Suraj Agro Infrastructure (India) Private Limited , CHENNAI V. ACIT Corporate Circle 2, Coimbatore

ITA 1591/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5964 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 21-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S SWAMINATHAN
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1591/MDS/2017 ( )( / ASSESSMENT YEAR : 2014-15 M/S SURAJ AGRO INFRASTRUCTURE (INDIA) PVT. LTD., 86, WEST PERIASAMY ROAD, R.S. PURAM, COIMBATORE 641 002. PAN : AABCV 2793 D V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, COIMBATORE 641 018. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI S. SWAMINATHAN, CA -.+, / 0 / RESPONDENT BY : MS. S. VIJAYAPRABHA, JCIT 1 / 2% / DATE OF HEARING : 26.09.2017 3') / 2% / DATE OF PRONOUNCEMENT : 13.10.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, COIMBA TORE, DATED 29.03.2017 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF EXPENDITURE SAID TO BE INCURRED BY THE ASSESSEE TOW ARDS REPAIRS 2 I.T.A. NO.1591/MDS/17 AND MAINTENANCE OF ROAD INSIDE THE PORT TRUST, TO T HE EXTENT OF ` 51,59,865/-. 3. SHRI S. SWAMINATHAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING STORAGE FACILITIES IN VARIOUS PORTS AC ROSS THE COUNTRY, INCLUDING JAWAHARLAL NEHRU PORT TRUST, MUMBAI AND C HENNAI PORT TRUSTS, ETC. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE IN FACT TOOK LAND ON LEASE FROM THE PORT AND BUILT UP STORAGE FACILITIES UNDER BUILT, OPERATE, LEASE AND TRANSFER SCHEME. A CCORDING TO THE LD. REPRESENTATIVE, AS PER AGREEMENT WITH PORT AUTH ORITIES, AFTER EXPIRY OF LEASE PERIOD, THE LAND TAKEN ON LEASE HAS TO BE RETURNED IN THE SAME CONDITION AS IT WAS TAKEN INITIALLY. ACCO RDING TO THE LD. REPRESENTATIVE, THE STORAGE FACILITIES ESTABLISHED BY THE ASSESSEE ON THE LEASE LAND CANNOT BE TAKEN AWAY BY THE ASSESSEE AFTER EXPIRY OF LEASE PERIOD. MOREOVER, THE PORT TRUST WILL NOT CO MPENSATE THE ASSESSEE FOR LEAVING THE STORAGE FACILITIES AT THEI R PREMISES. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE CUSTOMERS OF THE ASSESSEE ARE MAINLY EXPOR TERS AND IMPORTERS. THE CUSTOMERS TRANSFER THEIR GOODS FROM THE FACTORY AND STORE IT IN THE FACILITIES ESTABLISHED BY THE ASSES SEE FOR STORAGE 3 I.T.A. NO.1591/MDS/17 BEFORE IT WAS LOADED IN THE SHIP. ACCORDING TO THE LD. REPRESENTATIVE, THE STORAGE FACILITIES ESTABLISHED BY THE ASSESSEE INCLUDED TANKS FOR STORAGE OF OIL, BUILDING FOR STO RAGE OF OTHER MATERIAL AND APPROACH ROAD. HUNDREDS OF LORRIES US ED TO MOVE IN AND OUT IN THE PREMISES DURING LOADING / UNLOADING PROCESS. ACCORDING TO THE LD. REPRESENTATIVE, DUE TO MOVEMEN T OF HEAVY VEHICLES, THE ROADS BECAME DAMAGED DUE TO WEAR AND TEAR. THE ASSESSEE IS UNDER THE OBLIGATION TO MAINTAIN GOOD I NFRASTRUCTURE FACILITIES, INCLUDING ROADS, FOR SMOOTH RUNNING OF LORRIES. ACCORDING TO THE LD. REPRESENTATIVE, THE ROAD AT JAWAHARLAL N EHRU PORT AT MUMBAI WAS DAMAGED VERY BADLY, THEREFORE, THE ASSES SEE EXCAVATED THE SOIL, PUT SOME CONCRETE AND RELAYED T HE PAVEMENT BLOCKS. ACCORDING TO THE LD. REPRESENTATIVE, PCC W AS ALSO REQUIRED TO HAVE GRIP BETWEEN THE LOOSE SOIL AND PAVEMENT BL OCK. THE ASSESSEE, IN FACT, INCURRED ` 51,59,865/- FOR MAINTAINING THE ROAD. 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT EVEN THOUGH N O NEW ASSET CAME INTO EXISTENCE, THE WORK CARRIED BY THE ASSESS EE TO CONDUCT THE BUSINESS EFFECTIVELY HAVE A ENDURING BENEFIT. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER 4 I.T.A. NO.1591/MDS/17 DISALLOWED THE CLAIM OF THE ASSESSEE AND ALLOWED DE PRECIATION AT 5%. ACCORDING TO THE LD. REPRESENTATIVE, THE MOMEN T THE FACILITIES WERE ESTABLISHED AND EXPENDITURE WAS INCURRED FOR E FFECTIVELY CARRYING ON THE BUSINESS IN THE PROCESS OF EARNING PROFIT, THE SAME HAS TO BE ALLOWED AS REVENUE EXPENDITURE. ACCORDIN G TO THE LD. REPRESENTATIVE, THE EXISTING OF ROAD WAS MAINTAINED FOR THE PURPOSE OF SMOOTH RUNNING OF HEAVY VEHICLES, THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE CLAIM O F THE ASSESSEE. THE CIT(APPEALS) WITHOUT APPRECIATING THE FACTS, CONFIR MED THE ORDER OF THE ASSESSING OFFICER. 6. ON THE CONTRARY, MS. S. VIJAYAPRABHA, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE EXPENDITURE INCU RRED BY THE ASSESSEE FOR EARTH WORK, LAYING OF SAND, LAYING PAR SE BLOCK, LAYING OF CONCRETE YARD ARE IN THE NATURE OF CAPITAL EXPENDIT URE. THE ASSESSING OFFICER FOUND THAT EVEN THOUGH NO NEW ASS ET CAME INTO EXISTENCE, IT FACILITATED TO CONDUCT THE BUSINESS E FFICIENTLY. HENCE, ACCORDING TO THE LD. D.R., THE ASSESSEE DERIVED END URING BENEFIT, THEREFORE, THE EXPENDITURE HAS TO BE CAPITALIZED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN 5 I.T.A. NO.1591/MDS/17 DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF PROVIDING STORAGE FACILITIES AT PORT TRUST. THE ASSESSEE CRE ATED INFRASTRUCTURE FACILITIES FOR STORAGE AND ALSO ESTABLISHED ROAD FO R MOVEMENT OF HEAVY VEHICLES FOR TRANSPORTATION OF GOODS. SINCE THE ASSESSEE FOUND THAT THE ROAD ESTABLISHED WAS BADLY DAMAGED, IN ORDER TO MAINTAIN SMOOTH MOVEMENT OF HEAVY VEHICLES, THE ASS ESSEE REPAIRED THE ROAD BY RELAYING THE SAME. IN THE PRO CESS, THE ASSESSEE INCURRED AN EXPENDITURE OF ` 51,59,865/-. IT IS ALSO NOT IN DISPUTE THAT BY INCURRING THE EXPENDITURE, THE ASSE SSEE HAS NOT ESTABLISHED ANY NEW ASSET. IN OTHER WORDS, NO NEW ASSET CAME INTO EXISTENCE. UNLESS THE ASSESSEE MAINTAINS THE ROAD PROPERLY, THE ASSESSEE CANNOT CARRY OUT THE BUSINESS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF MAINTAINING THE EXISTING ROAD IN ORDER T O CARRY ON THE BUSINESS EFFICIENTLY AND EFFECTIVELY IN THE PROCESS OF RUNNING OF THE BUSINESS. THEREFORE, THE EXPENDITURE INCURRED BY T HE ASSESSEE IS IN THE REVENUE FIELD. HENCE, THE LOWER AUTHORITIES AR E NOT JUSTIFIED IN TREATING THE SAME AS CAPITAL EXPENDITURE. 8. IN VIEW OF THE ABOVE, WE ARE UNABLE TO UPHOLD TH E ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES 6 I.T.A. NO.1591/MDS/17 BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DI RECTED TO ALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE FOR MAINTA INING THE ROAD, TO THE EXTENT OF ` 51,59,865/- AS REVENUE EXPENDITURE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 13 TH OCTOBER, 2017 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 13 TH OCTOBER, 2017. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT-1, COIMBATORE 5. 7: -2 /DR 6. ( ; /GF.