ACIT, Ludhiana V. M/s Garyson Motors Pvt. Limited, Ludhiana

ITA 171/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80916 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 171/CHD/2014 ASSESSMENT YEAR : 2007-08 THE A.C.I.T., VS. GARYSON MOTORS PVT. LIMITED CIRCLE 1, SHERPUR CHOWK, G.T. ROAD, LUDHIANA. LUDHIANA. PAN: AABCG6317N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S.NAGAR, DR RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 25.09.2014 DATE OF PRONOUNCEMENT : 29.09.2014 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED CIT (APPEALS)-II, LUDHIANA DAT ED 20.12.2013 FOR ASSESSMENT YEAR 2007-08 CHALLENGING THE ORDER OF THE LEARNED CIT (APPEALS) IN ALLOWING A SUM OF RS.13,98,739/- OUT OF BUILDING REPAIR EXPENSES BY H OLDING THE SAME TO BE REVENUE IN NATURE. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TED THAT THE BILLS OF BUILDING REPAIR AND MAINTENANCE INCLUD ED THE BILLS FOR CC FLOORING, VITRIFIED FLOORING AND BILLS RELAT ING TO BOUNDARY WALL. THE ASSESSING OFFICER ASKED THE AS SESSEE WHY THESE EXPENSES MAY NOT BE CAPITALIZED. THE ASSESS EE 2 SUBMITTED THAT THESE BILLS PERTAINED TO REPAIR OF D AMAGED FLOOR AND BOUNDARY WALL ON ACCOUNT OF NORMAL WEAR AND TEA R AND ON ACCOUNT OF WATER ACCUMULATION. THE ASSESSING OFFI CER WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE AND HE LD THESE EXPENSES TO BE CAPITAL IN NATURE ON WHICH DEPRECIAT ION WAS ALLOWED AND ADDITION WAS ACCORDINGLY MADE. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEARNED CIT (APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSE E IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSE SSEE EXPLAINED THAT THE ASSESSEE COMPANY REQUIRE CC FLOO RING IN WORKSHOP BECAUSE THE FLOOR OF THE WORKSHOP GOT DAMA GED DUE TO RUNNING OF VEHICLES IN THE WORKSHOP. IT WAS NO RMAL WEAR AND TEAR. REGARDING REPAIR OF VITRIFIED FLOORING IN THE SHOWROOM, IT WAS EXPLAINED THAT IT WAS ALSO NORMAL WEAR AND TEAR OF FLOORING OF SHOWROOM WHICH GOT DAMAGED DUE TO MOVEMENT OF THE VEHICLES LYING IN THE SHOWROOM FOR DISPLAY PURPOSE AND TILES GOT DEFACED DUE TO MOVEMENTS OF V ISITORS AND STAFF MEMBERS. IT WAS ALSO SUBMITTED THAT THE BACKSIDE WALL GOT DAMAGED DUE TO LOW LYING AREA ON THE BACK OF THE BOUNDARY WALL AND DUE TO RAIN WATER IT GOT DAMAGED. IT WAS ALSO SUBMITTED THAT THE ASSESSEE COMPANY HAD SOLD 2 173 VEHICLES DURING THE YEAR UNDER CONSIDERATION AND TH E ASSESSEE IS IN THIS LINE OF TRADE FOR THE LAST MORE THAN FIV E YEARS. WITH THE PASSAGE OF TIME AND HEAVY ENGINEERING WORK BEIN G CARRIED OUT IN THE WORKSHOP, THE FLOORING AND BOUNDARY WALL GOT DAMAGED. THE BOUNDARY WALL OF THE SHOWROOM OF THE ASSESSEE IS ADJACENT TO RAILWAY TRACK AND DUE TO HEAVY TRAFF IC MOVEMENT, THE BOUNDARY WALL GOT DAMAGED. IT WAS, THEREFORE, 3 SUBMITTED THAT THESE EXPENSES WERE INCURRED ON REPA IRS AND NO NEW ASSET IS CREATED. THE LEARNED CIT (APPEALS ) CONSIDERING THE EXPLANATION OF THE ASSESSEE HELD TH AT THE EXPENSES WERE REVENUE IN NATURE AND ACCORDINGLY, DE LETED THE ADDITION. THE FINDINGS OF LEARNED CIT (APPEALS) I N PARA 3.4 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 3.4 I HAVE CAREFULLY CONSIDERED HE APPELLANTS SUBMISSIONS. THE EXPENSES CAPITALIZED BY HE AO PE RTAIN TO REPAIR OF FLOOR, VITRIFIED AND BOUNDARY WALL. THE APPELLANT HAS SUBMITTED THAT THESE EXPENSES WERE INCURRED FOR REPAIR OF DAMAGED FLOOR AND BOUNDARY W ALL ON ACCOUNT OF NORMAL WEAR AND TEAR AND ON ACCOUNT OF W ATER ACCUMULATION. IT IS SEEN FROM THE FACTS DISCUSSED IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF HE AO THAT ALL THESE ASSETS ALREADY EXISTED AND NO NEW ASSET HAS C OME INTO EXISTENCE. THE EXPENSES WERE INCURRED FOR RE PAIR OF THESE EXISTING ASSETS. IN THESE CIRCUMSTANCES, TH E EXPENSES ARE REVENUE IN NATURE. THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF BALLIMAL NAVALKISHORE VS. CIT (1997) 224 ITR 414 REFERRED TO BY THE ASSESSING OFFICER ALSO SUPPORTS THE APPELLANTS CASE ON THIS ISSUE. THE HON'BLE SUPREME COURT REFERRED TO THE FOLLOWING: THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND IS THAT AS A RESULT OF THE EXPENSES WHICH IS CLAIMED AS AN EXPENSES FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITURE IS NOT TO BRING A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJ ECT THE OBTAINING OF A NEW OR FRESH ADVANTAGE. THIS C AN BE THE ONLY DEFINITION OF REPAIRS BECAUSE IT IS O NLY BY REASON OF THIS DEFINITION OF REPAIRS THAT THE EXPENDITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING 4 INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, THEN OBVIOUSLY SUCH AN EXPENDITURE WOULD NOT BE AN EXPENDITURE OF A REVENUE NATURE BUT IT WOULD BE A CAPITAL EXPENDITURE, AND IT IS CLEAR THA T THE DEDUCTION WHICH THE LEGISLATURE HAS PERMITTED UNDER SECTION 10(2)(V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE WITHOUT ANY JUSTIFICATION. IN THESE FAC TS AND CIRCUMSTANCES OF THE ASSESSEE, THESE EXPENSES ARE ALLOWABLE AS REVENUE EXPENSES. AS SUCH DISALLOWAN CE MADE BY THE ASSESSING OFFICER IS DELETED. THIS GR OUND OF APPEAL IS ACCORDINGLY ALLOWED. THE ASSESSING OFFIC ER IS ALSO DIRECTED TO WITHDRAW ANY DEPRECIATION ALLOWED IN SUBSEQUENT YEARS ON ACCOUNT OF CAPITALIZATION OF TH ESE EXPENSES. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTS APPEAL. THE ASSESSE E IS DRIVING INCOME FROM TRADING OF TELCO CARS, REPAIR A ND SALE OF SPARE PARTS. THE VOLUME OF WORK CONDUCTED BY THE ASSESSEE IN THE SHOWROOM AND WORKSHOP BY SELLING THOUSANDS O F VEHICLES DURING THE YEAR WOULD CLEARLY SUGGEST THAT THE FLOORING OF THE WORKSHOP AND BOUNDARY WALL GOT DAMA GED IN THE ORDINARY COURSE OF BUSINESS AND AS SUCH, THE NA TURE OF BUSINESS OF THE ASSESSEE WOULD CLEARLY REVEAL THAT THE SAME REQUIRES REPAIRS. IN THAT PROCESS, THERE WAS NO O BJECT OF THE ASSESSEE TO BRING NEW ASSETS INTO EXISTENCE AND NO CAPITAL ASSETS HAVE BEEN CREATED IN THIS WAY. THUS THE AS SESSEE HAD CARRIED OUT CURRENT REPAIRS IN THE WORKSHOP AND THE SHOWROOM WHICH WAS NECESSARY FOR CARRYING ON THE BUSINESS AN D AS 5 SUCH, THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN HO LDING THESE EXPENDITURE TO BE REVENUE IN NATURE. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH SEPTEMBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH