P.D. MEHTA & CO., MUMBAI V. ITO 11(1)(3), MUMBAI

ITA 251/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1896 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJIV G SHAH
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI B.RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO.251/MUM/2011 ASSESSMENT YEAR: 2006-07 P.D.MEHTA & CO., 4F, NAAZ BUILDING, LAMINGTON ROAD, MUMBAIU. PA NO.AACCP 0938 P ITO 11(1)(3), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI RAJIV G SHAH RESPONDENT BY: SHRI VIJAY KUMAR JAISWAL DATE OF HEARING: 29.1.2013 DATE OF PRONOUNCEMENT: 1 .2.2013 ORDER PER B.R.MITTAL, JM: THE ASSESEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2006-07 AGAINST ORDER DATED 26.11.2010 OF LD CIT(A)-3,MUMBAI. 2. THE ONLY GRIEVANCE TAKEN BY ASSESSEE IS AS TO WH ETHER THE EXPENDITURE ON REPAIRS OF FLOORING OF THEATRE COMPOUND OF RS.5,15, 188 IS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. 3. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. 2 4. WE OBSERVE THAT ASSESSEE CLAIMED IN ITS PROFIT A ND LOSS ACCOUNT REPAIRS AND MAINTENANCE OF RS.10,66,736. THE AO ASKED THE ASSE SSEE TO FURNISH THE DETAILS. AO HAS STATED THAT AS PER PHOTOCOPIES OF BILLS/VOUCHER S, ASSESSEE SPENT RS.3,40,900 ON ACCOUNT OF MATERIAL PURCHASED AND RS.1,74,288/- TOW ARDS LABOUR CHARGES FOR BREAKING ORIGINAL FLOORING AND FIXING NEW SHAHBAD STONES FOR CINEMA COMPOUND FLOORING REPAIR. AO CONSIDERED THAT THE SAID AGREEMENT AMOUNT OF RS. 5,15,188/- IS CAPITAL IN NATURE AND DISALLOWED THE SAME. ON APPEAL, LD CIT(A) CONFIRME D THE ACTION OF AO AND STATED THAT NEW FLOORING WAS PURCHASED AND INSTALLED, WHICH CAN NOT BE SAID TO BE REPAIRING OF THE EXISTING FLOORING. HOWEVER, LD CIT(A) ALLOWED THE D EPRECIATION THEREON. 5. DURING THE COURSE OF HEARING, LD A.R. SUBMITTED THAT NO NEW ASSET HAS COME INTO EXISTENCE AND ONLY THE EXISTING FLOORING WAS REPLAC ED AS THE EXISTING TILES WERE BROKEN. LD D.R. DID NOT DISPUTE SAID FACT. 6. CONSIDERING THE FACT THAT ASSESSEE HAS SPENT AN AGGREGATE AMOUNT OF RS.5,156,818/- TOWARDS REPLACING THE EXISTING FLOOR AND THERE IS NO ADDITION OF NEW ASSETS, WE HOLD THAT SAID EXPENDITURE IS REVENUE IN NATURE. 7. THE HONBLE APEX COURT IN THE CASE OF ALEMBIC C HEMICALS WORKS LTD VS. CIT, 177 ITR 377(SC) HAS HELD THAT THERE IS ALSO NO SINGLE DEFINITIVE CRITERION WHICH BY ITSELF, IS DETERMINATIVE AS TO WHETHER A PARTICULAR OUTLAY IS CAPITAL OR REVENUE. THE ONCE FOR ALL PAYMENT TEST IS ALSO INCONCLUSIVE. WHAT IS RELEVAN T IS THE PURPOSE OF THE OUTLAY AND ITS INTENDED OBJECT AND EFFECT CONSIDERED IN A COMMON S ENSE WAY HAVING REGARD TO THE BUSINESS REALITIES. IN A GIVEN CASE, THE TEST OF ENDURING BENEFIT MIGHT BREAK DOWN. THE HONBLE ALLAHABAD HIGH COURT ALSO IN THE CASE OF CI T VS. KANORIA COLD STORAGE,100 ITR 155(ALL) HAS HELD THAT EXPENSES INCURRED FOR REPLAC ING OF TRANSFORMER AND SERVICE LINES OF A COLD STORAGE ARE REVENUE IN NATURE. 8. HENCE, WE REVERSE THE ORDERS OF AUTHORITIES BELO W BY ALLOWING THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE THAT SAID EXPENDITURE IS TO BE CONSIDERED AS REVENUE IN NATURE. HOWEVER, AO WHILE GIVING EFFECT TO THIS OR DER WILL WITHDRAWN THE CLAIM OF DEPRECIATION ALLOWED BY LD CIT(A). 3 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 1 ST FEBRUARY, 2013 SD/- (B.RAMAKOTAIAH ) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 1 ST FEBRUARY, 2013 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),3, MUMBAI 4. COMMISSIONER OF INCOME TAX, 11 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI