Ineos ABS (I) Ltd., Baroda V. The Dy.CIT., Circle-1(2), Baroda

ITA 2213/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89524 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE S/SHRI N. S. SAINI, AM & RAJPAL YADAV, JM. ITA NO. 2213/AHD/2011 ASST. YEAR 2008-09 .INEOS ABS (I) LTD., (FORMERLY KNOWN AS LANXESS ABS LTD.), 6 TH FLOOR, ABS TOWER, O.P. ROAD, BARODA. VS D.C.I.T., CIRCLE-1(2), BARODA. (APPELLANT) (RESPONDENT) PA NO. AACB 6164H APPELLANT BY SHRI SULABH PAD SHAH, AR RESPONDENT BY SHRI M. K. SINGH, SR.DR DATE OF HEARING: 9/6/2015 DATE OF PRONOUNCEMENT: 12/06/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 13 TH JULY, 2011 PASSED FOR AY 2008-09. IN RESPONSE TO THE NOTICE OF HEARING AN ADJOURNMENT APPLICATION HA S BEEN FILED BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. HOWEVER, CONSIDERING THE SMALLNESS OF THE ISSUES INVOLVED IN THE APPEAL, WE DID NOT GRANT THE ADJOURNMENT AND HEARD THE APPEAL WITH THE ASSIS TANCE OF LD. DR. ITA NO.2213/AHD/2011 ASST. YEAR 2008-09 2 2. THOUGH THE ASSESSEE HAS TAKEN 3 GROUNDS OF APPEA L BUT ITS GRIEVANCES REVOLVES AROUND A SINGLE ISSUE WHEREBY I T HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE MADE BY THE CIT(A) OF RS.5,24,236/- AND RS.34,22,891/- WHICH WERE CLAIMED BY THE ASSESS EE TOWARDS CURRENT REPAIRS OF THE ASSETS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28.9.2008 DECLARING AN INCOME OF RS.49 ,14,40,337/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 17 TH AUGUST, 2009. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE HAS DEBITED FOLLOWING EXPENDITURE UNDER THE HEAD CURR ENT REPAIR:- 1. PEST CONTROL TREATMENT : RS.1,02,200/- 2. PAINTING AT PLANTS : RS.1,90 ,305/- 3. MISCELLANEOUS CIVIL REPAIRS AT NANDESARI : RS.5,24,236/- TOTAL RS.8,16,831/- AND 1. PIPING AND WELDING ESKAY CONSTRUCTION - RS.1 9,68,293/- 2. PAINTING OF VESSELS & EQUIPMENTS RAJ DECO RS.14 ,54,598/- TOTAL RS.34,22,891/- ITA NO.2213/AHD/2011 ASST. YEAR 2008-09 3 THE AO HAS DISALLOWED BOTH THE CLAIMS OF THE ASSESS EE. HE GRANTED DEPRECIATION @ 10% ON THE EXPENDITURE OF RS.8,16,83 1/- AND @ OF 15% ON THE DISALLOWANCE OF RS.34,22,891/- BECAUSE B OTH THESE EXPENDITURES WERE TREATED AS OF CAPITAL NATURE. 4. ON APPEAL LD. CIT(A) HAS ALLOWED THE EXPENDITURE PARTLY WITH REGARD TO PEST CONTROL TREATMENT AND PAINTING WORK. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.5,24,236/- OUT OF TOTAL EXPENSES OF RS.8,16,831/- INCURRED BY THE ASSESSEE TOWARDS A LLEGED PEST CONTROL, PAINTING WORK AND CIVIL WORK AT NANDESWARI , MOXI AND KALOL PLANT. WITH REGARD TO OTHER EXPENDITURE INCURRED BY THE ASSESSEE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY CONCURRING WIT H THE AO. 5. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES WE ARE OF THE VIEW THAT IN VARIOUS AUTHORITATIVE ANNOUNCEMENT S REFERRED BY THE ASSESSEE IN ITS SUBMISSIONS FILED BEFORE THE CIT(A) [REPRODUCED BY CIT(A)] IT HAS BEEN PROPOUNDED THAT IN ORDER TO DEC IDE APPLICABILITY OF SECTION 31(1) THE TEST WAS NOT, WHETHER THE EXPENDI TURE WAS REVENUE OR CAPITAL IN NATURE, BUT WHETHER THE EXPENDITURE W AS CURRENT REPAIR. BASIC TEST WAS TO FIND OUT WHETHER EXPENDITURE WAS INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET AND THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET IN EXI STENCE OR TO OBTAIN ITA NO.2213/AHD/2011 ASST. YEAR 2008-09 4 NEW ADVANTAGE. THE CONTENTION OF THE ASSESSEE WAS T HAT WRITTEN DOWN VALUE OF BUILDING SHOWN BY THE ASSESSEE IS RS. 27.16 CRORES. IT HAS INCURRED THE EXPENDITURE FOR PRESERVING AND MAI NTAINING THE BUILDINGS. ON THE STRENGTH OF HONBLE DELHI HIGH CO URT RENDERED IN THE CASE OF CIT VS. DELHI PRESS SAMACHAR PATRA (P) LTD. 322 ITR 590 IT WAS ALSO POINTED OUT THAT IF AN ASSESSEE HAS RE-ERE CTED A PART OF BUILDING AFTER DEMOLITION THE EXISTING BUILDING THE N THAT EXPENDITURE WOULD FALL WITHIN THE AMBIT OF CURRENT REPAIR. THE ASSESSEE HAS CARRIED OUT CERTAIN CIVIL WORK AND INCURRED AN EXPE NDITURE OF RS.5,24,236/-. IF THIS EXPENDITURE IS TO BE WEIGHED VIS--VIS THE TOTAL W.D.V. OF THE BUILDING AT RS.27.16 CRORES THEN CERT AINLY THE SCALE WOULD TILT IN FAVOUR OF ASSESSEE THAT EXPENSES MUST HAVE BEEN INCURRED FOR PRESERVING THE BUILDING. THE LD. CIT(A ) SIMPLY DISBELIEVED THE CONTENTIONS OF THE ASSESSEE BY ASSUMING THAT TH E BILL REPRESENTING CIVIL WORK IS TO BE CONSTRUED THAT ASS ESSEE HAS CONSTRUCTED ALTOGETHER NEW BUILDING WHICH IS TO BE ADDED IN THE BLOCK OF ASSET. BUT IN OUR OPINION, IF THE EXPENSES WERE INCURRED FOR A REPAIR TO THE EXISTING BUILDING THOUGH BY WAY OF SOME CONS TRUCTIONS THEN, IT AMOUNTS TO CURRENT REPAIR. ITA NO.2213/AHD/2011 ASST. YEAR 2008-09 5 6. AS FAR AS THE SECOND ISSUE IS CONCERNED, THE ASS ESSEE HAS INCURRED THE EXPENDITURE ON EXISTING PLANT. THE REP AIR IS AN INTEGRAL PART OF A BIGGER PIECE OF MACHINERY, I.E., PIPING A ND WELDING WOULD NOT FUNCTION INDEPENDENTLY. THUS THERE IS NO FRESH INDU CTION OF THE MACHINERY. IT HAS REPAIRED TO ONE OF THE COMPONENTS OF ONE UNIT. THE LD. FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THIS ASPECT, THEREFORE, HAS ERRED IN CONFIRMING THE DISALLOWANCE. IN VIEW O F THE ABOVE DISCUSSION, WE ALLOW THE APPEAL OF ASSESSEE AND DEL ETE THE DISALLOWANCE. THE EXPENSES INCURRED BY THE ASSESSEE ON CURRENT REPAIR WILL BE ADMISSIBLE AS REVENUE EXPENDITURE AND THE DEPRECIATION GRANTED BY THE AO BY TREATING THIS EXP ENDITURE AS OF CAPITAL NATURE WILL BE REVERSED. THE AO SHALL CARRY OUT THIS EXERCISE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/06/2015 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER DATED 12/06/2015 MAHATA/- ITA NO.2213/AHD/2011 ASST. YEAR 2008-09 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 10/6/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER:10/6/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 12/6/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: