ACIT, Circle-10(2), Kolkata, Kolkata V. M/s Saraswaty Press Ltd., Kolkata

ITA 1793/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5867 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S BHATTACHERJEE
• Keywords: Business income; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3); 194C; 37; 28

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1793 &2219 / KOL / 20 16 ASSESSMENT YEAR :2012-13 ACIT, CIRCLE-10(2) P-7 CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-69 M/S SARASWATY PRESS LTD, 11, B.T. ROAD, BELGHARIA, KOLKATA-700056 V/S . V/S . M/S SARASWATY PRESS LTD., 11, B.T. ROAD, BELGHARIA, KOLKATA-700 056 [ PAN NO.AAECS 6328 J ] DCIT, CIRCLE-10 P-7, CHOWRINGHEE ROAD, 3 RD FLOOR, AAYAKAR BHAWAN, KOLKATA-69 /APPELLANT .. / RESPONDENT ITA NO .2220/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S SARASWATY PRESS LTD.,11, B.T. ROAD, BELGHARIA, KOLKATA-700 056 [ PAN NO.AAECS 6328 J ] V/S . DCIT, CIRCLE-10(2) P-7 CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-69 /APPELLANT .. / RESPONDENT / /BY APPELLANT SHRI RIP DAS, FCA /BY RESPONDENT SHRI S. BHATTACHERJEE, ADDL. CIT-DR /DATE OF HEARING 10-07-2018 /DATE OF PRONOUNCEMENT 20-07-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THESE THREE CASES PERTAIN TO ASSESSMENT YEARS 2011- 12 AND 2012-13. FORMER ASSESSMENT YEAR 2011-12 COMPRISES OF ASSESSE ES APPEAL ITA ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 2 NO.2220/KOL/2016 ARISING AGAINST COMMISSIONER OF IN COME TAX (APPEALS)-4, KOLKATAS ORDER DATED 11.07.2016 PASSED IN CASE NO. 1176/CIT(A)-4/CIRCLE- 10/KOL/14-15 INVOLVING PROCEEDINGS U/S. 143(3) OF T HE INCOME TAX ACT, 1961; IN SHORT THE ACT. LATTER ASSESSMENT YEAR 2012-13 INVOLVES REVENUES AND ASSESSEES CROSS APPEALS ITA NO.1793 AND 2219/KOL/2 016 FROM THE VERY CIT(A)S ORDER OF EVEN DATE PASSED IN CASE NO.1873/ CIT(A)-4/CIRCLE- 10(2)/KOL/14-15 IN SCRUTINY ASSESSMENT PROCEEDING S. 2. WE PROCEED ASSESSMENT YEAR-WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. ASSESSMENT YEAR: 2011-12 (ASSESSEES APPEAL ITA NO.2220 /KOL/2016) 3. THE ASSESSEES FIRST SUBSTANTIVE GROUND PLEADS T HAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS I N REJECTING ITS VALUE ADDED TAX (VAT FOR SHORT) AMOUNTING TO 2,12,100/- WRITTEN OFF AS NO LONGER RECOVERABLE CLAIMED AS A DEDUCTION. BOTH THE LEARNE D REPRESENTATIVES TAKE US TO CIT(A)S CORRESPONDING FINDINGS IN PARA 3.1 OF T HE ORDER READING AS UNDER:- 3.1 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF T HE APPELLANT IN THE MATTER IN THE BACKDROP OF THE ASSESSMENT ORDER. I FIND THAT THE A O HAS DISALLOWED THE SUM OF 2,12,100/- U/S.36(2)(I) OF THE ACT. THE AR IN HIS S UBMISSIONS HAS NOT DISPUTED THE FINDING OF FACT BY THE AO THAT THE SUM OF VAT WAS N OT FORMING PART OF INCOME IN THE PROFIT AND LOSS ACCOUNT IN ANY OF THE PREVIOUS ASSE SSMENT EARS. IN FACT, THE APPELLANT HAS SUBMITTED THAT IT IS MAINTAINING A SEPARATE ACC OUNT FOR VAT, WHEREIN THE INPUT AND OUTPUT IS ENTERED AND THE YEAREND BALANCE IS RE FLECTED IN THE BALANCE SHEET OF THE APPELLANT EVERY YEAR. I FIND THAT NOTHING IS RO UTED THROUGH PROFIT & LOSS ACCOUNT. IT WAS ALSO SUBMITTED THAT THIS ITEM IS A REVENUE NEUT RAL ITEM AND HAS NO IMPACT ON EITHER PROFITS OR LOSSES OF THE YEAR. THE APPELLANT HAS ALSO RELIED UPON CASE LAWS AS CITED IN THE FOREGOING. ON A HOLISTIC CONSIDERATION OF THE ISSUE AT HAND, I AM OF THE OPINION THAT ALLOWABILITY OF CLAIM U/S. 36(2) DEPEN DS ON ONLY TWO CRITERIA I.E. (A) THE AMOUNT OFF WRITE OFF MUST HAVE FORMED PART OF INCOM E OF THE ASSESSEE IN ANY OF THE PREVIOUS ASSESSMENT YEARS AND (B) THE AMOUNT MUST BE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. I FIND THAT THE APPELLANT HAS IND EED SATISFIED THE SECOND CRITERION (B) BUT AS FAR AS FIRST CRITERION (A) IS CONCERNED, THE APPELLANT HAS NOT FULFILLED THE SAME. THEREFORE THE CLAIM OF APPELLANT CANNOT BE AL LOWED U/S. 36(2) OF THE ACT. THIS GROUND IS DISMISSED ACCORDINGLY. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. THE REVENUE REITERATES THE ABOVE TWIN REASONING OF THE CIT(A) THAT ASSESSEE HAS NEITHER ROUTED THE IMPUGNED WRITE OFF THROUGH ITS P ROFIT AND LOSS ACCOUNT NOR DOES IT SATISFY THE BASIC TENET OF BAD DEBT WRITE O FF CLAIM U/S. 36(2) OF THE ACT ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 3 (SUPRA). WE FIND NO REASON TO CONCUR WITH THE SAME. HON'BLE JURISDICTIONAL HIGH COURTS JUDGMENT IN (1969) 71 ITR 131 (CAL) CIT VS. CHOWRINGHEE SALES BUREAU HAS ALREADY HELD THAT SUCH SALES TAX ITEMS A RE REVENUE IN NATURE. THERE IS FURTHER NO ISSUE BETWEEN THE PARTIES ABOUT THE FACT THAT ASSESSEE HAS ACTUALLY WRITTEN OFF THE SUM IN QUESTION OF 2,12,100/-. COMING TO CIT(A) FORMER REASON THAT THE ASSESSEE HAD NOT ROUTED THE SAID SUM FOR ITS PROFIT AND LOSS ACCOUNT, IT IS NOT IN DISPUTE THAT THE INSTANT TAXPAYER HAS FOLLOWED THE RELEVANT ACCOUNTING TREATMENT TO BE GIVEN TO THE VA T ITEM(S). WE THUS NO SUBSTANCE IN CIT(A)S FORMER REASON AS ASSESSEE HAS TO MANDATORILY COMPLY WITH THE RELEVANT ACCOUNTING PRINCIPLE REGARDING VA T IN QUESTION. COMING TO THE LATTER ISSUE OF HAVING NOT INCLUDED SAID VAT AM OUNT AS INCOME, WE ARE OF THE VIEW THAT ASSESSEES IMPUGNED WRITE OFF IS VERY MUCH INCIDENTAL TO CARRYING OUT OF ITS BUSINESS ACTIVITY. WE THUS FOLLOW HON'BL E APEX COURTS DECISION IN (1965) 55 ITR 707 CIT VS. NANITAL BANK LTD. TO CONCLUDE THAT ASSESSEES IMPUGNED CLAIM IS RATHER ALLOWABLE AS A BUSINESS LO SS U/S 28 R.W.S 37 OF THE ACT. WE ACCORDINGLY DELETE THE IMPUGNED DISALLOWANC E. 5. NEXT ISSUE IN ASSESSEES INSTANT APPEAL IS THAT OF DISALLOWANCE OF EARNEST MONEY DEPOSIT OF 7,55,500/- AS NO LONGER RECOVERABLE. THE CIT(A)S FINDINGS UNDER CHALLENGE QUA THIS ISSUE READ AS UNDER:- 4.1 I HAVE CONSIDERED THE SUBMISSION OF THE A OF TH E APPELLANT IN THE MATTE. I FIND THAT THE APPELLANT HAS CLAIMED A DEDUCTION OF 7,55,500/- IN RESPECT OF ADVANCE (EARNEST MONEY) WRITTEN OFF. IMPUGNED ORDER FIND FR OM THE ASSESSMENT ORDER THAT THE DISALLOWANCE IS MADE U/S 36(2) OF THE ACT. THE AR B EFORE ME HAS CLAIMED THE SAID WRITE OFF AS ALLOWABLE U/S.28 OF THE ACT, RELYING U PON THE CASE AS CITED SUPRA. THE AR HAS SUBMITTED BEFORE ME THAT IN THE COURSE OF NORMA L BUSINESS ACTIVITY, THE APPELLANT HAD TO PARTICIPATE IN VARIOUS TENDER PROCESSES WITH DIFFERENT GOVERNMENT ORGANIZATIONS FOR WHICH THEY HAD TO PAY EARNEST MON EY. SOME OF THE SIDED EARNEST MONIES COULD NOT BE RECOVERED FOR DIFFERENT REASONS AND AFTER LAPSE OF REASONABLE TIME, THE SAME WERE WRITTEN OFF SINCE CHANCES OF RE COVERY OF THE SAME BECAME REMOTE. SINCE THOSE EARNEST MONIES WERE PAID FOR RE GULAR BUSINESS PURPOSE AND FOR SECURING BUSINESS INCOME, WRITING OFF OF THE SALE W ERE TO BE TREATED AS NORMAL BUSINESS EXPENSES. ALTHOUGH, THE APPELLANTS AR HAS SUBMITTED THAT THE EARNEST MONEY WAS PAID FOR REGULAR BUSINESS PURPOSE, I FIND THAT NEITHER BEFORE THE AO NOR BEFORE ME, THE APPELLANT HAS FILED ANY PERCEPTIBLE EVIDENCE IN THIS REGARD. IT IS NOT UNDERSTOOD AS TO WHETHER THE EARNEST MONEY WAS GIVE N ON REVENUE ACCOUNT OR ON CAPITAL ACCOUNT. THUS, I AM UNABLE TO ACCEPT THE AP ES CONTENTIONS IN THE MATTER IN THE ABSENCE OF ANY COGENT SUPPORTING MATERIAL DOCUM ENTS IN THIS REGARD. IN VIEW OF THIS, THIS GROUND OF APPEAL IS DISMISSED. ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 4 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUT E THE BASIC FACT THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE IMPUGNED IN Q UESTION IN RESPECT OF ITS DEPOSITS FOR PARTICIPATING TENDERS PROCESSES IN DIF FERENT ORGANIZATIONS RECOVERABLE. THE CIT(A) HAS ALSO FOUND PERCEPTIBLE EVIDENCE IN ASSESSEES FAVOUR. HIS ONLY VIEW THAT IT IS NOT CLEAR AS TO WH ETHER THE SAID AMOUNT IS IN CAPITAL OR REVENUE ACCOUNT. WE FIND NO MERIT IN SUC H REASONING. THE FACT REMAINS THAT THE ASSESSEE HAS MADE THE IMPUGNED DEP OSITS SO AS TO CARRY OUT ITS ROUTINE BUSINESS ACTIVITY OF TAKING PART IN TEN DER PROCESS. WE THEREFORE CONCLUDE THE SAME TO BE REVENUE EXPENDITURE ALLOWAB LE IN THE NATURE OF BUSINESS LOSS U/S 28 R.W.S 37 OF THE ACT SINCE INCI DENTAL TO ITS CORE BUSINESS ACTIVITY OF TENDERS. THE ASSESSEE SUCCEEDS IN ITS S ECOND SUBSTANTIVE GROUND AS WELL. 7. THIS LEAVES US THE ASSESSEES THIRD AND LAST SUB STANTIVE GRIEVANCE CHALLENGING CORRECTNESS BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS MATERIAL SUPPLY CLAIMS OF 28,71,827/- AS DISCUSSED IN CIT(A)S ORDER AS FOLLOWS:- 6. GROUND NO.4 THIS GROUND IS DIRECTED AGAINST THE ACTION OF THE A O IN MAKING A DISALLOWANCE OF .28,71,827/- U/S 40(A)(IA) .W. SECTION 194C OF THE ACT. THE MATTER IS DISCUSSED AT PARA 5 OF THE ASSESSMENT ORDER. AT THE APPELLATE ST AGE, THE AR OF THE APPELLANT SUBMITTED AS FOLLOWS:- LEARNED ASSESSING AUTHORITY DISALLOWED RS.28,71,82 7/- AS PER PROVISION OF SEC 40(I)(A) OF THE IT ACT, 1961 FOR NON-DEDUCTION OF TDS U/S 194C OF THE ACT. IN THIS CONNECTION YOUR ASSESSEE BEG TO SUBMIT THAT LEARNED ASSESSING AUTHORITY DISALLOWED THE ABOVE SUM ON ACCOUNT OF F OLLOWING FOUR PARTIES, ALTHOUGH DETAILS OF HIS FINDINGS AND CALCULATIONS I N RESPECT OF THOSE FIGURES WERE NOT AVAILABLE: 1) MARBLE KIND & TILE CO RS. 7,63,350/- 2) B CON GROUP RS.10,66,312/- 3) SANJAY AGARWAL RS. 2,06,074/- 4) AVIDIP ENTERPRISE RS. 8,36,091/- ORDERS WERE PLACED BEFORE THEM FOR SUPPLY AS WELL A S FOR EXECUTION OF WORKS. IN SOME CASES OF EXECUTION OF CONTRACT, ANY REQUIRE MENTS OF MATERIALS ARE BEING PROCURED BY THEM FROM OUTSIDE INDEPENDENT PAR TIES AND NOT SUPPLIED BY YOUR ASSESSEE AND THEY RAISED INVOICES SEPARATELY F OR SUPPLY OF MATERIALS AND FOR LABOUR WHEN SUCH LABOUR CHARGES ARE REQUIRED. A S A RESULT IN CASE OF SUPPLY OF MATERIALS, STATED HEREIN ABOVE, TAXES HAV E NOT BEEN DEDUCTED AT SOURCE SINCE THESE ARE NOT CASES COMING UNDER EXPRE SSION CARRYING OUT ANY WORK . IN OTHER CASES TAXES WERE DULY DEDUCTED. IN THE MEMORANDUM ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 5 EXPLAINING THE PROVISION OF FINANCE BILL, 2009, DEF INITION OF WORK IN SEC 194C HAS BEEN CLARIFIED TO THE EFFECT THAT WORK SHALL NOT INCLUDE MANUFACTURING OR SUPPLYING OF MATERIALS ACCORDING TO REQUIREMENT OR SPECIFICATION OF COSTUMER BY USING RAW MATERIALS PURCHASED FROM A PERSON OTHE R THAN CUSTOMER. MOREOVER MARBLE KIND & TILES CO IS A REGULAR DEALER OF TILES AND OTHER BUILDING MATERIALS WHO ARE USED TO SALE THOSE MATERIALS IN T HEIR DAY TO DAY BUSINESS AND AS A RESULT PURCHASE OF MATERIALS FROM THEM IN THE NORMAL COURSE OF BUSINESS DO NOT CALL FOR ANY TAX DEDUCTION AT SOURC E. HOWEVER, SOMETIMES APART FROM SELLING GOODS IN THE NORMAL COURSE OF BU SINESS, THEY ARE ALSO DOING SOME LABOUR ORIENTED JOBS/FIXING JOBS AND TAXES WER E DEDUCTED AT SOURCE ON THOSE JOB, WHEN ARISE. LEDGER COPIES OF ABOVE PARTIES ALONG WITH THE LIST OF BILLS OF THOSE PARTIES ON WHICH TAXES WERE DEDUCTED AT SOURCE ARE ATTACHED. E VEN ACCEPTING BUT NOT ADMITTING THAT TAXES ARE REQUIRED TO BE DEDUCTED IN ALL THE BILLS, THEN ALSO IT WILL BE EVIDENT FROM THOSE PAPERS THAT LEARNED ASSESSING AUTHORITY, IN CASES NOS 1 TO 3 ABOVE, DISALLOWED MORE THAN WHAT WAS REQUIRED. HE FAILED TO CONSIDER THOSE BILLS ON WHICH YOUR ASSESSEE ALREADY DEDUCTED TDS. HOWEVER, IN VIEW OF THE MATTER STATED ABOVE, YOUR A SSESSEE BEGS TO SUBMIT THAT SAID DISALLOWANCE OF RS.28,71,827/- SHOULD BE DELETED. 6.1 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF T HE APPELLANT IN THE BACKDROP OF THE ASSESSMENT ORDER. IMPUGNED ORDER FIND FROM THE FACTS AND SUBMISSIONS OF THE AR OF THE APPELLANT THAT ADMITTEDLY TDS WAS NOT EFFECT ED ON SUCH PAYMENTS. THE APPELLANTS AR HAS SUBMITTED THAT THE EXPENSES PAID DID NOT FORM PART OF WORK AS DEFINED U/S. 194C OF THE ACT. IN SUPPORT OF SUCH CO NTENTIONS, THE AR HAS NOT SUBMITTED ANY EVIDENCE IN THIS REGARD. IT HAS BEEN CONTENDED BY THE AR THAT IN RESPECT OF FEW PARTIES, TDS HAS INDEED BEEN DEDUCTE D. THUS CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT PR OVISION OF SECTION 194C ARE VERY MUCH APPLICABLE IN THE APPELLANTS CASE. THUS, THE APPELLANT SHOULD HAVE MADE TDS ON SUCH PAYMENTS. THEREFORE, OUT OF THE TOTAL SUM O F 28,71,827/-, I DIRECT THE AO TO DISALLOW THE EXPENSES ONLY ON SUCH SUMS OF MONIES P AID/PAYABLE BY THE APPELLANT ON WHICH NO TDS HAS BEEN EFFECTED BY IT, IF WARRANTED AS PER THE RELEVANT PROVISION OF THE ACT. IN RESPECT OF EXPENSES WHERE TDS HAS BEEN EFFECTED AND DEPOSITED BEFORE FILING THE RETURN OF INCOME U/S. 139(1), THE SAME S HOULD BE ALLOWED. THIS GROUND IS DISPOSED OFF ACCORDINGLY. 8. SUFFICE TO SAY, BOTH THE LOWER AUTHORITIES ARE O F THE VIEW THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS AS THE IMPUGNED EXPENDITURE PERTAINING TO SUPPLY OF MATERIALS. WE QUOTE SECTION 194C EXPLANATION (IV)(E) OF THE ACT IN THIS BACKDROP TO CONCLUDE THAT THERE IS NO SPECIFIC FINDING IN LOWER AUTHORITIES ORDERS UNDER CHALLENGE THAT THE ASSESS EE HAD, IN FACT, SUPPLIED THE NECESSARY MATERIAL TO ITS PAYEES FOR MANUFACTURE OR SUPPLY PURPOSES. WE THEREFORE CONCLUDE THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE IMPUGNED DISALLOWANCE OF OUTRIGHT MA TERIAL PURCHASE. THE ASSESSEE SUCCEEDS IN THIRD AND FINAL SUBSTANTIVE GR OUND AS WELL AS THE MAIN APPEAL ITA NO.2220/KOL/2016. ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 6 9. WE NOW COME TO LATTER ASSESSMENT YEAR 2012-13. T HE REVENUES APPEAL ITA NO. 1793/KOL/2016 RAISES ITS FORMER SUBS TANTIVE GROUND CHALLENGING CORRECTNESS OF THE CIT(A)S ACTION TREA TING ASSESSEES REPAIR EXPENDITURE CLAIM ON BUILDING AMOUNTING TO 1,07,03,835/- AS REVENUE EXPENDITURE AS FOLLOWS:- 3. GROUND NO.1 THIS GROUND IS DIRECTED AGAINST THE ACTION OF THE A O IN DISALLOWING AN AMOUNT OF 1,07,03,835/- ON ACCOUNT OF REPAIRING EXPENSES OF BUILDING TREATING IT AS CAPITAL IN NATURE. THE MATTER IS DISCUSSED AT PARA 3 TO 3.3 OF THE ASSESSMENT ORDER. IN COURSE OF ASSESSMENTS PROCEEDINGS, THE ASSESSEE PROVIDED THE BREAKUP OF THE EXPENSES INCURRED AS FOLLOWS: EXPENSES INCURRED FOR REPAIR AT THE SITE OFFICE OF THE COMPANY AT 32 & 32/1,APC ROAD, KOLKATA-700009 RS.15,56,093/- EXPENSES INCURRED FOR REPAIR AT THE REGISTERED OFFI CE AS WELL AS UNIT-I&II OF THE COMPANY RS.91,47,742/- TOTAL RS.1,07,03,835/- THE AO REQUIRED OF THE ASSESSEE TO EXPLAIN THE NATU RE OF REPAIRS WORK CARRIED OUT IN RESPONSE TO WHICH A DETAILED EXPLANATION WAS FURNIS HED VIDE LETTER DATED 03.02.2015 TO THE EFFECT THAT THE EXPENSES WERE REVENUE IN NAT URE. HOWEVER, THE AO REJECTED THE ABOVE EXPLANATION OF THE ASSESSEE ON THE GROUND THA T THE REPAIRS WERE I THE NATURE OF CAPITAL EXPENDITURE BRINING ENDURING BENEFIT TO THE ASSESSEE. MOREOVER, THE AO NOTED THAT THE EXPENDITURE INCURRED AT UNIT-II OF T HE COMPANY AT 5/5, B.T. ROAD, BELGHORIA, KOLKATA 700056 COULD NOT BE ALLOWED OTHE RWISE ALSO, SINCE THE SAID PREMISES WAS NOT OWNED BY THE ASSESSEE BUT OWNED BY M/S WEST BENGAL CERAMIC DEVELOPMENT CORPORATION LTD. IN THIS REGARD, THE AS SESSEE HAD NOT ON RECORD ANY AGREEMENT BETWEEN IT AND THE OWNER FOR CARRYING OUT OF REPAIR WORKS. 3.1 AT THE APPELLATE STAGE, THE AR OF THE APPELLANT ADVANCED HIS ARGUMENT ON THE MATTER AND FILED WRITTEN SUBMISSION AS FOLLOWS: LEARNED ASSESSING AUTHORITY DISALLOW ENTIRE EXPEND ITURE OF RS.1,07,03,835/- INCURRED FOR REPAIRING OF BUILDINGS ON THE PLEA THA T NONE OF THE EXPENDITURE ARE OF ROUTINE REPAIRS BUT ENTIRELY ARE OF CAPITA L NATURE AND ALSO THAT NO REPAIRING EXPENSES ARE ALLOWABLE ON RENTED PROPERTY . IN THIS CONNECTION, YOUR ASSESSEE SUBMITS THAT THE COMPANY POSSESSES THREE UNITS NAMELY: 1) FACTORY & REGISTERED OFFICE : 11, B.T. ROAD, KOL KATA-56-UNIT I 2) 2 ND PRODUCTION UNIT :5/5 B.T.ROAD, KOLKATA-56-UNIT II 3) CITY & SALES OFFICE : 32&32A, A.P.C. ROAD, KOLK ATA-9 OUT OF THE ABOVE, 1 ST && 3 RD PROPERTY OWNED BY THE COMPANY AND 2 ND PROPERTY WAS TAKEN ON RENT. FIRSTLY, THE LEARNED ASSESSING AUTHORITY ERRED IN C ONCLUDING THAT NO REPAIRING EXPENSES ARE ALLOWABLE ON RENTED PROPERTY SINCE AS PER PROVISION OF SEC 30(A) OF THE ACT COST OF REPAIR ON RENTED PROPERTY WAS ALSO AN ALLOWABLE EXPENDITURE ALONG WITH PAYMENT OF RENT OF THE PROPE RTY. SECONDLY, YOUR ASSESSEE DURING THE COURSE OF HEARIN G OF THE ASSESSMENT, VIDE ITS LETTER DT. 03.02.2015, HAS FULLY DESCRIBED THE NATURE OF ACTIVITIES CARRIED ON FROM EACH OF THE PROPERTY AND ALSO THE REASON AN D CIRCUMSTANCES FOR WHICH SAID REPAIRING WORK WAS CARRIED ON. LEARNED A SSESSING OFFICER, WITHOUT GOING THROUGH THE MERIT OF THE LETTER AND WITHOUT F ULLY GOING THROUGH THE DETAILS ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 7 OF EXPENDITURE, DISALLOWED THE ENTIRE EXPENSES WITH A SIMPLE COMMENT THAT ENTIRE EXPENSES ARE OF CAPITAL NATURE. COPY OF THE ABOVE LETTER AS WELL AS DETAILS OF SUCH EXPENSES ARE ATTACHED. AL THE EXPENSES INCURRED ARE OF DAY TO DAY NORMAL R EPAIRING AND MAINTENANCE NATURE AND SOME OF THEM WERE MADE TO ENSURE SAFETY, SECURITY AND BENEFIT OF THE WORKERS AND STAFF SINCE THE PROPERTIES ARE VERY OLD SPECIALLY THE CITY OFFICE WHICH WAS BUILT UP NEAR INDEPENDENCE. NO NEW STRUCT URES ARE BUILT UP AND EXPENSES ARE ALL FOR MAINTENANCE OF THE EXISTING ST RUCTURES TO KEEP THEM IN WORKING CONDITION. NO NEW ASSET WAS CREATED AND THE COMPANY DID NOT RECEIVE ANY BENEFIT OF ENDURING NATURE. HON'BLE SUP REME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT HAVE CLEARLY DESCRIB ED THE TERM REPAIRS AS FOLLOWS: THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND IS THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EX PENDITURE OR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAINTA IN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITURE IS NO T TO BRING A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJET THE OBTAININ G OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION REPAIRS BECAUSE IT IS ONLY BY REASON OF THIS DEFINITION OF REPAIRS THAT THE EXPEN DITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOS E OF BRINING 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 CL EAR THAT THE DEDUCTION WHICH, THE LEGISLATURE HAS PERMITTED UNDER SECTION 10(2)(V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPEND ITURE AND NOT A CAPITAL EXPENDITURE. IN VIEW OF THE MATTER STATED ABOVE, YOUR ASSESSEE B EG TO SUBMIT THAT THE SAID AMOUNT OF RS.1,07,03,835/- SHOULD BE ALLOWED AS REG ULAR BUSINESS EXPENDITURE. 3.2 I HAVE CONSIDERED THE ARGUMENTS PUT FORTH BY TH E AR OF THE APPELLANT I THE BACKDROP OF THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE REPLY FURNISHED BY THE ASSESSEE IN THE MATTER TO THE AO DURING THE ASS ESSMENT PROCEEDINGS VIDE LETTER DATED 03.02.2015 AS WELL AS THE DETAILS FURNISHED B Y WITH REGARD TO THE IMPUGNED EXPENDITURE. THE JUDICIAL CITATION AS SUBMITTED IS ALSO TAKEN INTO ACCOUNT IN DECIDING THE ISSUE. I FIND THAT THE GROUNDS ON WHICH THE SAI D EXPENDITURE WAS DISALLOWED BY THE AO LAY IN TWO FOLDS I.E. (A) THAT THE EXPENSES WERE NOT OF ROUTINE IN NATURE BU T BRINGING ABOUT ENDURING BENEFITS AND (B) THAT ONE OF THE PREMISES WAS NOT OWNED BY THE ASSESSEE ON WHICH REPAIR WORK WAS DONE. ON ACCO UNT OF JUXTAPOSITION OF BOTH SIDES OF THE CONTENTIONS, I FIND THAT SUCH MATTER H AS BEEN ADJUDICATED UPON BY THE APEX COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS . CIT, WHEREIN THE ACID TEST OF DECIDING THE ISSUE HAS BEEN EXPOUNDED AS TO WHETHER EXPENDITURE OF SUCH KIND WOULD BE CONSIDERED AS REVENUE OR CAPITAL IN NATURE . FROM THAT RULING, I FIND THAT THE CARDINAL PRINCIPLE IN SUCH MATTER WOULD BE TO GAUGE AS TO (I) WHETHER THE EXPENDITURE INCURRED WAS TO BRING IN NEW ASSETS OR (II) WHETHER THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF OBTAINING NEW OR FRESH ADVANTAGE, I FIND THAT NEITHER OF THE TWO GROUNDS COULD BE IMPUTED IN THE INSTANT CASE GOING BY THE FACTS OF THE MATTER AT HAND. FURTHER, I FIND THAT THE ASSESSING OFFICER'S OBSERV ATION THAT EXPENDITURE INCURRED ON RENTED PREMISES WAS NOT ELIGIBLE FOR ANY DEDUCTION TO BE UNTENABLE SINCE AS PER THE PROVISION OF SECTION 30(A) OF THE ACT, COST OF REPA IR ON RENTED PROPERTY WAS ALSO AN ALLOWABLE EXPENDITURE ALONG WITH PAYMENT OF RENT OF THE PROPERTY. IN VIEW OF THE FOREGOING DISCUSSION, I DO NOT FIND ANY MERIT IN TH E ACTION OF THE AO IN RESORTING TO ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 8 MAKE THE IMPUGNED DISALLOWANCE OF 1,07,03,835/- ON BOTH FACTS AND LAW FOR WHICH THE SAME IS DIRECTED TO BE DELETED. THIS GROUND IS ALLOWED. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONT ENDS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE ASSESSEES IMPUGNED CLAIM TO BE NOT INCURRED IN ROUTINE MANNER AND IN VIEW OF THE FACT THAT THE REPAIRED PREMISES WAS NOT IN ITS OWNERSHIP . WE FIND NO SUBSTANCE IN EITHER OF THESE TWO ARGUMENTS. WE AFFORD SUFFICIENT OPPORTUNITIES TO THE REVENUE TO REFER TO THE CASE RECORD FOR THE PURPOSE OF PIN-POINTING ANY CAPITAL EXPENDITURE ELEMENT IN ASSESSEES CLAIM I.E. CREATI ON OF ALTOGETHER A NEW ASSET OR ANY ENDURING ADVANTAGE ETC. THERE IS NO SU CH REBUTTAL COMING FROM THE CASE FILE. THE REVENUES LATTER ARGUMENT RAISIN G OWNERSHIP ISSUE OF THE REPAIRED PREMISES ALSO HAS NO FORCE AS THERE IS NO SUCH PRE-CONDITION IN THE ACT THAT ONLY SELF-OWNED ASSET OR PREMISES OF THE C ONCERNED ASSESSEE CAN BE REPAIRED FOR THE PURPOSE RAISING THE CONSEQUENTIAL CLAIM AS REVENUE EXPENDITURE. THE CIT(A) HAS DULY TAKEN INTO CONSIDE RATION HON'BLE APEX COURTS DECISION (SUPRA). WE THEREFORE REJECT REVENUES BOT H ARGUMENTS. 10. THE REVENUES LATTER GRIEVANCE PLEADED IN THE I NSTANT APPEAL SEEKS TO REVIVE THE ASSESSING OFFICERS ACTION DISALLOWING I TS EMPLOYEES CONTRIBUTION PF/ESI U/S. 36(1)(VA) OF THE ACT ON ACCOUNT OF LAT E PAYMENT. SUFFICE TO SAY, IT HAS COME ON RECORD THAT THE ASSESSEE HAD PAID THE S UM IN QUESTION OF EMPLOYEES CONTRIBUTION TO PF AND ESI AMOUNTING TO 44,655/- BEFORE THE DATE OF FILING ITS RETURN U/S. 139(1) OF THE ACT. HON'BL E JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. M/S VIJAY SHREE LTD. (2011) 224 TAXMAN 12(CAL) HAS ALREADY DECIDED THE VERY ISSUE IN ASSESSEES FAVOUR AS RELIED UPON IN THE CIT(A)S FINDINGS. WE THEREFORE REJECT REVENUES IN STANT LATTER SUBSTANTIVE GROUND AS WELL AS ITS MAIN APPEAL ITA NO.1793/KOL/2 016. 11. THIS LEAVES US WITH ASSESSEES CROSS-APPEAL ITA NO.2219/KOL/2016 RAISING SOLE SUBSTANTIVE GROUND CHALLENGING CORRECT NESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS WRITE OFF CLAIM OF EXCESSIVE VAT PAID ITA NO.1793, 2219-2220/KOL/2016 A YS 12-13 & 11-12 ACIT CIR10(2)/DCIT CIR/10 VS. M/S SARASWATY PRESS LTD. PAGE 9 AMOUNTING TO 13,39,900/-. BOTH THE LEARNED REPRESENTATIVES FAIRL Y STATE AT THE OUTSET THAT THE INSTANT ISSUE IS SQUARELY COVER ED BY OUR FINDINGS IN FORMER ASSESSMENT YEAR 2011-12 DECIDED HEREINABOVE IN ASSE SSEES FAVOUR IN PRECEDING PARAGRAPHS. WE ADOPT THE SAID DISCUSSION MUTATIS MUTANDIS TO ACCEPT ASSESSEES IMPUGNED CLAIM AS WELL AS ITS LAT TER APPEAL ITA 2220/KOL/2016. 12. THESE TWO ASSESSEES APPEAL ITA NO.2219 AND 222 0/KOL/2016 ARE ALLOWED AND REVENUES APPEAL ITA NO.1793/KOL/2016 I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 20/07/2018 SD/- SD/- ( ) (( ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S )- 20 / 07 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S SARASWATY PRESS LTD., 11, B.T.ROAD, B ELGHARIA, KOLKATA-700056 2. /REVENUE-ACIT CIR-10(2)/DCIT CIR-10, P-7 CHOWRINGHE E SQ., 3 RD FL, KOLKATA-69 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 4,