M/s M.Gulab Singh & Sons Pvt. Ltd, Jalandhar V. The Dy Commissioner of Income Tax, Jalandhar

ITA 180/ASR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7768 (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: Depreciation; Business expenditure; 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. 180/(ASR)/2017 ASSESSMENT YEAR: 2013-14 PAN: AABCM6531G M/S M. GULAB SINGH & SONS 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 AN ADDITION OF RS.4,84,874/- WHICH THE ASSESSING OF FICER HAS MADE AFTER REJECTING THE BUILDING REPAIR AND MAINTENANCE EXPEN SES BY HOLDING IT BE A CAPITAL EXPENDITURE. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE AS SESSEE HAD UNDERTAKEN REPAIR WORK IN THE FACTORY PREMISES AT M AHARAJPUR DELHI, IT WAS SUBMITTED THAT THE DRAINAGE SYSTEM WAS INSTALLE D TO DISCHARGE THE EFFLUENTS/ DIRTY WATER GENERATED FROM THE ASSESSEE S PREMISES AND HENCE, ITA NO. 180(ASR)/2017 ASSESSMENT YEAR: 2013-14 2 IT HELPED TO MAINTAIN A CLEAN AND HEALTHY WORKING E NVIRONMENT IN ADDITION TO KEEPING THE WATER POLLUTION UNDER CHECK IN THE AREA. IT WAS ALSO SUBMITTED THAT DRAINAGE SYSTEM FORMED PART OF THE EXISTING BLOCK OF BUILDING AND NOW, ONLY THE REPAIRS WERE CARRIED OUT . IT WAS SUBMITTED THAT DUE TO OLD DRAINAGE SYSTEM THE DIRTY WATER USE D TO FLOWED BACK IN THE PREMISES AND CREATED BAD STINK AND THUS STARTED CREATING A HUGE RISK OF DISEASE AMONG THE EMPLOYEES OF THE ASSESSEE COMP ANY. HENCE, DUE TO SUCH UNHEALTHY ENVIRONMENT CAUSED BY A SINGLE DRAIN AGE SYSTEM, THE ASSESSEE COMPANY WAS LEFT WITH NO CHOICE BUT TO CAR RY OUT REPAIRS TO THE EXISTING DRAINAGE SYSTEM AND DUE TO EXCESSIVE PRESS URE ON THE SINGLE DRAINAGE SYSTEM AN ADDITIONAL SEWAGE LINE WAS CREAT ED WHICH WAS CONNECTED TO MAIN DRAINAGE SYSTEM OF THE AREA. THE LD. AR SUBMITTED THAT IT HAS BEEN HELD BY VARIOUS COURTS THAT REPAIR S OR CONTRIBUTION TO SEWERAGE LINES/WIRING ARE ALLOWABLE AS REVENUE EXPE NDITURE AND RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING JUDGMEN TS: COMMISSIONER OF INCOME TAX VS. NAVSARI COTTON & SI LK MILLS (GUJARAT HC) (1982) 135 ITR 0546 COMMISSIONER OF INCOME TAX VS. CHOWGULE CHEMICALS P VT. LTD. (BOMBAYHC) (1995) 216 ITR 0234 COMMISSIONER OF INCOME TAX VS. ASSOCIATED CEMENT CO MPANIES LTD. (SC) (1988) 172 ITR 0257 COMMISSIONER OF INCOME TAX VS. PANBARI TEA CO. LTD. (PUNJAB A HARYANA HC) (1985)151 ITR 0726 COMMISSIONER OF INCOME TAX VS. ANAND GUM INDUSTRIES (RAJASTHAN HC) (1985) 154 ITR 0680 ITA NO. 180(ASR)/2017 ASSESSMENT YEAR: 2013-14 3 HINDUSTAN TIMES LTD. VS. COMMISSIONER OF INCOME TAX (DELHI HC) (1980)122 ITR 0977 WITHOUT PREJUDICE THE LD. AR SUBMITTED THAT IT IS WELL SETTLED FACT THAT EXPENDITURE INCURRED FOR IMPROVING THE HEALTH OR WORKING ENVIRONMENT FOR THE EMPLOYEE AND FOR REDUCING AIR/N OISE/WATER POLLUTION ARE ALLOWABLE AS REVENUE EXPENDITURE EVEN THOUGH BENEFIT OF ENDURING NATURE IS OBTAINED AND RELIANCE IN THIS RE SPECT WAS PLACED ON THE FOLLOWING CASE LAWS: STEEL TUBES OF INDIA (P) LTD. VS. COMMISSIONER OF INCOME TAX (MADHYA PRADESH HC : INDORE BENCH)(1996) 130 CTR 05 47 COMMISSIONER OF INCOME TAX VS. SAKTHI TEXTILES LTD. (MADRAS HC)(2001) 250 ITR 0449 COMMISSIONER OF INCOME TAX VS. SAKTHI TEXTILES LTD. * (MADRAS HC)(2003)262 ITR 0375 COMMISSIONER OF INCOME TAX VS. BELGACHI TEA CO. LTD . (CALCUTTA HC) (1975) 99 ITR 0099 THE LD. AR FURTHER PLACED HIS RELIANCE ON A NUMBER OF CASES LAWS FOR THE PROPOSITION THAT ANY EXPENDITURE INCURRED F OR THE RUNNING OF BUSINESS EFFICIENTLY IS ALLOWABLE AS REVENUE EXPEND ITURE. 4. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD INCURRED A HUGE EXPENDITURE AND HAD CARRIED OUT WOR K FOR A SIGNIFICANT PERIOD WHICH CONTINUED FOR MONTHS AND THE EXPENDITU RE HAS RESULTED AN ENDURING BENEFIT TO THE ASSESSEE AND THEREFORE THE AUTHORITIES BELOW HAS RIGHTLY MADE THE ADDITIONS. ITA NO. 180(ASR)/2017 ASSESSMENT YEAR: 2013-14 4 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSEE FILED RETUR N OF INCOME DECLARING AN INCOME OF RS.1,85,06,87-/-. THE ASSESSING OFFICE R DURING ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.4,84,874/- ON BUILDING REPAIR AND MAINTENANCE. O N A QUERY FROM THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE E XPENDITURE RELATED TO PROVISIONING OF UPVC LINE TO THE EXISTING PIPES AND THEREFORE ASSESSEE WAS SHOW CAUSED AS TO WHY THE EXPENDITURE SHOULD NO T BE CAPITALIZED. THE ASSESSEE FILED REPLY AND SUBMITTED THAT EXPENDI TURE WAS OF REVENUE NATURE AND RELIED ON VARIOUS CASE LAWS. HOWEVER THE ASSESSING OFFICER ON THE BASIS OF DESCRIPTIONS MENTIONED ON THE BILLS AR RIVED AT THE CONCLUSION THAT SINCE ASSESSEE HAD INSTALLED PUMP AND DRAINAGE LINE AND HAD ALSO RECEIVED WARRANTY ON THE SAME THEREFORE SUCH EXPEND ITURE WAS NOT ONE OF RECURRING NATURE AND THERE WAS AN ENDURING BENEFIT TO THE ASSESSEE AND THEREFORE HE HELD IT TO BE CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION ON IT AND MADE THE ADDITION ACCORDINGLY. THE LD. CIT(A ) UPHELD THE ACTION OF ASSESSING OFFICER. WE FIND THAT THE EXPENDITURE INCURRED BY ASSESSEE M IGHT BE OF AN ENDURING NATURE YET IT CANNOT BE SAID THAT THE EXPE NDITURE IS OF A CAPITAL NATURE. IN OUR VIEW NO NEW ASSET HAS BEEN ACQUIRED BY THE ASSESSEE AND ASSESSEE CARRIED OUT ONLY THE REPAIR WORK TO THE EX ISTING DRAINAGE SYSTEM BY INCREASING ITS CAPACITY WITH LAYING DOWN OF AN A DDITIONAL SEWERAGE LINE. MOREOVER THE EXPENDITURE INCURRED BY ASSESSEE WILL RESULT BENEFIT TO THE EMPLOYEES AND TO THE POPULATION OF LOCAL AREA, IN VIEW OF BETTER ITA NO. 180(ASR)/2017 ASSESSMENT YEAR: 2013-14 5 CONTROL ON WATER POLLUTION. THE CASE LAWS RELIED ON BY LD. AR SPECIFICALLY STATES THAT EXPENDITURE INCURRED ON NEW PIPELINE FO R SUPPLY OF WATER POLLUTION IS BUSINESS EXPENDITURE. THE HON'BLE SUPR EME COURT OF INDIA IN THE CASE OF CIT VS. ASSOCIATED CEMENT COMPANIES LTD . HAS HELD THAT COST OF LAYING PIPELINES BORNE BY ASSESSEE IS ALLOWABLE EXPENDITURE AS REVENUE EXPENDITURE. VARIOUS COURTS HAS HELD THAT EVEN THOU GH BENEFIT OF ENDURING NATURE IS OBTAINED BY ASSESSEE EVEN THEN T HE EXPENDITURE IS ALLOWED AS REVENUE EXPENDITURE. THEREFORE IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND CASE LAWS RELIED ON BY ASSESSEE, WE ARE IN AGREEMEN T WITH THE ARGUMENTS OF LD. AR AND THEREFORE WE REVERSE THE ORDER OF LD. CIT(A) AND ALLOW THE APPEAL FILED BY ASSESSEE. 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 (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER