Dr. Gurvinder Singh Jammu, Jalandhar V. The Dy. Commissioner of Income-tax, Jalandhar

ITA 191/ASR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63424 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 191(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AAMPL8608D DR. GURVINDER SINGH JAMMU, VS. DY. COMMR. OF INCOM E-TAX, JALANDHAR. RANGE-3, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SANDEEP VIJH, CA RESPONDENT BY: SH. TARSEM LAL, DR DATE OF HEARING: 30/07/2012 DATE OF PRONOUNCEMENT:06/08/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A) JALANDHAR, DATED 13.03.2012 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.1,97,234/- FROM OUT OF REPAIR AND MAINTENANCE EX PENSES ON BUILDING WHICH REPRESENTED THE COST OF REPAINTING T HE BUILDING. THE CIT(A) HAS NOT APPRECIATE THE SUBMISSION MADE A ND HAS RELIED ON PRESUMPTIONS FOR UPHOLDING THE REVENUE EX PENDITURE AS CAPITAL EXPENDITURE. IN ANY CASE DEPRECIATION ON THE AMOUNT TREATED AS CAPITAL EXPENDITURE SHOULD HAVE BEEN ALL OWED. ITA NO.191(ASR)/2012 2 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OUT OF ELECTRICAL REPAIR TO THE EXTENT OF RS.37,609/- AS BEING CAPITA L IN NATURE BY LAYING DOWN A LOW VALUE LIMIT OF RS.5000/- PER BILL AS ALLOWABLE REVENUE EXPENDITURE. 3. IN GROUNDS NO.1 & 2, THE BRIEF FACTS ARE THAT TH E AO FOUND THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.2,57,646/- O N REPAIR AND MAINTENANCE OF A BUILDING WHICH WAS STILL INCOMPLET E, AS COMPARED TO EXPENDITURE OF RS.9975/- CLAIMED IN THE PRECEDING A SSESSMENT YEAR 2005-06. THE EXPENDITURE WAS ALSO FOUND TO BE QUITE HIGH WIT H REFERENCE TO THE RECEIPTS, AS COMPARED TO THE PRECEDING YEAR. ON EXA MINATION OF THE DETAILS OF THE EXPENSES INCURRED, THE AO WAS OF THE VIEW THAT EXPENDITURE OF RS.1,97,234/- OUT OF THE AFORESAID EXPENDITURE WAS CAPITAL IN NATURE WHICH WAS USED FOR CONSTRUCTION OF BUILDING. SIMILARLY, T HE AO FOUND THAT THE EXPENDITURE OF RS.55,455/- OUT OF THE ELECTRICAL RE PAIR EXPENDITURE AT RS.56,695/- WAS CAPITAL IN NATURE. THE AO CONFRONTE D THE ASSESSEE WITH HIS VIEW. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE EXPENDITURE ON REPAIR AND MAINTENANCE OF THE BUILDING HAD BEEN INCURRED DUE T O FAULT IN THE ORIGINAL PAINT. IT WAS SUBMITTED THAT THE EXPENDITURE ON THE PAINT OF THE PREMISES HAD BEEN CAPITALIZED FOR THE FIRST TIME IN THE FINANCI AL YEAR 2004-05, BUT DURING THE FINANCIAL YEAR UNDER REVIEW THE NEW BUILDING ST ARTED GENERATING REVENUE AND EXPENDITURE ON THE BUILDING WAS PUT UNDER REVEN UE EXPENSE. THE ITA NO.191(ASR)/2012 3 3 EXPENDITURE ON ELECTRICAL REPAIR WAS STATED TO HAVE BEEN INCURRED IN RESPECT OF ELECTRIC BULBS, SWITCHES, HOLDERS, ETC. WAS CON TENDED THAT THESE EXPENSES WERE OF CONSUMABLE NATURE AND WERE, THEREFORE, CLAI MED AS REVENUE EXPENSES. THE AO DID NOT ACCEPT THE ASSESSEES CLAI M SINCE THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM OF FAULT IN THE ORIGINAL PAINT. IN RESPECT OF THE EXPENDITURE ON ELECTRICAL REPAIR ALSO, THE AO HELD THAT THE ASSESSEE HAD NOT POINTED OUT PURCHASES OF SUCH ITEMS FROM THE DETAILS OF BILLS GIVEN IN THE SHOW CAUSE NOTICE. HE REJECTED T HE ASSESSEES EXPLANATION AND ADDED THE AMOUNTS TO THE ASSESSEES TOTAL INCOM E. 4. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE ALLOWED CERTAIN RELIEF AND SUSTAINED AN ADDITION OF RS.1,97,234/- OUT OF REPAIR AND MAINTENANCE EXPENSES AND RS.37,609/- ON ACCOUNT OF DISALLOWANCE OF ELECTRICAL REPAIRS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE CONSTRUCTI ON OF THE BUILDING OF THE ASSESSEE WAS IN PROGRESS DURING THE IMPUGNED YEAR W HICH WAS COMPLETED, IN FACT, IN THE SUBSEQUENT PREVIOUS YEAR. IT WAS OBSER VED BY THE LD. CIT(A) VIDE PARA 2.4 OF HIS ORDER THAT THERE WAS SUDDEN I NCREASE IN THE EXPENDITURE ON PAINTING, CLAIMED AS THE EXPENDITURE ON REPAINT ING, DOES NOT APPEAR TO BE CREDIBLE. THE ASSESSEE HAD ADMITTEDLY INCURRED CERT AIN EXPENDITURE ON PAINTING IN THE PRECEDING ASSESSMENT YEAR AND IT WO ULD BE QUITE IMPROBABLE ITA NO.191(ASR)/2012 4 4 TO PAINT THE SAME BUILDING AGAIN WITHIN ONE YEAR. T HOUGH A DOCTOR WOULD LIKE TO KEEP HIS HOSPITAL NEAT AND CLAN AND FRESHLY PAINTED, AS A PRUDENT BUSINESSMAN HE WOULD NOT LIKE TO SPEND ON PAINTING WITHIN A SHORT PERIOD OF GETTING THE BUILDING PAINTED. THE LD. CIT(A) ACCORD INGLY CONFIRMED THE ACTION OF THE AO IN DISALLOWING THE EXPENDITURE OF RS.1,97,234/- OUT OF REPAIR AND MAINTENANCE EXPENSES ON BUILDING. 5.1. AS REGARDS THE EXPENDITURE OF ELECTRICAL REPAI R, THE LD. CIT(A) OBSERVED THAT THE EXPENDITURE ON ITEMS OF CONSUMABL E IN NATURE LIKE BULBS ETC. WOULD CERTAINLY BE ELIGIBLE TO BE CONSIDERED F OR DEDUCTION AS REVENUE EXPENDITURE. THE ASSESSEE HAS INCURRED EXPENDITURE THROUGH HIGH VALUE BILLS OF RS.5000/- OR MORE AND ALSO THROUGH LOW VALUE BIL L OF LESS THAN RS.5000/- EACH. THE LD. CIT(A) HELD THAT THE BILLS OF MORE TH AN RS.5000/- INDICATE EXPENSES OF CAPITAL NATURE ON CONSUMABLE ITEMS AND ACCORDINGLY HELD THAT THE EXPENDITURE OF RS.37,609/- IS OF CAPITAL IN NAT URE AND CONFIRMED THE DISALLOWANCE TO THAT EXTENT. 6. WE FIND THAT IN THE PRESENT CASE, THE EXPLANATIO N OF THE ASSESSEE IS THAT THE ASSESSEE HAD STARTED ITS HOSPITAL IN THE PRECED ING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06 AND HAD CAPITALIZED VARIOUS EXPENSES DURING THAT SAID PREVIOUS YEAR. OUR ATTENTION WAS INVITED TO THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF THE PRECEDING PREVIOUS YE AR RELEVANT TO ASSESSMENT YEAR 2005-06 WHEN THE ASSESSEE HAD STARTED ITS HOSP ITAL, WHERE THE GROSS ITA NO.191(ASR)/2012 5 5 RECEIPT WERE TO THE TUNE OF RS.39,32,966/- AND TOTA L ASSETS AS ON 31 ST MARCH, 2005 WERE TO THE TUNE OF RS.1,13,38,613/- IN WHICH THE BUILDING COMPLETED WAS FOR AN AMOUNT OF RS.59,24,011/- AND BUILDING UN DER CONSTRUCTION WAS AT AN AMOUNT OF RS.11,46,609/-. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS BEEN MAKING CONSTRUCTION OF THE BUILDING OF THE HOSPITAL DURING THE YEAR WHICH, IN FACT, WAS COMPLETED IN THE FOLLOWING YEAR . BUT AT THE SAME TIME, IT CANNOT BE RULED OUT THAT THE ASSESSEE BEING A HOSPI TAL AND DOCTOR HAS TO KEEP THE HOSPITAL NEAT AND CLEAN WHICH GIVES A NEWER LOO K AND WHICH ENABLES THE ASSESSEE TO HAVE AN ADVANTAGE OF BETTER PROFESSIONA L RECEIPTS. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO OR THE LD. CIT(A) THAT SUCH EXPENDITURE IS OF AN ENDURING IN NATURE, THOUGH THE TEST OF ENDURI NG BENEFIT IS NOT CERTAIN OR CONCLUSIVE AND CANNOT BE APPLIED BLINDLY AND MECHAN ICALLY AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO . LTD. VS. CIT REPORTED IN (1980) 124 ITR 1. BUT IN THE PRESENT CASE, THERE IS NOTHING ON RECORD THAT THE ASSESSEE HAD CREATED AN ASSET OR HAD TAKEN AN A DVANTAGE OF ENDURING IN NATURE, WHICH HAS TO BE CONSIDERED IN THE COMMERCIA L SENSE. IN THE FACTS AND CIRCUMSTANCES, THE AO IS NOT JUSTIFIED IN DISALLOW ING SUCH EXPENDITURE AND DISALLOWANCE SO SUSTAINED BY THE LD. CIT(A) IS DIRE CTED TO BE DELETED. 7. AS REGARDS GROUND NO. 2 ON SIMILAR FACTS, NONE O F THE AUTHORITIES HAVE BROUGHT ON RECORD THE ENDURING BENEFIT ENJOINED BY THE ASSESSEE OR INCURRING SUCH EXPENSES. THE ASSESSEE HAD CREATED AN ASSET. T HEREFORE, THE LD. CIT(A) ITA NO.191(ASR)/2012 6 6 IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A. O. IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE AO IS DIRECTED TO DE LETE THE ADDITION SO MADE. THUS, GROUND NO.2 OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.191(ASR)/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH AUGUST, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6TH AUGUST, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:DR. GURVINDER SINGH JAMMU, JALANDHAR. 2. THE DCIT, R-3, JALANDHAR. 3. THE CIT(A), JLR. 4. THE CIT JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.