M/s MBD Enterprises Pvt. Ltd, Jalandhar V. The Dy Commissioner of Income Tax, Jalandhar

ITA 179/ASR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7770 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 179/(ASR)/2017 ASSESSMENT YEAR: 2013-14 PAN: AAECM8399K M/S MBD ENTERPRISES PVT. LTD., MBD HOUSE, RAILWAY ROAD, JALANDHAR. VS. DY. C. I. T., CENTRAL CIRCLE-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY: SH. RAHUL DHAWAN (D. R.) DATE OF HEARING: 14.09.2017 DATE OF PRONOUNCEMENT: 11.10.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), JALANDHAR DATED 17.02.2017 FOR ASST. YEAR: 2013-14. 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, H OWEVER THE CRUX OF GROUNDS OF APPEAL IS THE ACTION OF LD. CIT(A), B Y WHICH HE HAS UPHELD THE ACTION OF LD. CIT(A) IN DISALLOWING THE REVENUE EXPENDITURE AS CAPITAL EXPENDITURE. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE AS SESSEE HAD UNDERTAKEN REPAIR WORK IN THE FACTORY PREMISES AND GENERATOR ROOM HAD ALSO BEEN REPAIRED. IT WAS SUBMITTED THAT THE OLD G ENERATOR ROOM WAS NOT SERVING THE PURPOSE OF REDUCING THE NOISE BEING PRO DUCED FROM THE RUNNING OF THE GENERATOR AND THEREFORE THE NOISE FR OM SUCH GENERATOR ITA NO. 179(ASR)/2017 ASSESSMENT YEAR: 2013-14 2 ROOM WAS CREATING A LOT OF DISTURBANCE AND NOISE PO LLUTION IN THE WORKING AREA OF THE FACTORY AND OFFICE PREMISES OF THE ASSE SSEE COMPANY. THEREFORE IN ORDER TO REDUCE SUCH NOISE LEVELS, TH E ASSESSEE COMPANY UNDERTOOK TO PROVIDE SOUND PROOFING SYSTEM TO THE GENERATOR ROOM AND THEREFORE IT WAS NOT A CASE OF CREATION OF NEW ASSET AND EXPENDITURE WAS INCURRED FOR IMPROVING THE HEALTH / WORKING ENVIRONMENT FOR THE EMPLOYEES//LABOUR BY REDUCING AIR/NOISE POL LUTION, IT WAS SUBMITTED THAT EVEN THOUGH THERE IS BENEFIT OF ENDU RING NATURE STILL THE EXPENDITURE IS ALLOWABLE IS A REVENUE EXPENDITURE. RELIANCE IN THIS RESPECT WAS PLACED IN THE FOLLOWING CASE LAWS: STEEL TUBES OF INDIA (P) LTD. VS. COMMISSIONER OF INCOME TAX (MADHYA PRADESH HC: INDORE BENCH) (1996) 130 CTR 0547 COMMISSIONER OF INCOME TAX VS. SAKTHI TEXTILES LTD. (MADRAS HC) (2001) 250 ITR 0449 WITHOUT PREJUDICE THE LD. AR SUBMITTED THAT VARIOU S COURTS HAS HELD THAT WHERE THE EXPENDITURE HAS BEEN INCURRED F OR THE RUNNING OF BUSINESS EFFICIENTLY, THE SAME MUST ALSO BE ALLOWED AS REVENUE EXPENDITURE IN THE BUSINESS OF THE ASSESSEE. RELIAN CE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: COMMISSIONER OF INCOME TAX VS. MADRAS SPINNERS LTD .(KERALA HC) COMMISSIONER OF INCOME TAX VS. MAKHAN SARMAH SAVAPA NDIT (GAUHATI HC) ITA NO. 179(ASR)/2017 ASSESSMENT YEAR: 2013-14 3 MOREOVER IT WAS SUBMITTED THAT VARIOUS COURTS HAS HELD THAT AMOUNT OF EXPENSE IS IRRELEVANT FOR DETERMINING THE CHARACTER OF EXPENDITURE AND THE CHARACTER OF PAYMENT CAN BE DET ERMINED BY CONSIDERING THE TRUE NATURE OF THE ASSET, FURTHER I T WAS SUBMITTED THAT NO NEW ASSET HAD COME INTO EXISTENCE. 4. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT LD. CIT(A) HAS UPHEL D THE ACTION OF ASSESSING OFFICER IN VIEW OF THE OBSERVATION OF ASS ESSING OFFICER THAT ASSESSEE CREATED VIRTUALLY A FRESH ASSET BY WAY OF SOUND PROOF ROOM WHICH WOULD PROVIDE ENDURING BENEFIT TO THE ASSESSE E. THE LD. CIT(A) HAS ALSO OBSERVED THAT IN THE YEAR CONSIDERATION THE EX PENDITURE ON BUILDING REPAIR AND MAINTENANCE HAD SIGNIFICANTLY INCREASED AND THEREFORE IT WAS ALSO HELD THAT ASSESSEE HAD CREATED A NEW CAPITAL A SSET IN THE BUILDING IN THE FORM OF SOUND PROOF ROOM. HOWEVER WE ARE NOT IN AGREEMENT THAT THE FINDINGS OF LD. CIT(A) AS VARIOUS COURTS HAS HELD T HAT EVEN THOUGH AN EXPENDITURE RESULTS INTO BENEFIT OF ENDURING NATURE , THE SAME CANNOT BE SAID TO BE CAPITAL EXPENDITURE, THEREFORE THE QUANT UM OF EXPENDITURE CANNOT BE A FACTOR IN DECIDING AS TO WHETHER EXPEND ITURE IS REVENUE OR CAPITAL NATURE. UNDOUBTEDLY, THE ASSESSEE INCURRED EXPENDITURE FOR CREATING SOUND PROOF ROOM FOR GENERATOR WHICH WILL HELP IN IMPROVING THE HEALTH/WORKING ENVIRONMENT FOR THE EMPLOYEES/LABOUR BY REDUCING ITA NO. 179(ASR)/2017 ASSESSMENT YEAR: 2013-14 4 AIR/NOISE POLLUTION. THE HON'BLE MADHYA PRADESH HIG H COURT IN THE CASE OF STEEL TUBES OF INDIA (P) LTD. HAS HELD THAT EXPE NDITURE INCURRED IN DEVELOPING GARDEN IN FRONT OF FACTORY DOES NOT RESU LT IN ENHANCEMENT OF VALUE OF FACTORY, SAME WAS NECESSARY TO AVOID POLLU TION OF ENVIRONMENT THEREFORE IT HELD THE EXPENDITURE TO BE REVENUE EXP ENDITURE. SIMILARLY, THE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI TEXTILES LTD. HAS HELD THAT INSTALLATION OF DUST EXTRACTION PLANT WAS TO PROTECT THE HEALTH OF THE WORKERS AND THEREFORE EXPENDITURE INCURRED ON T HE INSTALLATION OF SUCH PLANT WAS HELD TO BE REVENUE EXPENDITURE. FURT HER IT IS A FACT THAT THE DECREASE IN NOISE POLLUTION WILL RESULT INTO MO RE CONCENTRATION BY THE EMPLOYEES AND THEY CAN RUN THE BUSINESS MORE EFFICI ENTLY AND FOR THIS PURPOSE ALSO THE EXPENDITURE INCURRED BY ASSESSEE H AS TO BE ALLOWED AS REVENUE EXPENDITURE. THE VARIOUS CASE LAWS RELIED O N BY THE ASSESSEE ALSO SUPPORTS THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LD. AR AND THEREFORE WE REVERSE THE ORDER OF LD. CI T(A). 6. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.10.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11.10.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE ITA NO. 179(ASR)/2017 ASSESSMENT YEAR: 2013-14 5 (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER