M/S Narain Automobiles, Lucknow V. ITO-2(2), Lucknow

ITA 237/LKW/2011

• Counselvise Citation: 23723714 RSA 2011
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K K DIXIT
• Keywords: Depreciation; Corroborative evidences; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.237(LKW.)/2011 A.Y.: 2006-07 M/S. NARAIN AUTOMOBILES, VS. THE ITO, RANGE II(2), 4, SHAHNAJAF ROAD, LUCKNOW. LUCKNOW. PAN AADFN5214G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K.DIXIT, ADVOCATE RESPONDENT BY : MS. MANJU THAKUR, D.R. O R D E R PER H.L.KARWA, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-I, LUCKNOW DATED 17.2.2011 RELATING TO THE ASSESSMENT YEAR 2006-07. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER : 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, LUCKNOW HEREINAFTER REFERRED TO AS THE CIT(A), ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.3,50,000 UNDER THE HEAD REPAIRS AND RENEWALS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEALER OF MAHINDRA RANGE OF VEHICLES. IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE 2 HAS DEBITED A SUM OF RS.11,57,094 UNDER THE HEAD REPAIR AND RENEWAL EXPENSES. THESE EXPENSES WERE INCURRED IN RESPECT OF PROPERTY, WHICH HAS BEEN TAKEN ON RENT FROM THE HUF OF SHRI GOPAL NARAIN, WHO IS ALSO A PARTNER IN ASSESSEE FIRM. ON EXAMINATION OF DETAILS AND SUPPORTING BILLS/VOUCHERS OF EXPENSES, THE AO FOUND THAT THE EXPENDITURE WAS OF ENDURING BENEFIT AND NOT MERELY IN THE NATURE OF DAY TO DAY MINOR REPAIRS. THE ASSESSEE DID FILE DETAILS AND SOME SUPPORTING EVIDENCE ON RECORD. THE AO OPINED THAT THE EXPENDITURE ON ROUTINE REPAIR CANNOT ALSO BE RULED OUT. THE AO ALSO FOUND THAT THERE WAS NO FORMAL AGREEMENT BETWEEN THE TENANT AND THE LANDLORD. CONSIDERING THE DETAILS AND THE NATURE OF EXPENSES, THE AO ESTIMATED THE CAPITAL EXPENDITURE IN THE BUILDING AT RS.5 LACS WHICH WAS DISALLOWED OUT OF REPAIRS AND RENEWAL EXPENSES. HOWEVER, THE AO ALLOWED DEPRECIATION AT THE RATE OF 5% ON ABOVE EXPENDITURE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) AND THE LD. CIT(A) RESTRICTED THE ADDITION OUT OF REPAIRS AND RENEWAL EXPENSES TO RS.3,50,000 WITHOUT ANY ALLOWANCE FOR DEPRECIATION THEREON. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI K.K.DIXIT, ADVOCATE, LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.3,50,000 UNDER THE HEAD 'REPAIRS AND RENEWAL EXPENSES' BY NOT APPRECIATING THE FACTS THAT FULL AND COMPLETE DETAILS OF THE EXPENSES WERE ON RECORD AND NONE OF THE AUTHORITIES WAS ABLE TO IDENTITY ANY SPECIFIC EXPENDITURE, WHICH COULD BE IDENTIFIED AS EITHER CAPITAL IN NATURE OR DISALLOWABLE IN ANY MANNER AND SO, 3 THE DISALLOWANCE CONFIRMED MAY BE DELETED. BEFORE US, SHRI K.K.DIXIT, LEARNED COUNSEL FOR THE ASSESSEE FILED THE DETAILS OF EXPENSES AS UNDER : A) REPAIR TO BUILDING RS.8,40,831 B) REPAIR TO ELECTRICAL RS.96,477 C) REPAIR TO OFFICE VEHICLE & FURNITURE RS.1,61,555 D) REPAIR TO OFFICE EQUIPMENT RS.40,610 E) REPAIR TO AIR CONDITIONER RS.17,621 TOTAL RS.11,57,094 WE FIND THAT OUT OF THE ABOVE, THE AO HAS ASSUMED THAT A SUM OF RS.5 LACS OUT OF EXPENDITURE DEBITED UNDER REPAIR TO BUILDING IS OF CAPITAL IN NATURE. HOWEVER, THE LD. CIT(A) OBSERVED THAT THE AO MADE AN EXCESSIVE ESTIMATE IN ESTIMATING THE EXPENSES FOR REPAIRS AND RENEWALS TO THE BUILDING. WE HAVE ALSO SEEN THE BREAK UP OF EXPENSES FURNISHED BY THE ASSESSEE. FROM THE SAME, IT IS CLEAR THAT SOME OF THE CLAIMS IN RESPECT OF THE BUILDING INVOLVED AN EXPENDITURE OF CAPITAL IN NATURE. HOWEVER, WE DIFFER WITH THIS OBSERVATION OF THE LD.CIT(A) THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE AN AMOUNT OF RS.3,50,000 OUT OF 'REPAIRS AND RENEWAL EXPENSES' TO BE CAPITAL IN NATURE IN RESPECT OF THE BUILDING. IN OUR CONSIDERED VIEW, THE ORDER OF THE LD. CIT(A) NEEDS TO BE MODIFIED TO THIS EXTENT THAT IT WILL BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE OUT OF REPAIRS AND RENEWALS IN RESPECT OF THE BUILDING TO RS.1,75,000. WHILE HOLDING SO, WE MAY OBSERVE THAT THE AUTHORITIES BELOW HAVE NOT IDENTIFIED ANY SPECIFIC EXPENDITURE, WHICH COULD BE SAID AS EITHER CAPITAL IN NATURE OR DISALLOWABLE IN ANY MANNER. IN F ACT, BOTH THE AUTHORITIES BELOW HAVE MADE THEIR OWN ESTIMATES. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE RESTRICT THE DISALLOWANCE TO RS.1,75,000 WITHOUT ANY ALLOWANCE FOR DEPRECIATION THEREON, BECAUSE THE ASSET IN RESPECT OF WHICH THESE EXPENSES ARE CLAIMED, 4 IS ADMITTEDLY OWNED BY THE HUF-PARTNER AND THEREBY DOES NOT BELONG TO THE ASSESSEE AND THEREFORE, NO CLAIM FOR DEPRECIATION IS ALLOWABLE. IN VIEW OF THE ABOVE, THE ASSESSEE GETS A RELIEF OF RS.1,75,000. THUS, THE ORDER OF THE LD. CIT(A) STANDS MODIFIED TO THE ABOVE EXTENT. 6. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10.8.2011. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT AUGUST 10TH, 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.