M/s. Uday Gas Agency, Ahmedabad V. The Income tax Officer, Ward-6(1), Ahmedabad

ITA 2149/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2099 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-05-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: DEEPAK K SONI
• Keywords: Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

I.T.A. NO.:2149/AHD/2010 ASSESSMENT YEAR: 2005-06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: SHRI PRAMOD KUMAR AM AND SHRI KUL BHARAT JM ] I.T.A. NO.2149/AHD/2010 [ASSESSMENT YEAR: 2005-06] M/S. UDAY GAS AGENCY, PLOT NO.1136, NR. SRP CAMP, PO. KRISHNANAGAR, SAIJPUR BOGHA, AHMEDABAD [PAN : AAAFU 4690 A] ..APPELLANT VS. INCOME TAX OFFICER, WARD 6(1), AHMEDABAD RESPONDENT APPEARANCES BY: DEEPAK K SONI, FOR THE APPELLANT. T. SANKAR, FOR THE RESPONDENT. DATE OF CONCLUDING THE HEARING : MAY 07, 2013 DATE OF PRONOUNCING THE ORDER : MAY 10, 2013 ORDER PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DA TED 15 TH APRIL 2010, IN THE MATTER OF ASSESSMENT U/S 143(3) OF THE INCOME TAX I.T.A. NO.:2149/AHD/2010 ASSESSMENT YEAR: 2005-06 PAGE 2 OF 5 ACT, 1961 FOR THE ASSESSMENT YEAR 2005-06, ON THE F OLLOWING GROUNDS:- YOUR APPELLANT BEING DISSATISFIED WITH THE ORDER P ASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) PRESENT THIS APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OT HER GROUND. 1.0 THE ORDER PASSED BY THE ASSESSING OFFICER WAS BAD I N LAW SINCE. THE ORDER WAS CONTRARY TO THE PROVISIONS OF LAW AND THE FACTS OF YOUR APPELLANTS CASE. IT I S SUBMITTED THAT IT BE SO HELD NOW. 2.0 THE COMMISSIONER OF INCOME TAX (APPEALS) UPHOLDING THAT RS.1,91,974/- INCURRED BY THE APPELLANT ON CURRENT REPAIRS WAS NOT DEDUCTIBLE ON THE GROUNDS THAT EXPENDITURE WAS OF CAPITAL NATURE. THE APPELLANT SUBMITS THAT THE EXPENDITURE WAS INCURRED ON CURRENT REPAIRS AND WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE APPELLANT SUBMITS THAT EXPENDITURE IS OF REVENUE NATURE INCURRED UNDER THE CURRENT REPAIRS AND THEREFORE DEDUCTIBLE IN COMPUTATION OF THE TOTAL INCOME. THE DISALLOWANCE BE DELETED. 2.1 THE APPELLANT WITHOUT PREJUDICE TO ABOVE FURTHE R SUBMITS THAT THE DISALLOWANCE OF RS.1,91,974/- HOLDING EXPENDITURE AS OF CAPITAL NATURE IS EXCESSIVELY HIGH. THE DISALLOWANCE IF ANY BE RESTRICTED TO A NOMINAL AMOUNT AND THE BALANCE OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE DIRECTED TO BE DELETED. THE APPELLANT SUBMITS THAT IT BE SO HELD NOW. YOUR APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, AMEN D AND/OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE THE FINAL HEARING OF THE APPEAL. 2. BRIEFLY STATED, THE MATERIAL FACTS ARE LIKE THIS. T HE ASSESSEE IS A DEALER OF COOKING GAS INDANE. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS INCURRED EXPENSES AMOUNTING TO RS.2,83 ,324/- UNDER THE HEAD REPAIRS AND MAINTENANCE WHEREAS AVERAGE EXPENDITURE I.T.A. NO.:2149/AHD/2010 ASSESSMENT YEAR: 2005-06 PAGE 3 OF 5 UNDER THIS HEAD FOR PRECEDING ASSESSMENT YEARS WAS RS.50,000/- APPROXIMATELY. ON BEING ASKED THE REASONS FOR THIS SUDDEN INCREASE IN EXPENDITURE, IT WAS STATED BY THE ASSES SEE THAT THIS YEAR EXPENSES WERE HIGHER SINCE ASSESSEE HAD TO COM PLY WITH MORE STRINGENT NORMS FOR BEING TREATED AS INDANE S TAR DISTRIBUTOR THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAS INCURRED EXPENSES OF RS.67,773/- IN RESPECT OF BUILDING MATERIAL AND CIVIL WORKS, RS.92,775/- IN RESPECT OF FURNITURE AND ELECTRIC WORKS, RS.69,700/- IN RESPECT OF COLOUR AN D POP WORK AND RS.21,726/- IN RESPECT OF RELATED OTHER EXPENSES. T HE ASSESSING OFFICER WAS OF THE VIEW THAT AS A RESULT OF THIS EX PENDITURE, LOOK OF THE OFFICE COMPLETELY CHANGED AND THE VALUE OF O FFICE BUILDING STANDS INCREASED. IT WAS ALSO NOTED THAT BENEFIT OF THESE EXPENSES WILL BE DERIVED IN THE YEARS TO COME ALSO, AND THES E REPAIR EXPENSES WERE NOT INCURRED IN THE NORMAL COURSE. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED THE REPAIRS AND MAINTENANCE EXPENSES TO THE TUNE OF RS.2,51,974/-. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) BUT WITHOUT COMPLETE SUCCESS. LEARNED CIT(A) UPHELD THE DISALLOWANCE IN PRINCIPLE BUT RESTRICTED THE SAME T O RS.1,91,974/-. WHILE DOING SO, LEARNED CIT(A) OBSERVED AS FOLLOWS: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I ALSO PERUSED THE COPY OF THE BILLS OF THE EXPENSES. ON T HE PERUSAL OF THESE DETAILS, IT IS SEEN THAT SALE OF T HE EXPENSES ARE IN THE NATURE OF CURRENT REPAIRS SUCH AS COLOUR EXPENSES CANNOT BE TERMED AS CAPITAL EXPENSES. FURT HER THE ASSESSING OFFICER HIMSELF HAS HELD THAT IN EARL IER ASSESSMENT YEAR, THE APPELLANT HAS BEEN SHOWING APP ROX. RS.50,000/- UNDER THE HEAD REPAIRS. THEREFORE, IN M Y OPINION, IT WOULD BE FAIR TO ESTIMATE SUCH EXPENSES IN THE I.T.A. NO.:2149/AHD/2010 ASSESSMENT YEAR: 2005-06 PAGE 4 OF 5 FORM OF CURRENT REPAIRS AT RS.60,000/- OTHER EXPENS ES SUCH AS LAYING OF TILES & PURCHASE OF NEW FURNITURE & LAYING OF NEW ELECTRIC LINE/SWITCHES ETC. AMOUNT TO CAPITAL EXPENSES WHICH CANNOT BE SAID TO BE CURRENT REPAIRS . HOWEVER ON SUCH EXPENSES THE ASSESSING OFFICER WOUL D ALLOW DEPRECIATION WHICH IS ADMISSIBLE TO AN OFFICE BUILDING. IN OTHER WORDS, THE AMOUNT OF RS.60,000/- IS CONSID ERED AS CURRENT REPAIRS & BALANCE AMOUNT OF RS.1,91,974/- A S CAPITAL EXPENSES ON WHICH DEPRECIATION WOULD BE ALL OWABLE TO THE APPELLANT. 3. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE HAVE EXAMINED THE DETAILS OF EXPENDITURE AND WE DO NOT FIND ANY MATERIAL TO SUPPORT CREATION OF A NEW ASSET AS A RESULT OF THESE REPAIRS EXPENSE SIMPLY BECAUSE THE ASSESSEE WAS NOT CAREFUL IN CARRYING OUT DUE REPAIRS IN PAST AND ASSESSEE HAS TO DO UP HIS OFFICE IN THIS YEAR, TO ENSURE ITS ENTIT LEMENT TO A COVETED STAR STATUS, DOES NOT ALTER THE NATURE OF E XPENDITURE. IN AT ACTIVITY LIKE THAT OF THE ASSESSEE, REPLACEMENT OF WORN OUT FLOOR TILES AND MINOR ALTERATIONS IN WOODEN WORK CANNOT B E TREATED AS CAPITAL EXPENDITURE. IN OUR CONSIDERED VIEW, THESE EXPENSES ARE OF ROUTINE CURRENT REPAIRS IN NATURE, AND THE FACT OF THE ASSESSEE NOT HAVING CARRIED OUT SIMILAR REPAIRS IN PAST CANN OT BE PUT AGAINST THE ASSESSEE. IN VIEW OF THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PR OPER TO DIRECT I.T.A. NO.:2149/AHD/2010 ASSESSMENT YEAR: 2005-06 PAGE 5 OF 5 THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALL OWANCE OF RS.1,91,974/-. THE ASSESSEE GETS THE RELIEF ACCORDI NGLY. 6. IN THE RESULT, THE APPEAL IS ALLOWED. IT WAS SO PRONOUNCED IN THE OPEN COURT IMMEDIATELY UPON CONCLUSION OF HE ARING. SD/- SD/- KUL BHARAT PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) AHMEDABAD, THE DAY OF MAY, 2013 TRUE COPY COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD