ASSOCIATION , THE ASSESSEES OBJECT IS TO MAKE INTER CORPORATE DEPOS ITS. ACCORDINGLY, THE MONEY LENT BY WAY OF ICD TO M/S PITTIE CEMENT LTD. IS IN THE ORDINARY COURSE OF ASSESSE ES BUSINESS. HE HAS FURTHER SUBMITTED THAT THE INTERE ST ON THIS ICD WITH M/S PITTIE CEMENT LTD. WAS OFFERED AS BU SINESS INCOME BY THE ASSESSEE FOR THE EARLIER YEARS AND TH E AO HAS ACCEPTED THE SAME. THEREFORE, THE INTEREST INCOME FROM THE INTER CORPORATE DEPOSITS ARE ACCEPTED AS THE INCOM E OF THE ASSESSEE, THE SIMILAR IS THE CASE THAT THE DEBTS IS NOT RECOVERED AND NOT RECOVERABLE AND ON WRITING OFF TH E SAID LOAN AMOUNT SHOULD BE ALLOWABLE AS DEDUCTION U/S 36(1)( VII) OF THE ACT. 6. THE LEARNED AR HAS FURTHER SUBMITTED THAT THE A SSESSEE HAS BEEN GIVING THE LOAN UNDER ICD AND THEREFORE I T IS A PART AND PARCEL OF THE ASSESSEES MAIN BUSINESS. THUS, THE MAIN CONTENTION OF THE LEARNED AR IS THAT ONCE THE INTER EST ON THE ICD HAS BEEN ACCEPTED AS INCOME FROM THE BUSINESS T HEN THE CLAIM OF WRITTEN OF LOAN AMOUNT AS BAD DEBTS CANNOT BE DISALLOWED ON THE GROUND THAT THE ASSESSEE IS NOT I N THE BUSINESS OF MONEY LENDING. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 5 7. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEES BUSINESS IS DEALING IN COMPUTER DAT A PROCESSING, PRINTING, REGISTRAR AND SHARE TRANSFER AGENT, COMPUTER SOFTWARE DEVELOPMENT AND EXPORT OF IT EN ABLED SERVICES. THE MONEY ADVANCED TO M/S PITTIE CEMEN T LTD IS NOT UNDER THE ORDINARY COURSE OF BUSINESS OF THE AS SESSEE, THEREFORE, THE CLAIM OF BAD DEBTS CANNOT BE ALLOWED IN VIEW OF THE PROVISIONS OF SECTION 36(1)(VII) R.W.S.36(2) O F THE IT ACT. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORIT IES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEES M AIN BUSINESS IS IN COMPUTER DATA PROCESSING, PRINTING, REGISTRA R AND SHARE TRANSFER AGENT, COMPUTER SOFTWARE DEVELOPMENT AND EXPORT OF IT ENABLED SERVICES. MERELY BECAUSE THE ASSESSEE I S PERMITTED BY ITS MEMORANDUM OF ASSOCIATION TO GIVE INTER CORPORATE DEPOSITS / LOANS DOES NOT IPSO FACTO CHAN GE THE NATURE OF THE ISOLATED TRANSACTIONS OF INTER-CORPOR ATE DESPOTS. IT IS EVIDENT FROM THE RECORD THAT THE ASSESSEE IS NOT REGULARLY ADVANCING THE LOAN UNDER INTER CORPORATE DESPOTS BU T THESE ARE THE SOME ISOLATED TRANSACTIONS WHICH CANNOT BE TREATED AS REGULAR AND PRIMARY BUSINESS ACTIVITY OF THE ASSESS EE. THESE INTER CORPORATE DEPOSITS ARE MORE IN THE NATURE OF INVESTMENTS OF THE SURPLUS FUNDS BY THE ASSESSE E. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 6 THEREFORE, WHEN THE PROVISIONS OF TRANSACTIONS OF I NTER- CORPORATE DEPOSITS IS ONLY ONE OR TWO THE SAME CANN OT PARTAKE THE CHARACTER OF REGULAR BUSINESS ACTIVITY OF THE A SSESSEE. THE CIT(A) HAS DECIDED THE ISSUE IN PARAGRAPH 3.4 A S UNDER : 3.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ORDER OF THE AO, AND FACTS OF THE CASE A RE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF COMPUTER DATA PROCESSING, PRINTING REGISTERS AND SHARE TRANSFER AGENT AND COMPUTETR5 SOFTWARE DEVELOPMENT. THE APPELLANT COMPANY HAS ALSO ADVANCED THE LOANS OF RS.7,75,000/- TO THE COMPANY NAMED PITTEE CEMENT LTD IN EARLIER YEAR. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY HAS DEBITED AN AMOUNT OF RS.7,75,000/- TO THE PROFIT AND LOSS ACCOUNT AS BAD DEBTS. THE AO HAS MADE INVESTIGATION AND HELD THAT THE ADVANCING LOAN IS NOT THE BUSINESS OF THE ASSESSEE COMPANY BECAUSE THE COMPANY IS ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE EQUIPMENT AND DATA PROCESSING ETC. THE AO HAS ALSO HELD THAT SIN CE THIS LOAN WAS NOT INCIDENTAL TO THE BUSINESS OF THE ASSESSEE COMPANY, THEREFORE, IT WAS NOT ALLOWABLE A S PER THE PROVISIONS OF SECTION 36(1)(VII) R.W. SECT ION 36(2) OF THE IT ACT. IN THE ALTERNATIVE PLEA, TH E APPELLANT HAS ARGUED THAT IF IT IS NOT TREATED AS BAD DEBS, THEN DEDUCTION U/S 37(1) MAY BE ALLOWED. HOWEVER, THIS ARGUMENT IS ALSO REJECTED BY THE AO BY HOLDING THAT ONLY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ALLOWAB LE U/S 37(1) OF THE IT ACT. BEFORE ME, THE APPELLANT HAS GIVEN THE ARGUMENT THAT THE MONEY WAS LENT BY WAY OF ICD OF PITTEE CEMENT COMPANY LTD IN THE ORDINARY COURSE OF ITS BUSINESS AND ALSO RELIED DON THE DECISION OF HON. DELHI TRIBUNAL IN THE CASE OF GOETZE(INDIA)LTD (SUPRA). SECTION 36(1) (VII) AND 36(2) HAS LAID D OWN THE CONDITIONS THAT THE BAD DEBTS CLAIMED SHOULD HA VE BEEN SHOWN AS INCOME IN THE EARLIER YEAR AND SHOULD HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS AND ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 7 ALSO IT SHOULD HAVE BEEN INCIDENTAL TO THE BUSINESS OF THE CONCERNED COMPANY. FROM THE FACTS OF THIS CASE , IT IS CLEAR BEYOND ANY DOUBTS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND ITS EXPORTS. IT IS ALSO TRUE, THAT THE COMPANY IS NOT ENGAGED IN THE MONEY LENDING BUSINESS. A LOAN GIVEN TO M/S PITTEE CEMENT LTD CANNOT BE TREATED AS INCIDENTAL TO BUSINESS BECAUSE THE APPELLANT COMPANY HAS NOT SUBMITTED ANY EVIDENCE TO PROVE THAT IT HAS SHOWN INTEREST INCOME EARNED FROM THIS ADVANCE AS BUSINESS INCOME BEFORE THE AO AND BEFORE ME. THUS, THE FACTS OF THIS CASE ARE DISTINGUISHABLE TO THE DECISION RELIED UPON OF THE APPELLANT, THEREFORE, IT WILL NOT HELPFUL TO THE CO MPANY SECONDLY, THE ALTERNATIVE PLEA OF THE APPELLANT TH AT IT MAY BE ALLOWED THE DEDUCTION U/S 37(1) IS ALSO NOT ACCEPTABLE BECAUSE THE EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINES S. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT THE AO HAS RIGHTLY DISALLOWED RS.7,75,000/- THUS THE ORDER OF THE AO IS CONFIRME D AND GROUND OF APPEAL IS DISMISSED. 9. THE AO AS WELL AS THE CIT(A) HAVE GIVEN THE FIN DINGS OF THE FACT THAT THE MONEY ADVANCED BY THE ASSESSEE B Y WAY OF ICD IS NOT A REGULAR BUSINESS OF THE ASSESSEE AND T HE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF MONEY LE NDING AND WE DO NOT FIND ANY ERROR IN THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, WE CONFIRM THE ORDERS OF THE AO AND CI T(A). THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 8 10. THE SECOND GROUNDS OF APPEAL REGARDING, CONFIR MING THE DISALLOWANCE OF DEPRECIATION ON LET OUT AND RESIDE NTIAL PROPERTY OF RS.3,46,528/- AND THE ADDITION OF NOTI ONAL RENT OF RS.1,54,688/-. THE AO DISALLOWED THE DEPRECIATION ON LETTING OUT PROPERTY AND RESIDENTIAL PROPERTY OF RS.3,46,52 8/-. THE AO ALSO MADE ADDITION OF RS.1,54,688/- OF NOTIONAL RE NT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) WHO HAS CONFIRMED THE DISALLOWANCE AS WELL AS THE A DDITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS SHOWN THE INCOME FROM THE LETTING OUT PROPERTY AS INCOME FROM THE HOUSE PROPERTY AFTER CLAIMING THE MUNICIPAL TAX AND DEDUCTION U/S 24. THEREFORE, THE DEPRECIATION ON THE SAID PR OPERTY CANNOT BE ALLOWED. AS REGARDS THE NOTIONAL RENT, TH E CIT(A) HAS RECORDED THAT FOR THE ASSESSMENT YEAR 2003-04 T HIS GROUND HAS BEEN DECIDED AGAINST THE ASSESSEE AND THE ASSE SSEE DID NOT CHALLENGED THIS GROUND BEFORE THE APPELLATE AUT HORITY. 11. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMI TTED THAT SINCE THE PROPERTY IS PART OF THE BLOCK ASSETS , THE ASSESSEE IS ENTITLED FOR DEPRECIATION. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 9 12. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 13. AFTER CONSIDERING THE RIVAL CONTENTIONS AND REL EVANT RECORD, WE NOTE THAT WHEN THE ASSESSEE HIMSELF ADMI TTED THAT THE RENTAL INCOME IS INCOME FROM HOUSE PROPERTY AFT ER AVAILING THE BENEFIT OF MUNICIPAL TAXES AND OTHER DEDUCTIONS UNDER SECTION 24 OF THE ACT THEN THE DEPRECIATION IS NOT ALLOWABLE ON THE SAID PROPERTY. THE CIT(A) HAS DECIDED THE ISSUE OF NOTIONAL RENT AGAINST THE ASSESSEE FOR AY 2003-04 WHICH ATTEND THE FINALITY, THEN WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. THE CIT( A) HAS DECIDED THIS ISSUE IN PARAGRAPH 4.4 AS UNDER : 4.4 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, ORDER OF THE AO AND BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY HAS SHOWN RENTAL INCOME OF RS.2,70,410/- AFTER DEDUCTING MUNICIPAL TAXES AND DEDUCTION U/S 24 OF THE IT ACT. HOWEVER , THE APPELLANT HAS CLAIMED DEPRECIATION OF RS.3,46,528/- WHICH WAS DISALLOWED BY THE AO AS NO T ADMISSIBLE AS PER THE PROVISIONS OF SECTION 24. THE AO HAS ALSO ADDED NOTIONAL RENT IN RESPECT OF VACANT F LATS NO.C106 AND C107 ON THE BASIS OF ASSESSMENT YEAR 2003-04. THE AO HAS MENTIONED THAT AN AMOUNT OF RS.15,84,344/- WAS SHOWN AS EXPENDITURE INCURRED TOWARDS THE REPAIR OF THE BUILDING. HOWEVER, THE A O HAS NOT MADE ANY ADDITION ON THIS ACCOUNT. SO FAR A S, THE DEPRECIATION OF RS.3,46,528/- IS CONCERNED, I A M FULLY AGREE WITH THE AO THAT IT IS NOT ALLOWABLE FO R HE INCOME COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PER THE SECTION 24 OF THE ACT. THUS, THE ADDITION MADE BY THE AO IS CONFIRMED. SECONDLY, THE AO HAS MADE ADDITION OF RS.154,688/- ON ACCOUNT OF NOTIONAL RENT OF VACANT FLATS NO. C10 6 AND C107 ON THE BASIS OF ASSESSMENT YEAR 2003-04. I HAVE PERUSED THE ORDER OF THE LD. CIT(A) AND HON. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 10 TRIBUNAL OF THE AY 2003-04. THIS GROUND WAS NOT CONTENDED BEFORE THE APPELLATE AUTHORITY. IT SHOWS THAT THE APPELLANT COMPANY HAS ACCEPTED THIS ADDITION MADE FOR THE AY 2003-04. KEEPING IN VIEW THIS FACT, THE DECISION OF THE AO FRO MAKING THIS ADDITION AS NOTIONAL RENT OF THE VACANT FLAT IS UPH ELD. 14. FROM THE FINDINGS OF THE CIT(A), IT IS CLEAR T HAT THE ASSESSEE HAS NO CASE IN RESPECT OF THE CLAIM OF DEP RECIATION AS WELL AS NOTIONAL RENT. ACCORDINGLY, GROUND NO.2 IS DISMISSED. 15. THE THIRD GROUNDS OF APPEAL IS REGARDING, CON FIRMING THE ADDITION OF RS.15,18,344/- ON ACCOUNT OF EXPENDITUR E INCURRED ON REPAIRS OF BUILDING. THE ASSESSEE CLAIMED AN EX PENDITURE OF RS.15,18,344/- TOWARDS THE REPAIRS OF BUILDING. THE AO HAS NOT DISALLOWED THIS EXPENDITURE WHILE COMPLETING TH E ASSESSMENT BUT THE CIT(A) HAS NOTICED THAT THE SAI D EXPENDITURE IS NOT ALLOWABLE AND ACCORDINGLY, HE HA S PROPOSED TO ENHANCE THE ASSESSMENT IN RESPECT OF THE CLAIM O F REPAIRS OF BUILDING. ACCORDINGLY, THE CIT(A) HAS MADE AN ENHANCEMENT OF RS.15,18,344/- BEING THE EXPENDITUR E INCURRED TOWARDS REPAIRS OF BUILDING AND DISALLOWED . 16. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMI TTED THAT THE SAID EXPENDITURE IS REGARDING THE OFFICE B UILDING AND NOT FOR THE BUILDING LET OUT. ACCORDINGLY, THE CIT (A) HAS ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 11 COMMITTED AN ERROR IN ENHANCING AND DISALLOWING THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SAME CANNOT BE ALLOWED AGAINST THE LET OUT BUILDING FROM WHICH RENTAL INC OME HAS BEEN SHOWN BY THE ASESEEE. 17. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UP ON THE ORDER OF THE CIT(A). 18. AFTER CONSIDERING THE RIVAL CONTENTIONS AND REL EVANT, WE NOTE THAT THE AO HAS NOT DISCUSSED THIS ISSUE AND THEREFORE NO DISALLOWANCE WAS MADE. THE CIT(A) HAS DISALLOWE D THE EXPENDITURE TO THE EXTENT OF ENHANCEMENT WAS MADE. . THUS, IT IS NOT CLEAR FROM THE RECORD, WHETHER THIS EXPEN DITURE WAS INCURRED FOR THE OFFICE BUILDING OR OTHER HOUSE PRO PERTY. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF T HE AO FOR DECIDING AFRESH AFTER VERIFICATION AND EXAMINATION OF THE RECORD. NEEDLES TO SAY THAT THE AO SHALL GIVE F AIR AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFOR E PASSING THE DENOVO ORDER ON THIS ISSUE. THIS GROUND IS AL LOWED FOR STATISTICAL PURPOSES. 19. THE FOURTH GROUNDS OF APPEAL IS REGARDING CONFI RMING TAXING OF REVENUE EXPENDITURE AS CAPITAL EXPENDITUR E BY THE ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 12 AO OF RS.68,859. THE AO DISALLOWED THE EXPENDITUR E OF RS.68,859/- BY TREATING THE SAME AS CAPITAL EXPENDI TURE. 20. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISAL LOWANCE MADE BY THE AO. 21. WE HAVE HEARD THE LEARNED AR AND LEARNED DR AN D CONSIDERED THE RELEVANT RECORD. WE NOTE THAT THE AO IN PARAGRAPH 8.3 RECORDED THE DETAILS OF EXPENDITURES AS UNDER : I FIRE EXTINGUISHER RS.4,950 II CARPET RS.24,127 III CEILING FANS RS.13,125 IV FABRICATOR-GRILLS, ETC RS.21,157 V FABRICATOR-GRILLS ETC RS.5,500 TOTAL RS.68,859 22. FROM THE DETAILS OF THE ABOVE EXPENDITURE IT I S CLEAR THAT THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE F OR ACQUIRING CERTAIN ARTICLES WHICH ARE CAPITAL IN NAT URE. THEREFORE, THE EXPENDITURE CANNOT BE ALLOWED AS REV ENUE EXPENDITURE. ACCORDINGLY, WE UPHOLD THE ORDER OF T HE AUTHORITIES BELOW QUA THIS ISSUE. ITA NO. 1470/MUM/2010 (ASSESSMENT YEAR: 2004-05) 13 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 07.1.2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 7 TH DAY OF JAN 2011 SRL:241210 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI