SAMEER RAMKARAN KARWA, MUMBAI V. ASST CIT 16(1), MUMBAI

ITA 201/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70883 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 201 /MUM/2012 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2008-09) SHRI SAMEER R. KARWA, 74, BLUE HEAVEN, MOUNT PLEASANT ROAD, MUMBAI 400 013. ( ( ( ( / VS. ASSTT. COMMISSIONER OF INCOME TAX RG.16(1), MUMBAI. #. !./ PAN : AGKPK 2975N ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI BHUPENDRA KARKHANIS 01./ 2 3 ! / RESPONDENT BY : SHRI SHISHIR SRIVASTAVA !($ 2 / // / DATE OF HEARING : 22-08-13 45- 2 / DATE OF PRONOUNCEMENT : 30-08-13 '6 / O R D E R PER P.M. JAGTAP, A.M. : .. , !'# THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) - 27, MUMBAI DATED 19-9-2011. 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS. 25,01,021/- MADE BY THE A.O. AND CONFIRMED BY THE L D. CIT(A) ON ACCOUNT OF REPAIRS EXPENDITURE INCURRED BY THE ASSESSEE TO THE FACTORY AND OFFICE BUILDING TREATING THE SAME AS CAPITAL IN NATURE. ITA 201/M/12 2 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ALUMINUM COLLAPSIBLE T UBES UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S MAXIM CONT AINERS CO. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y HIM ON 29-09-2008 DECLARING LOSS OF RS. 1,00,00,976/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, AN EXPENDITURE OF RS. 25,01,0 21/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF REPAIRS AND MAINTENANCE. BE FORE THE A.O., IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE SAID E XPENDITURE WAS INCURRED ON MAJOR REPAIRS TO THE BUILDING IN THE FORM OF REP LACEMENT OF THE FLOORING, RCC FOOTING WORK, REMOVING DAMAGED FOOTING, DISMANT LING AND REPAIRING EXISTING STRUCTURES ETC. IT WAS CONTENDED THAT THE SAID EXPENDITURE WAS INCURRED FOR KEEPING THE FACTORY BUILDING IN RUNNIN G CONDITION AND THERE WAS NO NEW ASSET OR ANY ENDURING BENEFIT IN THE CAPITAL FIELD WAS ACQUIRED BY THE ASSESSEE. THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. WHO DISALLOWED THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF REPAIRS AND MAINTENANCE TREATING THE SAM E AS CAPITAL IN NATURE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALL OWANCE MADE BY THE A.O. RELYING ON HIS APPELLATE ORDER FOR A.Y. 2007-08 WHE REIN A SIMILAR DISALLOWANCE WAS CONFIRMED. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR A.Y. 2007-08 VIDE ITS ORDER DATED 30 TH MARCH, 2012 PASSED IN ITA NO. 3918/MUM/2011 AND C.O. NO. 27/MUM/2012 WHEREIN A SIMILAR DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF REPAIRS A ND MAINTENANCE WAS DELETED BY THE TRIBUNAL FOR THE FOLLOWING REASONS G IVEN IN PARA NO. 13 OF ITS ORDER:- ITA 201/M/12 3 13. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES ON T HIS ISSUE AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DETAIL S OF REPAIRS AND MAINTENANCE EXPENDITURE FURNISHED BY THE ASSESSEE. IT IS OBSERVED THAT THE SAID EXPENSES WERE MAINLY INCURRED BY THE ASSES SEE ON REPLACEMENT OF THE EXISTING FLOORING IN THE FACTORY BUILDING AN D ON RCC FOOTING WORK WHICH WAS REQUIRED FOR THAT PURPOSE. THE SAID EXPEN DITURE INCURRED BY THE ASSESSEE THUS WAS IN THE NATURE OF REPAIRS AND REPLACEMENT OF THE PORTION OF THE BUILDING NAMELY FLOORING OF THE EXIS TING BUILDING AND THERE WAS NO NEW ASSET THAT HAS COME INTO EXISTENCE AS A RESULT OF INCURRING OF THE SAID EXPENSES. THIS POSITION HAS N OT BEEN DISPUTED EVEN BY THE ASSESSING OFFICER OR BY THE LEARNED CIT (A). THE REPAIRS AND MAINTENANCE EXPENSES HOWEVER, WERE TREATED BY THEM AS OF CAPITAL NATURE MAINLY ON THE GROUND THAT THE SAME HAS RESUL TED IN THE BENEFIT OF ENDURING NATURE TO THE ASSESSEE. THEY HOWEVER, A PPEAR TO HAVE IGNORED THE FACT THAT SUCH ENDURING BENEFIT, IF ANY , ACCRUED TO THE ASSESSEE IS IN THE REVENUE FIELD AND NOT IN THE CAP ITAL FIELD AS IT DID NOT BRING ANY NEW ASSET IN EXISTENCE. IT IS BY NOW WELL SETTLED THAT THE EXPENDITURE WHICH BRINGS ENDURING BENEFIT TO THE AS SESSEE IN THE CAPITAL FIELD ALONE CAN BE TREATED AS OF CAPITAL NA TURE AND IF THERE IS ANY BENEFIT ACCRUED TO THE ASSESSEE IN THE REVENUE FIEL D, THE EXPENDITURE INCURRED CANNOT BE TREATED AS OF CAPITAL NATURE EVE N IF THAT BENEFIT IS OF ENDUING NATURE IN OUR OPINION, THE EXPENDITURE INCU RRED BY THE ASSESSEE ON REPAIRS AND MAINTENANCE IN THE PRESENT CASE DID NOT BRING ANY NEW ASSET IN EXISTENCE AND SINCE THE SAID EXPEN DITURE INCURRED BY THE ASSESSEE ON THE REPAIRS AND REPLACEMENT OF PORT ION OF THE BUILDING BROUGHT BENEFIT TO THE ASSESSEE ONLY IN THE REVENUE FIELD, THE SAME WAS ALLOWABLE AS BUSINESS EXPENDITURE BEING REVENUE IN NATURE. IN THAT VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) ON THIS ISSUE AND ALLOW THE CROSS-OBJECTION OF THE ASSESSEE. 5. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2007-08, WE RESPECTFULLY FOLLOW THE SAID DECISION RENDERED BY THE TRIBUNAL I N A.Y. 2007-08 AND DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENDITURE. GROUND NO. 1 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 6. AS REGARDS GROUND NO. 2 RAISED BY THE ASSESSEE I NVOLVING THE ISSUE OF DISALLOWANCE MADE OUT OF VEHICLE AND TELEPHONE EXPE NSES, IT IS OBSERVED THAT IN THE ABSENCE OF ANY LOG BOOK OR CALL REGISTER MAI NTAINED BY THE ASSESSEE TO SHOW THAT THE VEHICLE EXPENSES AND TELEPHONE EXPENS ES AGGREGATING TO RS. ITA 201/M/12 4 6,18,858/- WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE DISALLOWANCE OF 10% OUT OF THE SAID EXPENSES WA S MADE BY THE A.O. ON ACCOUNT OF PERSONAL ELEMENT INVOLVED IN THE SAID EX PENSES. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 7. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS NOT BEEN ABLE TO RAISE ANY CONTENTION TO SHOW THAT THE DISALLOWANCE OF 10% OUT OF VEHICLE AND TELEPHONE EXPENSES MADE BY THE A .O. AND CONFIRMED BY THE LD. CIT(A) FOR PERSONAL USE IS EXCESSIVE AND UNREAS ONABLE. IN OUR OPINION, THE INVOLVEMENT OF PERSONAL ELEMENT IN THE SAID EXPENSE S CANNOT BE RULED OUT AND SINCE NO DISALLOWANCE ON ACCOUNT OF SUCH PERSONAL E LEMENT WAS MADE BY THE ASSESSEE SUO MOTU IN THE COMPUTATION OF TOTAL INCOM E, THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) TO THE EXTENT OF 10% OF THE TOTAL EXPENSES IS UPHELD BEING FAIR AND REASONABLE. ACCO RDINGLY WE CONFIRM THE SAME. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUG. 2013. . '6 2 45- 7'(8 30-8-13 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 7'( DATED 30-8-13 $.)(.!./ RK , SR. PS ITA 201/M/12 5 '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. < () / THE CIT(A)- 27, MUMBAI 4. < / CIT CITY -16 MUMBAI 5. :$? 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, @ / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1: 0) //TRUE COPY// A A A A/ // /!B !B !B !B ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI