Imperial Fastners Pvt. Ltd, New Delhi V. DCIT, New Delhi

ITA 1880/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3788 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: O P SAPRA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 1880/DEL/2010 ASSESSMENT YEAR: 2006-07 IMPERIAL FASTNERS PVT. LTD., VS. DCIT, 1092, SHIV MOTOR MARKET, CIRCLE 11(1), BARA BAZAR KASHMERE GATE, NEW DELHI. NEW DELHI. AAAC10832P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI O.P. SAPRA, ADV. RESPONDENT BY : SMT. MONA MOHANTY, SR. DR ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 08.02.2010 FOR A.Y . 2006-07. GROUNDS OF APPEAL READ AS UNDER: - 1. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CAS E OF THERE IS NO LEGAL WARRANT OR VALID JUSTIFICATION ON THE P ART OF LD. AO TO MAKE DISALLOWANCE OF EXPENSES INCURRED ON CURREN T REPAIRS OF POWER PLANT TAKEN ON THE LEASE DURING THE YEAR. THE DISALLOWANCE OF RS. 31,54,844/- ON THE SAID AMOUNT IS TOTALLY UNLAWFUL, UNJUSTIFIED AND UNREASONABLE. THE CIT(A) HAS ALSO ITA NO. 1880/D/2010 2 ERRED IN LAW AND ON FACTS IN DISMISSING THE APPELLA NT ON THIS ISSUE. THE SAME DESERVES TO BE ALLOWED. 2. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE THERE IS NO LEGAL WARRANT OR VALID JUSTIFICATION ON THE PART OF LD. AO TO NOT ALLOW RS. 3,15,484/- CLAIMED AS EXPENDITURE BEI NG THE AMOUNT SPENT ON CURRENT REPAIR OF THE POWER PLANT T AKEN ON LEASE DURING THE YEAR. THE ACTION OF LD. AO NOT AL LOWING THE SAME IS TOTALLY UNLAWFUL, UNJUSTIFIED AND UNREASONA BLE. THE CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN STATIN G THAT THE SAID EXPENDITURE IS NOT ALLOWABLE U/S 35D OF THE AC T WHEN IT WAS AT NO STAGE CLAIMED THAT THE AMOUNT SPENT IS CO VERED U/S 35D OF THE ACT. THE SAME DESERVES TO BE ALLOWED. 2. THE BUSINESS OF THE ASSESSEE IS MANUFACTURING OF STEEL FASTENERS, NUTS AND BOLTS. IT FILED ITS RETURN OF INCOME ON 8.12.2006 SHOWING A LOSS OF RS. 19,84,792/- AND BOOK PROFIT U /S 115JB AT RS. 7,36,458/-. DURING THE COURSE OF HEARING THE AO OB SERVED THAT ASSESSEE HAD DEBITED A SUM OF RS. 31,54,844/- IN TH E COMPUTATION OF INCOME AS DEFERRED REVENUE EXPENDITURE. 10% OF THE SAID AMOUNT WAS DEBITED TO PROFIT & LOSS ACCOUNT ON THE GROUND THAT THOSE ARE DEFERRED REVENUE EXPENDITURE. THE ASSESSEE WAS REQ UIRED TO EXPLAIN THE ALLOWABILITY OF THE SAID EXPENDITURE IN ITS ENT IRETY. IT WAS SUBMITTED THAT THE AMOUNT SPENT IS OF REVENUE IN NA TURE AS THE SAME HAS BEEN INCURRED ON REPAIR OF PLANT TAKEN ON LEASE AND NOT OWNED BY THE ASSESSEE. THE AO REJECTED SUCH CONTENTION OF T HE ASSESSEE ITA NO. 1880/D/2010 3 BECAUSE ACCORDING TO HIM THESE EXPENDITURES WERE NO THING BUT LEASE HOLD IMPROVEMENTS WHICH WERE OF CAPITAL IN NATURE. ACCORDING TO AO SUCH EXPENDITURE HAS GIVEN THE ASSESSEE AND AN E NDURING BENEFIT WHICH IS EVIDENT FROM THE FACT THAT ONLY 10% OF THE SAID AMOUNT HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AND IN THIS MANNER HE HAS ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE AND REDUCING LOSS THERE FROM THE NET INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS. 11,70,050/-, AS THE BOOK PROFIT U/S 115JB WAS T HE LESSER AMOUNT THEN THE ASSESSABLE INCOME UNDER THE NORMAL PROVISI ONS. LD. CIT(A) HAS ALSO UPHELD THE ADDITION. THE ASSESSEE IS AGGR IEVED, HENCE IN APPEAL. 3. IT IS THE CASE OF THE ASSESSEE THAT DURING THE Y EAR UNDER CONSIDERATION IT HAS ENTERED INTO AN AGREEMENT WITH M/S CENTRAL COALFIELD LTD., RANCHI FOR LEASE OF THEIR THERMAL P OWER STATION OF 2X10 MW CAPACITY AT KATHARA ON MONTHLY LEASE BASIS. THE OWNERSHIP RIGHTS OF THE SAID POWER STATION CONTINUE D TO BE WITH LESSOR. THE SCOPE OF WORK TO BE EXECUTED BY THE AS SESSEE WAS TO OPERATE AND MAINTAIN THE POWER STATION IN ADDITION TO CARRY OUT OTHER WORKS. TO MAKE IT OPERATIONAL THE ASSESSEE HAS INC URRED CERTAIN EXPENDITURE. THE DETAIL GIVING ALL PARTICULARS WAS SUBMITTED TO THE AO. THE SAID EXPENDITURE WAS TREATED AS DEFERRED R EVENUE ITA NO. 1880/D/2010 4 EXPENDITURE IN THE BOOKS OF THE ASSESSEE COMPANY. ALL THE EXPENDITURE INCURRED FALL IN THE CATEGORY OF CURREN T REPAIRS IN VIEW OF THE FACT THAT THEY HAVE BEEN INCURRED ON EXISTING P LANT WHICH WAS TAKEN ON LEASE AND WAS MADE OPERATIONAL. DURING TH E YEAR 2253500 UNITS OF POWER WERE GENERATED AND SOLD FOR RS. 61,1 7,125/-. COPIES OF ANNUAL AUDITED ACCOUNTS OF THE SAID PLANT OF THE COMPANY WERE ALSO FILED. AS THE MANUFACTURING ACTIVITY WAS CARR IED OUT DURING THE YEAR AND THE REVENUE WAS GENERATED THEREFORE, THE A MOUNT SPENT ON REPAIR IS AN ADMISSIBLE EXPENDITURE. IT IS ALSO TH E CASE OF THE ASSESSEE THAT THE EXPENDITURES ARE IN THE NATURE OF REVENUE AND THEY HAVE BEEN INCURRED OUT OF NECESSITY. TO GET BETTER FINANCES FROM THE BANK THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENDITURE. THE YEAR BEING FIRST YEAR OF OPERATION THE REVENUE GENERATED WAS NOT SUFFICIENT TO ABSORB WHOLE EXPENDITURE INCURRED DUR ING THE YEAR. IN THIS MANNER IT IS THE CLAIM OF THE ASSESSEE THAT EX PENDITURE ARE ALLOWABLE. ALL THESE FACTS ARE FOUND MENTIONED IN THE PARA 3 OF ORDER OF LD. CIT(A). ALTERNATIVELY IT IS THE CASE OF THE ASSESSEE THAT DEPRECIATION OF 10% SHOULD BE ALLOWED ON IT, IN CAS E MAIN GROUND OF THE ASSESSEE IS NOT ACCEPTED. LD. CIT(A) HAS UPHEL D THE TREATMENT GIVEN BY THE AO BY HOLDING THAT THE EXPENDITURE INC URRED BY THE ASSESSEE ARE CAPITAL IN NATURE. ITA NO. 1880/D/2010 5 4. THE SUBMISSIONS MADE BEFORE AO AND CIT(A) WERE R EITERATED BEFORE US BY THE LD. AR WHO HAS ALSO FILED BEFORE U S SYNOPSIS OF HIS ARGUMENTS. IN THE SYNOPSIS APART FROM REITERATING THE SUBMISSIONS MADE BEFORE AO AND CIT(A), IT IS THE CASE OF LD. AR THAT THE CASE LAW RELIED UPON BY LD. CIT(A) TO HOLD THAT THE EXPE NDITURE ARE CAPITAL IN NATURE HAS NO APPLICATION TO THE FACTS OF THE CA SE OF THE ASSESSEE. IN ADDITION HE HAS SUBMITTED THAT IN ALL SUBSEQUENT YEARS THE EXPENDITURE INCURRED HAVE BEEN ALLOWED BY THE REVEN UE AND HE HAS PRODUCED BEFORE US A CHART THEREOF WHICH IS ANNEXED TO SYNOPSIS AS ANNEXURE 1 AND READ AS UNDER: - IMPERIAL FASTNERS PRIVATE LIMITED, DELHI COMPARATIVE CHART OF EXPENSES FOR THREE YEARS ON RE PAIRS & MAINTENANCE OF KATHARA PLANT FOR THREE YEARS ASSESSMENT YEAR REPAIRS & MAINTENANCE (RS.LAKHS) 2009-10 53.97 2008-09 70.76 2007-08 64.24 2006-07 31.54 5. ON THE OTHER HAND, LD. DR RELYING UPON THE ORDER OF AO AND CIT(A), PLEADED THAT THE EXPENSES INCURRED BY THE A SSESSEE ARE OF CAPITAL IN NATURE AS IT HAS GIVEN ENDURING BENEFIT TO THE ASSESSEE. THE ASSESSEE ITSELF HAS TREATED THE SAID EXPENDITURE AS DEFERRED REVENUE EXPENDITURE WHICH IS DIVIDED INTO 10 PARTS. THEREFO RE, SHE PLEADED ITA NO. 1880/D/2010 6 THAT THE CLAIM OF THE ASSESSEE HAS RIGHTLY BEEN DEN IED BY THE LD. CIT(A) AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. TO APPRECIATE THE NATURE OF THE EXPENDITURE MADE BY THE ASSESSEE IT WILL BE RELEVAN T TO REPRODUCE THE DETAILS SUBMITTED BY THE ASSESSE WITH REGARD TO THO SE EXPENDITURE A COPY OF WHICH IS PLACED AT PAGE 17 OF THE PAPER BOO K: - DETAIL OF DEFERRED REVENUE EXPENDITURE DURING THE Y EAR 2005-06 SR. SUPPLIER DATE BILL NO. DESCRIPTION OF NATURE OF AMOUN T GOODS EXPENDITURE (RS.) 1. VINSOIL OIL COMPANY, 06.08.05 001 T.R. OIL FOR LU BRICATION 443,906 J-2/6B, RAJOURI GARDEN, OF PARTS OF PLANT NEW DELHI 110027 FOR ITS RUNNING 2. BALAJI INDUSTRIAL PRODUCTS LTD. 23.09.05 014 STEEL HAMMER RE PLACEMENT 227,908 117 & 119, INDUSTRIAL AREA, (COAL CRUSHER) JOTHWARA, JAIPUR 302012 3. SAVITA CHEMICALS LTD., 17.10.05 4722 TURBINE FLUID FOR MOVEMENT OF 633,764 PLOT NO. 10/2, KHARAPADA, TURBINE P.O. NAROLI, SILVASA 396230 4. EXSOL ENERGY SYSTEMS, 13.12.05 345 LEAD ACID REPLACEMENT 530,000 THE CRANIUM, 24, TOP FLOOR, STATIONERY CELL ADHCHINI, NEW DELHI 110017 BATTERIES 5. EAGLE POONAWALA INDUSTRIES 10.03.06 8408 MECHANICAL REPLACEME NT 143,899.60 212/2, HADAPSAR, PARTS OFF SOIL POONAWALA ROAD, PUNE-411028 6. ADVANT AUTOMATION SOLUTIONS 13.03.06 0139 HOT WELL LEVEL REPLACEME NT 107,640 PRIVATE LIMITED, 11/124, SWITCH HOT WELL INDIRA NAGAR, LUCKNOW (U.P) 7. R.K. AUTOMOBILES (P) LTD., 16.03.06 1245 VALVES REPLA CEMENT 208,000 2620/3, HAMILTON ROAD, BEARINGS KASHMERE GATE, DELHI-6. OIL SEALS ETC. 8. ANIL RUBBER MILLS (P) LTD., 25.03.06 146 CONVEYOR BELT REPLACEMENT 750,031 PLOT NO. 30, SECTOR-6, FARIDABAD 121006 ITA NO. 1880/D/2010 7 9. DHANBAD ELECTRO POWER 31.01.06 06 ELECTRIC METER REPLACE MENT 109,695 METERS, 28, BINOD MARKET, (NEAR COURT MORE), HIRAPUR, DHANBAD 860002 _______________________________________________________________________________________ TOTAL 3,154,843.60 ________________________________________________________________________________________ 7. ALONGWITH THE ABOVE DETAILS THE ASSESSEE HAS PLA CED BILLS AND VOUCHERS FROM PAGES 18 TO 26A. THE COPY OF THE REP LY DATED 31 ST JULY, 2008 FILED BY THE ASSESSEE BEFORE AO EXPLAINI NG THE ALLOWABILITY OF SUCH EXPENDITURE IS AS UNDER: - 3. A STATEMENT GIVING DETAIL ON AMOUNT SPENT ON V ARIOUS ITEMS DEBITED TO DEFERRED REVENUE EXPENDITURE ALONG WITH PHOTOCOPY OF RELATED BILLS IN SUBMITTED HEREWITH. THE AMOUNT SO DEBITED IS EXPENDITURE ON REPAIRS TO POWER GENERATION PLANT AT KATHARA, JHARKHAND TAKEN ON LEA SE. THE AMOUNT SPENT IS REVENUE EXPENDITURE AS THE SAME HAS BEEN INCURRED ON REPAIRS TO PLANT TAKEN ON LEASE WH ICH IS NOT OWNED BY THE ASSESSEE COMPANY, THE LEASE AGREEM ENT DOES NOT GIVE ANY OWNERSHIP RIGHTS TO THE COMPANY O VER THE SET PLANT, EVEN OTHERWISE THE ITEMS WHICH HAVE PURCHASED AND FITTED IN THE PLANT ARE OF NORMAL WEA R AND TEAR AND DO NOT HAVE LONG LIFE AND ARE SUBJECT TO REPLACEMENT FROM TIME TO TIME DURING THE RUNNING OF PLANT. THE COMPANY HAS NOT CREATED ANY ASSET FOR I TSELF BY INCURRING THE SAID EXPENDITURE. THERE IS NO BEN EFIT OF ENDURING NATURE TO THE COMPANY BY INCURRING THE SAI D EXPENDITURE. THE LEASE AGREEMENT CAN BE TERMINATED AT ANY TIME EVEN DURING THE CURRENCY OF LEASE AND, AT THAT ITA NO. 1880/D/2010 8 STAGE THE PLANT IS TO BE HANDED OVER TO ITS OWNER B Y THE COMPANY WITH ALL FITTINGS INCLUDING THESE ITEMS. IN THE BOOKS OF ACCOUNTS THE AMOUNT HAS BEEN DEBITE D AS DEFERRED REVENUE EXPENDITURE OUT ON NECESSITY. THE NEED WAS TO SHOW SUFFICIENT PROFITS TO THE BANKERS OF TH E COMPANY TO PRESENT GOOD FINANCIAL RATIOS AS BORROWE R WHICH INDICATORS OF FINANCIAL HEALTH OF THE COMPANY AS JUDGED BY THE BANKERS AS PER THEIR NORMS AND STANDA RD PRACTICE. UNDER THE INCOME TAX ACT THERE IS NO TERM AS DEFERR ED REVENUE EXPENDITURE. UNDER THE ACT THE TREATMENT O F ANY EXPENDITURE INCURRED DURING THE COURSE OF RUNNING O F BUSINESS IS EITHER CAPITAL OR REVENUE. IN VIEW OF THE FACTS SUBMITTED ABOVE SPECIALLY THAT THE AMOUNT HAS BEEN SPENT ON THE REPAIRS TO PLANT ON WHICH THE COMPANY DOES N OT HAVE ANY OWNERSHIP RIGHTS NOR CAN DERIVE THE SAME A T ANY POINT OF TIME AND THE ITEMS NEED FREQUENT REPLACEMENT THE AMOUNT SPENT IS DEFINITELY OF REVEN UE NATURE ELIGIBLE FOR DEDUCTION AS EXPENSE FOR THE YE AR TO ARRIVE AT THE TAXABLE INCOME OF THE ASSESSING COMPA NY. 8. RIGHT FROM THE BEGINNING IT HAS BEEN THE CLAIM O F THE ASSESSEE THAT THE NATURE OF EXPENDITURE INCURRED BY THE ASSE SSEE IS REVENUE. FROM THE DETAILS IT CAN BE SEEN THAT NONE OF THE EX PENDITURE HAS CREATED ANY ITEM OF CAPITAL ASSET. IT IS IN THE NAT URE OF LUBRICATING OIL, REPLACEMENT OF STEEL HAMMER, TURBINE FLUID FOR MOVE MENT OF TURBINE, LEAD ACID STATIONERY CELL BATTERIES WHICH HAVE BEEN REPLACED, ITA NO. 1880/D/2010 9 MECHANICAL PARTS WHICH HAVE BEEN REPLACED AND OTHER ITEMS OF REPLACEMENT LIKE HOT WELL LEVEL, VALVES BEARINGS OI L SEALS, CONVEYOR BELT AND ELECTRICAL METERS. IF ASSESSEE HAS TO BRI NG THE PLANT IN WORKING ORDER AND TO RUN IT, THESE EXPENDITURE ARE NECESSARY IN REGULAR COURSE AND THEY REPRESENTS DAY TO DAY EXPEN DITURE EITHER IN THE NATURE OF CURRENT REPAIR OR IN RESPECT OF WEAR AND TEAR OF THE PLANT AND MACHINERY. THEREFORE, NONE OF THESE EXPENDITUR ES HAVE CREATED ANY CAPITAL ASSET TO THE ASSESSEE AND THEY ARE NOT IN THE NATURE OF CAPITAL EXPENDITURE. 9. NOW, IT IS THE CASE OF THE LD. CIT(A) THAT ASSES SEE HAS ENTERED INTO AN AGREEMENT TO RUN THAT PLANT ON 14 TH OCTOBER, 2005, WHEREAS EVEN PRIOR TO THAT EXPENDITURE HAVE BEEN INCURRED O N 6 TH AUGUST, 2005 AND 23 RD SEPTEMBER, 2005. IT IS THE CASE OF THE ASSESSEE T HAT IT WAS UNDER NEGOTIATIONS TO RUN THAT PLANT AND, THERE FORE, THESE PURCHASES HAVE BEEN MADE IN ADVANCE AND IT IS NOT I N DISPUTE THAT ASSESSEE HAD RUN THE SAID PLANT DURING THE YEAR UND ER CONSIDERATION AND HAS ALSO GENERATED THE ELECTRICITY. WE HAVE PE RUSED THE AGREEMENT ON THE BASIS OF WHICH THE ASSESSEE HAS OP ERATED THE SAID PLANT. THE TERM OF LEASE IN CLAUSE 1.1 HAS BEEN DE SCRIBED AS TWENTY YEARS COMMENCING FROM 14 TH OCTOBER, 2005 SUBJECT TO PAYMENT TO THE LESSOR, THE MONTHLY RENT OF RS. 32 LAKH (STATED IN CLAUSE 4.1 OF THE ITA NO. 1880/D/2010 10 AGREEMENT) STARTING FROM 14 TH APRIL, 2006 BEFORE 15 TH DAY OF EVERY MONTH. CLAUSE 1.4 UNDER THE HEAD SCOPE OF WORK C ASTS AN OBLIGATION ON THE ASSESSEE TO MAINTAIN THE PLANT AN D EQUIPMENTS AND TO CARRY OUT ALL THE REPAIRS INCLUDING CAPITAL REPA IR AND STATUTORY INSPECTION/OVERHAULING/REPAIR OF BOILERS. PROCUREM ENT OF SPARES, CONSUMABLES, OILS, LUBRICANTS AND CHEMICALS REQUIRE D FOR OPERATION AND MAINTENANCE OF POWER PLANT. UNDER CLAUSE 5, TH E LASSEE IS UNDER AN OBLIGATION TO MAKE AVAILABLE THE ELECTRICITY SUP PLY TO THE LESSOR AT THE RATES DESCRIBED THEREIN. UNDER CLAUSE 17.3 THE TERMINATION CLAUSE IS DESCRIBED AS UNDER: - 17.3 AT THE EXPIRATION OR SOONER DETERMINATION OF DEMISE, THE LESSEE SHALL YIELD UP AND DELIVER UPON LESSER PEACEFUL POSSESSION OF THE STATION IN GOOD RUNNING CONDITION WITHOUT CLAIMING ANY COMPENSATION VALUE THEREOF BUT LESSER SHALL PAY TO THE LESSEE WRITTEN DOWN VALUE OF THE ADDITIONS AND ALTERATIONS OF THE BUILD ING, STATION OR ADDITIONAL MACHINERY THAT MAY BE BROUGHT BY THE LESSEE AT THE STATION. ON SUCH DETERMINATION T HE SCHEDULE STATION SHALL REST IN AND BE THE ABSOLUTE PROPERTY OF LESSER. 10. A CUMULATIVE READING OF ALL THESE CLAUSES WILL SHOW THAT ASSESSEE WAS TO OPERATE THE PLANT OF GENERATION OF ELECTRICITY AND PART OF THE GENERATION OF ELECTRICITY WAS TO BE SUPPLIED TO THE LESSOR AT ITA NO. 1880/D/2010 11 PRESCRIBED RATES. THE ASSESSEE WAS TO INCUR EXPENS ES ON REPAIRS AND MAINTENANCE OF THE PLANT TO MAKE AND TO RUN IT AS O PERATIONAL. THOUGH THE PLANT WAS TO GENERATE ELECTRICITY AND GE NERATE REVENUE IN THE YEAR UNDER CONSIDERATION BUT THE PAYMENT OF LEA SE RENT WAS TO START FROM 14 TH APRIL, 2006 WHICH DATE FALLS IN THE NEXT FINANCIAL YEAR. THE TERM OF LEASE IS 20 YEARS. AS PER CLAUSE 17.3, UPON EXPIRATION OF LEASE, THE ASESSEE WAS TO HANDOVER THE PLANT IN GOO D RUNNING CONDITION EXCEPT LIABILITY OF LESSOR TO PAY TO THE ASSESSEE THE WRITTEN DOWN VALUE OF THE ADDITIONS AND ALTERNATIONS OF THE BUILDING, STATION OR ADDITIONAL MACHINERY THAT MAY BE BROUGHT BY THE LESSOR AT THE STATION AND ON SUCH DETERMINATION THE SCHEDULE STAT ION SHALL REST IN AND BE THE ABSOLUTE PROPERTY OF THE LESSER. THUS, THIS CLAUSE CONVEYS THAT WHAT THE ASSESSEE IS ENTITLED IS ONLY WRITTEN DOWN VALUE OF THE ADDITIONS AND ALTERNATIONS TO THE BUILDING, STATION OR ADDITIONAL MACHINERY. THE AFOREMENTIONED DETAIL WILL REVEAL T HAT NONE OF THE ITEM REPRESENTS ADDITION OR ALTERNATION TO THE BUIL DING, STATION OR ADDITIONAL MACHINERY. THEREFORE, THE AMOUNT OF EXP ENDITURE INCURRED BY THE ASSESSEE CANNOT BE SAID TO BE GIVIN G ANY ENDURING BENEFIT TO THE ASSESSEE. IT HAS NOT CREATED ANY CA PITAL ASSET FOR THE ASSESSEE. THEREFORE, KEEPING IN VIEW THE TERMS OF AGREEMENT AND FACTS OF THE CASE, IT CANNOT BE SAID THAT THE EXPEN DITURE INCURRED BY THE ASSESSEE HAS GIVEN AT ANY ENDURING BENEFIT. ITA NO. 1880/D/2010 12 11. AS PER WELL SETTLED LAW, THE WAY IN WHICH THE E NTRIES ARE MADE BY AN ASSESSEE IN ITS BOOKS OF ACCOUNT IS NOT DETER MINATIVE OF THE QUESTION THAT WHETHER THE ASSESSEE HAS EARNED ANY P ROFIT OR SUFFERED ANY LOSS. THE ASSESSEE MAY, MAKE ENTRIES WHICH ARE NOT IN CONFORMITY WITH THE PROPER ACCOUNTANCY PRINCIPLES, CONCEAL PROFIT OR SHOW LOSS AND THE ENTRIES MADE BY HIM CANNOT, THERE FORE, BE REGARDED AS CONCLUSIVE ONE WAY OR THE OTHER AND REF ERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF SUTLEJ WATER MILLS LTD. VS. CIT 116 ITR 1 ( SC). THEREFORE, THE ENTRIES MADE BY THE ASSESSEE SHOWING THE SAID E XPENDITURE AS DEFERRED REVENUE EXPENDITURE IS NOT DETERMINATIVE O F THE FACT THAT WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE AR E IN THE NATURE OF CAPITAL. IT HAS BEEN DESCRIBED EARLIER THAT THE NA TURES OF THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT CAPITAL IN NATURE. IT HAS ALREADY BEEN DESCRIBED THAT ASSESSEE HAS OPERATED T HE PLANT FOR THE YEAR UNDER CONSIDERATION AND HAS GENERATED THE REVE NUE OUT OF PRODUCTION OF ELECTRICITY. THEREFORE, CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE HAS NOT GIVEN ANY ENDURING BENEFIT TO THE ASSESSEE AND THEY ARE REVENUE EXPENDITURE. THE TREATMENTS GIVEN BY T HE ASSESSEE IN ITS ACCOUNT HAS NO RELEVANCE PARTICULARLY IN THE VIEW T HAT COMPUTATION ITA NO. 1880/D/2010 13 OF INCOME THE ASSESSEE HAS CLAIMED THESE EXPENDITUR ES IN THEIR ENTIRETY. 12. AS WE HAVE HELD THAT THE AFOREMENTIONED EXPENDI TURE ARE ALLOWABLE AS REVENUE IN NATURE, WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE ALTERNATIVE GROUND OF THE ASSESSEE WHICH P LEADS THAT IN CASE THE EXPENDITURE ARE HELD TO BE OF CAPITAL IN NATURE THEN THE DEPRECIATION SHOULD BE ALLOWED. THAT GROUND OF THE ASSESSEE HAS BECOME INFRUCTUOUS. 13. IN THE RESULT, THE APPEAL FILED BY THE ASESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17.6.2011 SD/- SD/- (SHAMIM YAHYA) (I.P. BANSA L) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.6.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR