SHRIJEE LIFESTYLE P. LTD ( FORMERLY KNOWN AS KAGZI BROTHERS P. LTD ), MUMBAI V. DCIT CIR 4(2), MUMBAI

ITA 1869/MUM/2010

• Counselvise Citation: 186919914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Depreciation; Business expenditure; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D,MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) & SMT. ASHA VIJAYARAGHAVAN (JM) I.T.A.NO.1869/MUM/2010 (A.Y. 2006-07)) M/S. SHRIJEE LIFESTYLE PVT.LTD., 384-M, DABHOLKAR WADI, 3 RD FLOOR, KALBADEVI ROAD, MUMBAI-400002. PAN: AAACK1560G VS. DY.COMMR. OF INCOME-TAX, CIRCLE- 4(2), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI VIJAY MEHTA. RESPONDENT BY SHRI R .K. GUPTA O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED ON 26-02-2010 BY THE CIT(A) IN RELATION TO THE ASSTT. YEAR 2006-0 7. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF MANUFACTURING TEXTILE GOODS. THE COMPANY HAD E-FILE D THE RETURN OF INCOME ON 29-11-2006 DECLARING TOTAL INCOME AT RS.10,67,859/- UNDER THE NORMAL PROVISIONS AND PAID TAXES UNDER THE MAT PROVISIONS ON BOOK PROFIT U/S.115JB AT RS.81,75,729/-. 3. THE ASSESSEE HAD CLAIMED REPAIR & MAINTENANCE EX PENDITURE OF RS.14,82,107/0 FOR THE FACTORY PREMISES SITUATED AT DOMBIVLI. THE AO HAS DISCUSSED THIS ISSUE AT PARA 5.1 AND HAS OBSERVED T HAT THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 11-12-2008 WAS ASKED TO STATE THE NATURE OF WORK DONE. HOWEVER, THE AO HAS REMARKED THAT NEITHER THE ASSES SEE HAS FILED THE BILLS AND ITA NO.1869/M/10. SHRIJEE LIFESTYLE P.LTD. 2 VOUCHERS RELATING TO REPAIRS & MAINTENANCE NOR HAS HE GIVEN THE NATURE OF WORK DONE. THE AO OBSERVED THAT THE AUDIT REPORT MENTION ED THAT THE ASSESSEE HAD MADE ADDITION TO ITS BUILDINGS AT RS.31,47,795/- AN D SINCE THE ASSESSEE HAD FURNISHED THE DETAILS, THE AMOUNT IS TO BE CAPITALI ZED TO FIXED ASSETS AND THEREFORE THE AO ALLOWED DEPRECIATION AT 10%. THE A O MADE ADDITION OF RS.13,33,896/- AFTER ALLOWING DEPRECIATION @ 10% OF RS.1,48,211/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) AND THE ASSESSEE CLARIFIED THAT THE ASSESSEE HAD ITSELF CA PITALIZED THE AMOUNT OF RS.3`1,47,795/- AND THE AO HAD FURTHER CAPITALIZED THE BALANCE AMOUNT CLAIMED AS REPAIRS & MAINTENANCE AND ALLOWED DEPRECIATION. THE ASSESSEE SUBMITTED THAT DETAILS REQUIRED BY THE AO WERE FILED AND EXPENDIT URE FOR REPAIR WAS OF CURRENT REPAIR IN NATURE AND WAS NOT A CAPITAL EXPENDITURE. SINCE THE ASSESSEE HAD OCCUPIED THE BUILDING FOR MORE THAN 25 YEARS, THE A CTUAL REPAIR ITSELF CAME TO RS.14,96,603/-. THE ASSESSEE FURNISHED COPIES OF BI LLS AND DETAILS OF EXPENDITURE CLAIMED. THE CIT(A) HELD AS UNDER : 3.1 I HAVE GONE THROUGH THE ORDER OF THE A.O. AND SUBMISSION OF APPELLANT AND DETAILS OF EXPENDITURE FURNISHED. THE APPELLANT HAS UNDERTAKEN EXTENSIVE RENOVATION OF ITS FACTORY BUILDING AND HAS ITSELF CAPITALIZED RS.32,24,897/-. THE DETAILS OF BUILDING REPAIR AND MAINTENANCE FILED AT PAGE 54 AND 65 SHOW S EXPENDITURE OF CEMENT, SAND, PAINT, PIPE, NOZZLE, INSTALLED FRP SHEETS, ASBESTOS FLAT CEMENT SHEET E TC. AND THOUGH THE DETAILS ARE UNDER THE 34 HEADS, THE EXPENDITURE IS PART AND PARCEL OF EXTENSIVE RENOVAT ION WORK UNDERTAKEN AND ARE NOT CURRENT REPAIRS UNDER T HE CIRCUMSTANCES, ACTION OF THE A.O. IS FOUND TO BE VA LID AND IS CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, SHR I VIJAY MEHTA, SUBMITTED THAT THE CIT(A) DID NOT APPRECIATE THAT IN TEXTILE PROCESSING INDUSTRY SOME REPAIRS TO BUILDING ARE INEVITABLE. FURTHER, HE SUBMITTED T HAT IN THE PRECEDING PREVIOUS ITA NO.1869/M/10. SHRIJEE LIFESTYLE P.LTD. 3 YEARS SUCH EXPENDITURE INCURRED HAD BEEN ALLOWED. T HE LD. COUNSEL SUBMITTED THAT PROCESSING OF TEXTILE GOODS INVOLVES ADDING VA RIOUS CHEMICALS AND GIVING HEAT TREATMENT AT VERY HIGH TEMPERATURE AND THERE I S BOUND TO BE DAMAGE TO THE BUILDING AND HIGH CORROSION TO THE TOP FLOOR REQUI RING PERIODICAL REPAIRS TO MAINTAIN THE SHOP FLOOR IN GOOD WORKING CONDITION. THE LD. COUNSEL FOR THE ASSESSEE FILED THE DETAILS OF BUILDING REPAIRS & MA INTENANCE ALONG WITH COPY OF DETAILS AND VOUCHERS AT PAGES 12 TO 48 OF THE PAPER BOOK. 4.1 THE LD. D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE EVID ENCES AND GONE THROUGH THE PAPER BOOK. WE FIND THAT THERE HAVE BEEN REPAIR S TO BUILDING, PLANT & MACHINERY AND THE EXPENSES HAVE BEEN INCURRED IN T HE COURSE OF BUSINESS OF THE ASSESSEE. WE ALSO FIND THAT SMALL EXPENSES HAVE BEE N INCURRED FOR MAINTENANCE AND REPLACEMENT OF CEMENT SHEET AND PLASTERING OF T HE FLOOR. THE MADRAS HIGH COURT IN CIT VS. ASHER TEXTILES LTD. (240 ITR 483) AND IN CIT VS. JAWAHAR MILLS LTD. (226 ITR 230) (MAD) HAS OBSERVED THAT WHILE TH E EXPENDITURE INCURRED IN BRINGING THE BUILDING INTO EXISTENCE, THE REPAIR & REPLACEMENT TO PORTIONS OF THE BUILDING FOR THE CONTINUED ENJOYMENT OF THAT BUILDI NG IS NOT CAPITAL EXPENDITURE. THE FACT THAT NEW MATERIALS HAVE TO BE USED FOR REP LACING OF WORN OUT OR DAMAGED PARTS OR PORTION OF THE BUILDING DOES NOT R ESULT IN A NEW ASSET BEING CREATED. EVERY PART OF THE BUILDING IS NOT TO BE RE GARDED AS A SEPARATE ASSET. IT IS THE STRUCTURE AS A WHOLE WHICH HAS UTILITY AND REPA IRS & REPLACEMENTS TO THAT STRUCTURE AS A WHOLE CANNOT BE REGARDED AS CAPITAL EXPENDITURE. THE AHMEDABAD TRIBUNAL IN THE CASE OF NATIONAL DAIRY DEVELOPMENT BOARD VS. ADDL. CIT 310 ITR 375 HAS HELD THAT THE EXPENDITURE ON REPAIRS & MAI NTENANCE IS ALLOWABLE AS A REVENUE EXPENDITURE. 6. HAVING GONE THROUGH THE DETAILS OF THE REPAIR & MAINTENANCE OF BUILDING PRODUCED AT PAGE-12 OF THE PAPER BOOK, WE ARE OF TH E OPINION THAT MOST OF THEM ITA NO.1869/M/10. SHRIJEE LIFESTYLE P.LTD. 4 ARE TOWARDS REPLACEMENT EXPENDITURE, LABOUR CHARGES , PAINTING EXPENDITURE, EXPENDITURE TOWARDS SAND, KHADI AND CEMENT WHICH AR E REVENUE IN NATURE AND HENCE ALLOWABLE AS NORMAL BUSINESS EXPENDITURE. HEN CE, WE ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 7. THE NEXT ISSUE IS REGARDING DISALLOWANCE OF RS.1 ,42,981/- U/S.43B. THE AO HAS DISCUSSED THE ISSUE AT PARA 4.1 OF THE ASSESSME NT ORDER. THE CIT(A) HELD THAT THE ASSESSEE SUBMITTED THAT IT HAD MADE PAYMEN T WITHIN THE GRACE PERIOD. IT IS SEEN THAT THE AO HAS DISCUSSED THIS ISSUE AT PAR A 4.1 AND HAS GIVEN IN A TABLE THE ACTUAL DATE OF PAYMENTS AND HAS HELD THAT EMPLO YEES CONTRIBUTION TOWARDS PROVIDENT FUND IS REQUIRED TO BE MADE WITHIN DUE DA TE. 8. ON APPEAL BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE LD. CIT(A) ERRED IN ALLOWING THE GROUND FOR THE PAYMENT OF PF U/S.43B O N THE BASIS OF PAYMENT WITHIN GRACE PERIOD, WHEREAS THE ACTUAL TENDER DATE OF CHEQUE WAS BEFORE THE DUE DATE I.E. AROUND 12/13/14 DAYS OF THE SUBSEQU ENT MONTHS I.E. BEFORE 15 TH . 9. WE FIND THAT THIS ISSUE IS NOW SETTLED BY THE D ECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXCLUSIONS LTD. ( 319 ITR 306) AND THE DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD. (321 I TR 508) WHEREIN THE HIGH COURT HAS HELD THAT BOTH THE EMPLOYERS AND THE EMP LOYEES CONTRIBUTION AS WELL AS OTHER INCIDENTAL CHARGES CANNOT BE DISALLOWED U/ S.43B, IF PAID BEFORE THE DUE DATE OF FILING OF THE RETURN U/S.139(1). WE FIND T HAT SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. P.M. ELECTRONICS LTD. (313 ITR 161). RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE ALLO W THE APPEAL OF THE ASSESSEE WITH THE DIRECTION THAT EMPLOYERS/EMPLOYEES CONTRIB UTION TO P.F., IF PAID WITHIN THE DUE DATE OF FILING OF THE RETURN U/S.139(1), SH OULD BE ALLOWED AND CANNOT BE DISALLOWED U/S.43B. 9. IN THE RESULT, THE APPEAL IS ALLOWED. ITA NO.1869/M/10. SHRIJEE LIFESTYLE P.LTD. 5 ORDER PRONOUNCED ON THE 24TH DAY OF JUNE, 2011 . SD/- SD/- (PRAMOD KUMAR) (SMT. ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 24TH JUNE , 2011. NG: COPY TO : 1. ASSESSEE. 2. DEPARTMENT. 3 CIT(A)-8,MUMBAI. 4 CIT-4,MUMBAI. 5.DR,D BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.1869/M/10. SHRIJEE LIFESTYLE P.LTD. 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 13-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 14-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER