Vipinchandra M. Chokhawala, Nandurbar V. Deputy Commissioner of Income-tax,

ITA 1751/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4311 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Capital asset; Depreciation; Business expenditure; Salary income; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1751/PUN/2016 / ASSESSMENT YEAR : 2012-13 SHRI VIPINCHANDRA M. CHOKHAWALA, OLD STATION ROAD, SWASTIK PULSE MILL, NAVAPUR. PAN : ADNPC8588M . /APPELLANT VS. DCIT, CIRCLE-1, NASHIK . / RESPONDENT ASSESSEE BY : SHRI AMIT KHATIWALA REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 19.06.2018 / DATE OF PRONOUNCEMENT: 03.08.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-1, NASHIK, DATED 23-06-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSE E DID NOT PRESS GROUND NOS. 3 AND 4. GROUND NO.5 IS GENERAL IN NATURE. A CCORDINGLY, THE SAID GROUND NOS. 3 TO 5 ARE DISMISSED AS SUCH. THAT LEAV ES GROUND NOS. 1 AND 2 FOR ADJUDICATION. THEREFORE, GROUND NOS. 1 AND 2 RA ISED BY THE ASSESSEE ARE EXTRACTED HERE AS UNDER : 1. THE LD.CIT(A)-1, NASHIK ERRED IN HOLDING THAT EXPENDITURE OF RS.17,77,045/- INCURRED BY THE APPELLANT ON REPAIRS OF FACTORY BUILDING, WALLS AND PLATFORM IS CAPITAL IN NATURE AND THEREBY CONFI RMING THE ADDITION MADE BY THE ASSESSING OFFICER. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE THE LD.CIT(A) OUGHT TO HAVE HELD T HAT THE EXPENDITURE OF ITA NO.1751/PUN/2016 SHRI VIPINCHANDRA M. CHOKHAWALA 2 RS.17,77,045/- INCURRED BY THE APPELLANT ON REPAIRS OF FACTORY BUILDING WALLS AND PLATFORM IS REVENUE IN NATURE. 2. THE LD.CIT(A) ERRED IN CONCLUDING THAT THE APPEL LANT HAS LAID A NEW WALL/PLATFORM OF DIFFERENT TYPE OF PLACE OF OLD WAL L/PLATFORM RESULTING IN NEW AND DISTINCT ADVANTAGE AND HENCE THE EXPENDITURE OF RS.17,77,045/- DOES NOT FALL WITHIN THE MEANING OF THE TERM CURRENT REPAIR S. 3. BRIEFLY STATED RELEVANT FACTS RELATING TO THE ABOVE GR OUNDS INCLUDE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINES S OF MANUFACTURING AND TRADING OF TOOR DAL AND OTHER PULSES AN D OTHER COMMODITIES, CONSTRUCTION OF ROW HOUSE AND DEVELOPMENT OF ESTATE. ASSESSEE DERIVES INCOME FROM SALARY, HOUSE PROPERTY, BUSIN ESS OR PROFESSION, SHARE IN PROFIT OF FIRM, SHORT TERM CAPITAL GAIN, OTHER SOURCE S AND INTEREST. ASSESSEE FILED THE RETURN OF INCOME ON 06-09-2012 DECLARIN G TOTAL INCOME OF RS.1,65,52,780/-. ASSESSEES CASE WAS SELECTED UNDER CAS S. IN THE ASSESSMENT PROCEEDINGS, COPIES OF AUDIT REPORTS, COMPUTA TION OF INCOME AND FINAL ACCOUNTS, LEDGER, CASH/BANK ACCOUNTS OF THE ASSESSEE WERE SCRUTINIZED. ON THE VERIFICATION OF THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, AO NOTIC ED THAT ASSESSEE CLAIMED FACTORY BUILDING REPAIR EXPENSES AMOUNTING TO RS.1 7,77,045/- AS ALLOWABLE DEDUCTION. ASSESSEE FILED THE LEDGER AND VOUCHERS RELATING TO THE SAID REPAIRS. AO OPINED THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE FOR IMPROVING THE FIXED ASSETS. THE EXPENDITURE IS NOT IN THE NORMAL COURSE OF BUSINESS AND NOT A ROUTINE TYPE OF BUSINESS EXPENDITURE. EVENTUA LLY, THE AO MADE ADDITION OF RS.16,25,357 TO THE TOTAL INCOME OF THE ASS ESSEE AFTER ALLOWING DEPRECIATION AT RS.1,51,688/- TREATING THE SAME AS CAPITAL EXPENDITURE. AO ALSO MADE OTHER ADDITIONS TOO ON ACCOUN T OF (1) INCOME FROM HOUSE PROPERTY AT RS.87,500/-; (2) DISALLOWANCE OF INTER EST U/S.36(I)(II) AT RS.6,575/-; (3) NON BUSINESS EXPENSES AT RS.1,00,000/-; AN D (4) SCRAP SALE AT RS.75,000/- (ON ADHOC BASIS). ITA NO.1751/PUN/2016 SHRI VIPINCHANDRA M. CHOKHAWALA 3 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) UPHELD TH E ADDITION MADE BY THE AO ON ACCOUNT OF REPAIRS TO THE FACTORY BU ILDING. WHILE DOING SO, THE CIT(A) RELIED ON VARIOUS JUDGMENTS AND FINALLY CONCLUDED THAT R ENEWAL AND INSTALLATION OF ENTIRE WALL IN THE BUILDING WITH NEW PLATFORM IS NOT COVERED UNDER THE EXPRESSION CURRENT REPAIRS. IT IS A CASE OF COMPLETE REPLACEMENT AND CHANGE. REGARDING THE OTHER ADDITIONS, THE CIT( A) GAVE PART RELIEF TO THE ASSESSEE. 5. THE ONLY ISSUE FOR ADJUDICATION BEFORE US IS WHETHER TH E AO/CIT(A) ARE JUSTIFIED IN TREATING THE REPAIR EXPENSES INCURRED BY THE ASSESSEE ON THE FACTORY BUILDING IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS NOT CREATED ANY NEW ASSET. ASSESSEE CARRIED OUT INTERNAL AND OUTER CEMENT PLASTER, TWO COAT CEMENT MORTAR WITH NEERU FINISH TO CONCRETE BRICK S URFACE, INTERNAL AND EXTERNAL PAINTING OF COMPOUND WALL. THE EXPENDITURE QUALIFIES FOR CURRENT REPAIRS AND THEREFORE, THE SAME SHOULD BE ALLOWED AS RE VENUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE HELD BY THE AO/CIT(A). IN SUPPORT OF HIS CLAIM, LD. COUNSEL RELIED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NRB BEARING LTD., VS. ACIT AND VICE VERSA IN ITA NOS. 672 AND 1982/MUM/2011, DATED 30-10-2015. 7. LD. DR FOR THE REVENUE VEHEMENTLY OPPOSED THE ARGU MENTS OF THE LD. COUNSEL FOR THE ASSESSEE AND PLACED HIS RELIANCE HEAVILY ON THE ORDERS OF AO/CIT(A). 8. AFTER HEARING BOTH THE SIDES AND ON PERUSING THE ORDERS OF THE RE VENUE AUTHORITIES ON THIS ISSUE, WE FIND THE ISSUE HAS TO BE DEC IDED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NRM BEARING LTD. (SUPRA) WHERE THE TRIBUNAL HA D AN OCCASION ITA NO.1751/PUN/2016 SHRI VIPINCHANDRA M. CHOKHAWALA 4 TO ANSWER THE SIMILAR ISSUE. WE THEREFORE, PROCEED TO E XTRACT THE RELEVANT FINDING GIVEN BY THE TRIBUNAL AND THE SAME READS AS UNDER : 17. BEFORE US, THE LD. COUNSEL SUBMITTED THAT ENT IRE EXPENDITURE SHOULD BE TREATED AS REVENUE EXPENDITURE BEING CURRENT REPAIR S. IN SUPPORT ASSESSEE HAD FURNISHED ALL THE RELEVANT DETAILS AND BILLS AND NO NE OF THESE EXPENDITURES HAVE GONE TO CREATE ANY CAPITAL ASSET OF ENDURING N ATURE. ALL THE EXPENDITURE INCURRED WAS PURELY FOR REPAIRS AS PER THE DETAILS AND SUBMISSION MADE BEFORE THE CIT(A) AS INCORPORATED IN PARA 5.2 OF TH E APPELLATE ORDER. THE EXPENDITURE WHICH HAS BEEN CONFIRMED BY THE CIT(A) IS ON ACCOUNT OF CONSTRUCTION OF A BOUNDARY WALL HOWEVER THE CONSTRU CTION COST OF BOUNDARY WALL WAS ONLY RS. 1,63,048/- AND THAT ALSO CANNOT B E HELD TO BE CAPITAL EXPENDITURE BUT ONLY REPAIRS, BECAUSE OLD WALL WAS TO BE REPLACED. 18. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 19. AFTER CONSIDERING THE RELEVANT SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT NO SPECIFIC FINDING WITH REGARD TO THE EXPENDITURE AGGREGATING TO RS. 8,78,595/- HAS BEEN GIVEN BY THE CIT(A) WHEN THE COST OF CONSTRUCTION OF BOUNDARY WALL ITSELF WAS ONLY RS. 1 ,63,048/-, WHICH WAS THE BASIS FOR THE DISALLOWANCE BY THE LD. CIT(A). HENCE , IN THE INTEREST OF JUSTICE, WE FEEL THAT THIS MATTER SHOULD ALSO BE RESTORED BA CK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER CALLING FOR THE DETAI LS AND EXAMINE THE NATURE OF THE EXPENDITURE AGGREGATING RS. 8,78,595/-. IF SUCH EXPENDITURE ARE PURELY FOR REPAIRS WITHOUT CREATING ANY CAPITAL ASSET OF ENDUR ING NATURE, THEN SUCH EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITUR E. ACCORDINGLY, GROUND NO. 5 & 6 ARE TREATED AS ALLOWED FOR STATISTICAL PU RPOSES. 9. ON GOING THROUGH THE ABOVE FINDING AND THE FACTS RELAT ING TO THE PRESENT ASSESSEE, WE CONCUR WITH THE ARGUMENTS OF LD. C OUNSEL FOR THE ASSESSEE THAT EXPENDITURE ON REPAIRS MADE BY THE ASSESSEE IS NO T FOR CREATING A NEW ASSET WHICH HAS THE CAPACITY TO YIELD ANY REVENUE . THE BILLS/VOUCHERS SUBMITTED BY THE ASSESSEE BEFORE US EVIDENCES THE NAT URE OF REPAIRS AND THE SAME ARE ATTRIBUTABLE TO REVENUE EXPENSES. THEREFORE , WE REVERSE THE ORDERS OF AO/CIT(A) ON THIS VERY ISSUE. ACCORDINGLY, THE GRO UND NOS.1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 03 RD DAY OF AUGUST, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 03 RD AUGUST, 2018 ITA NO.1751/PUN/2016 SHRI VIPINCHANDRA M. CHOKHAWALA 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-1, NASHIK 4. THE PR.CIT-1, NASHIK 5. , , B BENCH PUNE; 6. / GUARD FILE.