M/s Agricultural Produce Marketing Committee, New Delhi V. ACIT, New Delhi

ITA 2588/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69683 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 18-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR; S MISHRA
• Assessee Lawyers: MOHD AMIN; AWNISH AHLAWAT
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 2588 /DEL/ 2011 (ASSESSMENT YEAR: 2004 - 05 ) ITA NO. 2298/DEL/2010 (ASSESSMENT YEAR: 2006 - 07) AGRICULTURAL PRODUCE MARKETING COMMITTEE, MNI COMPLEX NFM PHASE - II, SARAI PIPAL THALA, AZADPUR, NEW DELHI PAN AAA A4091N VS. ACIT CENTRAL CIRCLE - 19(1) , JANDEWALAN, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 2289/DEL/2010 (ASSESSMENT YEAR: 2006 - 07) ITA NO. 2445/DEL/2011 (ASSESSMENT YEAR: 2004 - 05) APPELLANT BY : S MT AWNISH AHLAWAT, ADV. & SH. MOHD AMIN, ADV. RESPONDENT BY: S. MISHRA, DR & Y KAKKAR, DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THESE ARE CROSS APPEALS OF ASSESSEE AND REVENUE FOR ASSESSMENT YEARS 2004 - 05 AND 2006 - 07. 2. FOR THE ASSESSMENT YEAR 2004 - 05, THE ASSESSEES APPEAL TRAVELLED UP TO ITAT IN RESPECT OF VARIOUS ISSUES REGARDING CAPITAL AND REVENUE EXPENDITURE. THE TRIBUNAL B Y O RDER DATED 17.11.2008, RESTORED THE ISSUE BACK TO THE AO TO FRAME ACIT CENTRAL CIRCLE - 19(1), JANDEWALAN, NEW DELHI VS. AGRICULTURAL PRODUCE MARKETING COMMITTEE, MNI COMPLEX NFM PHASE - II, SARAI PIPAL THALA, AZADPUR, NEW DELHI PAN AAAA4091N (APPELLANT) (RESPONDENT) PAGE NO. 2 A FRESH ASSESSMENT. THE APPEALS FOR ASSESSMENT YEAR 2004 - 05 IN THE WAKE OF FRESH ORDERS PASSED ACCORDINGLY BY THE AO AND THEREAFTER ASSESSEES APPEAL BEFORE THE LD CIT(A) DECISION IS CHALLENGED AND FOR THE AY 2006 - 07 THE APPEAL HAS COME IN THE REGULAR COURSE. 3. THE ASSESSEE IS A STATUTORY COMMITTEE KNOWN AS AGRICULTURAL PRODUCE MARKETING COMMITTEE, AZADPUR, NEW DELHI WHICH WAS CONSTITUTED INITIALLY UNDER THE ACT OF PARLIAMENT I.E. DELHI AGRICUL TURAL PRODUCE MARKETING REGULATION ACT, 1976 , REPEALED BY DELHI AGRICULTURAL PRODUCE MARKETING REGULATION ACT, 1998. UNDER THE PROVISIONS OF THE ACT, THE COMMITTEE IS A BODY CORPORATE CONSTITUTED TO PROVIDE FACILITIES TO THE FARMERS AND THE PERSONS VISITIN G THE MARKET FOR MARKETING OF NOTIFIED AGRICULTURAL PRODUCE IN AZADPUR MANDI, DELHI, AND TO DO OTHER ACTS IN RELATION TO SUPERINTENDENCE, DIRECTIONS AND CONTROL OF MARKET FOR REGULATING MARKETING OF AGRICULTURAL PRODUCE. THE ASSESSEE CLAIMED THAT BEING A L OCAL AUTHORITY ESTABLISHED UNDER DELHI AGRICULTURAL PRODUCE MARKET (REGULATION) ACT, 1976, NOW, THE DELHI AGRICULTURAL PRODUCE MARKET (REGULATION) ACT, 1998 HAS BEEN GRANTED EXEMPTION UNDER SECTION 10(20) OF THE INCOME TAX FROM PAYMENT OF TAX. THE INCOME T AX AUTHORITIES DID NOT ACCEPT THE CONTENTION OF THE AGRICULTURAL PRODUCE MARKETING COMMITTEE, AZADPUR, (HEREAFTER APMC ), ON THE ISSUE THAT THEY ARE A LOCAL AUTHORITY. THE ISSUE WAS SETTLED FIRSTLY BY THE TRIBUNAL IN FAVOUR OF AGRICULTURAL PRODUCE MARKETI NG COMMITTEE, AZADPUR AND THEN BY HONBLE DELHI HIGH COURT THAT AGRICULTURAL PRODUCE MARKETING COMMITTEE, AZADPUR IS A LOCAL AUTHORITY AND, THEREFORE, EXEMPTED FROM PAYMENT OF TAX UNDER SECTION 10(2 0 ) OF THE ACT . THIS ISSUE WAS ULTIMATELY DECIDED BY THE HONBLE SUPREME COURT AGAINST THE ASSESSEE. 4. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2004 - 05 UNDER CONSIDERATION DECLARING NIL TAXABLE INCOME AND CLAIMED EXEMPTION UNDER SECTION 10(20) OF TH E ACT AS THEY HAVE BEEN DOING IN THE EARLIER YEARS. THE RETURN WAS ACCOMPANIED BY AUDITED BALANCE SHEET. THE ASSESSEE S CASE WAS TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER COMPUTED THE INCOME ON THE BASIS OF FIGURES DECLARED IN THE AUDITED ACCOUNTS. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE REGARDING EXEMPTION UNDER SECTION 10(20). HOWEVER THE ASSESSING OFFICER ALLOWED THE CONTRIBUTION MADE TO DELHI AGRICULTURAL MARKETING BOARD (DAMB). THE ASSESSING OFFICER ALSO DISALLOWED THE EXPENSES INCURRED ON THE MAINTENANCE OF MARKET YARD (CIVIL) & ELECTRICAL . THE PAGE NO. 3 ASSESSEE FILED THE APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER BEFORE THE CIT(A) WHO VIDE ITS ORDER DATED 10.02.2011 PARTLY ALLOWED THE APPEAL. THAT SO FAR A S DISALLOWANCE INCURRED ON ACCOUNT OF MARKET YARD (CIVIL) AND MARKET YARD (ELECTRICAL) IS CONCERNED THE CIT(A) ALLOWED FURTHER EXPENDITURE TO THE EXTENT OF RS. 2,62,92,432/ - TO BE REVENUE IN NATURE. HOWEVER EXPENDITURE AMOUNTING TO RS. 2,07,28,388/ - ON ACC OUNT OF REPAIRS AND MAINTENANCE OF MARKET YARD (CIVIL) EXCLUDING RS. 36,11,153/ - OF MARKET YARD (ELECTRICAL) HAVE BEEN DECLARED AS CAPITAL IN NATURE. THE ASSESSEE I S AGGRIEVED THAT NO REASONS HAS BEEN CITED BY THE LD CIT(A) AS TO WHY THE ELECTRICAL EXPENSE S TO THE TUNE OF RS. 3,61,11,153/ - ARE TREATED AS CAPITAL IN NATURE. 5 . LIKEWISE THE ASSESSEE FILED RETURNED OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2006 - 07 UNDER CONSIDERATION, DECLARED AS NIL TAXABLE INCOME AND CLAIMED EXCEPT U/S 10(20) OF THE ACT AS THEY HAVE BEEN DOING SO IN THE EARLIER YEARS. ASSESSING OFFICER COMPUTED ON THE BASIS OF FIGURE S DECLARED ON THE AUDITED REPORT . ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE REGARDING EXEMPTION OF U/S 10(20) AND ALSO DISALLOWED CONTRIBUTION MADE T O DELHI AGRICULTURAL MARKETING BOARD AND AUDITED BACK THE SAME IN TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO DISALLOWED EXPENSES INCURRED ON THE MAINTENANCE OF ENTERTAINMENT EXPENSES. 6 . THE ASSESSEE PREFERRED AN APPEAL AGAINST THE SAID ORDE R BEFORE LD CIT(A) WHO VIDE ITS ORDER DATED 05.03.2010 DECIDED THE ISSUE REGARDING CONTRIBUTION MADE TO THE DELHI AGRICULTURAL MARKETING BOARD (DAMB) AS STATUTORY PAYMENT AND AS SUCH DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 7,64,43,623/ - FROM THE INCOME OF THE ASSESSEE. HOWEVER, DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED ON ACCOUNT OF MAINTENANCE OF MARKET YARD (ELECTRICAL) AND MARKET YARD (CIVIL) IS CONCERNED, THE LD CIT(A) ALLOWED FURTHER EXPENSES TO THE EXTENT OF RS. 54, 53,332/ - TO BE REVENUE IN NATURE. HOWEVER, EXPENSES AMOUNTING TO RS. 2,38,84,959/ - ON ACCOUNT OF REPAIRS AND MAINTENANCE OF MARKET YARD (CIVIL) AS WELL AS ELECTRICAL HAVE BEEN DECLARED CAPITAL IN NATURE. THE ASSESSEE IS AGGRIEVED THAT NO REASON HAS BEEN SH OWN AS TO HOW THE ELECTRICAL EXPENSES TO THE TUNE OF RS. 2,38,84,959/ - ARE CAPITAL IN NATURE AND ALSO EVEN THOUGH IT HAS BEEN DECLARED THE EXPENSES AS CAPITAL IT IS NOT BEEN GRANTED ANY DEPRECIATION. PAGE NO. 4 7 . THE GROUNDS RAISED BOTH BY THE ASSESSEE AND THE REVE NUE ARE THE SAME AND ONLY THE FIGURES ARE DIFFERENT. THE GROUNDS RAISED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2004 - 05 ARE FOLLOWS: - 1. THAT THE LEARNED CIT(APPEALS) - XXII IS NOT JUSTIFIED IN DISALLOWING PART OF THE EXPENSES INCURRED ON THE MAINTENANCE OF MARKET YARD (CIVIL) BEING CAPITAL IN NATURE WHEREAS THE ASSESSEE HAD DEBITED THE SAME IN THE INCOME & EXPENDITURE ACCOUNT AS THE EXPENSES WERE REVENUE IN NATURE AND WERE RECURRING EXPENSES. 2. THAT THE LEARNED CIT(APPEAL) - XII IS NOT JUSTIFIED IN DISALLOWING EXPENSES INCURRED ON THE MAINTENANCE OF MARKET YARD (ELECTRICAL) BEING CAPITAL IN NATURE WHEREAS THE ASSESSEE HAD DEBITED THE SAME IN THE INCOME & EXPENDITURE ACCOUNT AS THE EXPENSES WERE REVENUE IN NATURE AND WERE RECURRING EXPENSES. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, AMEND OR WITHDRAW ANY ONE OR MORE OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 4. THAT THE LE ARNED ASSESSING OFFICER WAS ALSO NOT JUSTIFIED IN NOT CONSIDERING THE EXPLANATION FIELD BY THE ASSESSEE WITH REGARD TO EACH AND EVERY EXPENSE AND IGNORING THE DETAILS FILED FOR EXPENSE AND THE RELEVANT VOUCHERS FILED AT THE TIME OF FINALIZATION OF ASSESSME NT. 8 . THE GROUNDS RAISED IN THE ASSESSMENT YEAR 2004 - 05 BY THE REVENUE IS AS FOLLOWS: - 1. THE CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 4,62,92,432/ - BY TREATING THE SAME AS REVENUE EXPENDITURE OUT OF TOTAL DISALLOWANCE OF RS. 5,04,44,839/ - MADE BY THE A.O. ON ACCOUNT OF CAPITAL EXPENDITU RE ON ACCOUNT OF MAINTENANCE OF MARKET YARD (CIVIL) AND MARKET YARD (ELECTRICAL) BRING ABOUT BENEFITS THAT LASTS FOR MANY YEARS TO COME AND ADD TO THE CAPITAL OF INFRASTRUCTURE OF THE ASSESSEE IN THE SET ASIDE PROCEEDINGS BY THE HONBLE ITAT VIDE ITS ORDER DATED 07.11.2008. 2. THAT APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD ANY OTHER GROUND OF APPEAL. 9 . THE GROUNDS RAISED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006 - 07 ARE AS FOLLOWS: - 1. THAT THE LEARN ED CIT (APPEALS) - XXII WAS NOT JUSTIFIED IN DISALLOWING PART OF THE EXPENSES INCURRED ON THE MAINTENANCE OF MARKET YARD (CIVIL)BEING CAPITAL IN NATURE WHEREAS THE ASSESSEE HAD DEBITED THE SAME IN THE INCOME & EXPENDITURE ACCOUNT AS THE EXPENSES WERE REVENUE IN NATURE AND WERE RECURRING EXPENSES. 2. THAT THE LEARNED CIT (APPEALS) - XXII WAS NOT JUSTIFIED IN DISALLOWING PART OF THE EXPENSES INCURRED ON THE MAINTENANCE OF MARKET YARD (ELECTRICAL) BEING CAPITAL IN NATURE WHEREAS THE ASSESSEE HAD DEBITED THE SAME IN THE INCOME & EXPENDITURE ACCOUNT AS THE EXPENSES WERE REVENUE IN NATURE AND WERE RECURRING EXPENSES. 3. THAT THE LEARNED CIT (APPEAL) - XXII WAS NOT JUSTIFIED IN DISALLOWING PART OF THE MAINTENANCE OF THE ENTERTAINMENT EXPENSES. PAGE NO. 5 4. THAT THE LEARNED CIT (APPEAL) XXII & LEARNED A.O. DID NOT ALLOW DEPRECIATION ON THE CAPITAL EXPENDITURE ADDED IN THE INCOME WHICH A PERSON IS ENTITLED TO AS CONSEQUENCE. 5. THAT THE LEARNED ACIT/CIT (APPEAL) WERE NOT JUSTIFIED IN CHARGING INTEREST UNDER SECTION 234 - A, 234 - B A ND 234 - C OF THE INCOME TAX ACT. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, AMEND OR WITHDRAW ANY ONE OR MORE OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 10 . THE GROUNDS RAISED BY THE REVENUE IN THE ASSESSMENT YEAR 2006 - 07 ARE AS FOLLOWS: - 1. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 54,53,332/ - OUT OF RS. 2,93,38,291/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITAL EXPENSES CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 54,53,332/ - TREATING THE EXPENSES AS REVENUE IN NATURE WITHOUT SUBSTANTIATING IN THE ORDER AS TO HOW THE GIVEN ITEMS WARRANT THEIR CLASSIFICATION A S REVENUE IN LIGHT OF THE CIRCUMSTANCES WHEREIN THE EXPENSES WERE INCURRED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD ANY OTHER GROUND OF APPEAL. 11 . LD SR DR CONTENDS THAT THE LD CIT(A) HAS ERRED IN ALLOWING EXPENSES ON MAJOR REPAIR S OF ROAD, FOOTPATH, WATER PROOFING AND PAINTING, LAYING AND JOINING OF WATER CONNECTION AS REVENUE IN NATURE, WHEREAS, THESE ITEMS ARE CAPITAL IN NATURE BUT THEY HAVE BEEN ALLOWED AS REVENUE E XPENDITURE . THEREFORE THIS GROUND OF REVENUES APPEAL SHOULD BE ALLOWED. 1 2 . LD COUNSEL FOR THE ASSESSEE IN REPLY CONTENDS THAT THESE EXPENSES ARE PURELY REVENUE IN NATURE AND CIT(A) HAS RIGHTLY HELD SO AND THAT THE ASSESSEE HAD INCURRED EXPENDITURE UNDER VARIOUS HEADS AS IT HAS TO TAKE CARE OF SO MANY MARKETING YARDS. THE SAME INCLUDES REPAIRING OF ROADS, REPAIRING OF FOOTPATHS, REPAIR OF BOUNDARY WALL, SEWERAGE, STREETS, SHEDS AND WATER SUPPLY. SINCE THE ASSESSEE EARNS INCOME BY MAKING AVAILABLE THESE FACILITIES TO THE FARMERS, IT IS OBLIGATORY TO KEEP ALL THESE FACILITIES IN GOOD AND PROPER CONDITION SO AS TO ENABLE THE FARMERS, TRADERS, TO CARRY OUT THEIR ACTIVITIES IN AN EFFICIENT MANNER. LD COUNSEL ALSO BROUGHT TO OUR NOTICE THAT IN ASSEESSEES OWN CASE OF AY 2003 - 04 & 2005 - 06, THE TRIBUNAL UPHELD THE LD CIT(A) DECISION OF TREATING THESE EXPENDITURES AS REVENUE IN NATURE AND THE APPEAL PREFERRED BY THE REVENUE AGAINST IT WAS DISMISSED BY HONBLE HIGH COURT OF DELHI. THE FOLLOW ING EXPENSES PAGE NO. 6 OF THE ASSESSEE FOR THE AYS 2005 - 06 AND 2003 - 04 WAS HELD TO BE OF REVENUE IN NATURE : - (I) MAJOR REPAIR OF ROAD (EXIT GATE NSM) (II) MAJOR REPAIR OF FOOTPATH (D - BLOCK NSM) (III) IMPROVEMENT WORK OF THE MARKET RCC UG TANK (IV) MAJOR REPAIR OF BOUNDARY WALL AT OKHLA SUB YARD (V) MAJOR REPAIR OF OKHLA SUB YARD AND NSM (VI) IMPROVEMENT OF SEWERAGE AND STORM WATER DRAIN (NSM) (VII) MAJOR REPAIR OF STREET AT NSM A - BLOCK (VIII) IMPROVEMENT OF WATER LINE WORK (NFM & NSM ) 1 3 . THUS, ACCORDING TO THE LD AR, THE LD CIT(A) HAS RIGHTLY ALLOWED THESE EXPENSES AS REVENUE EXPENDITURE. OUR ATTENTION WAS INVITED TO VARIOUS CITATIONS AND PRECEDENTS LAID DOWN BY THE HONBLE SUPREME COURT AND HIGH COURT S IN THIS RESPECT. IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD. V. COMMISSIONER OF INCOME - TAX ( 1955 ) 27 ITR 34, 4 (SC), THEIR LORDSHIPS OF THE SUPREME COURT OBSERVED AS UNDER: - IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS IT IS PROPERLY ATTRIBUTABLE TO CAPITAL AND IS OF THE NATURE OF CAPITAL EXPENDITURE. IF ON THE OTHER HAND IT IS MADE NOT FOR THE PURPOSE OF BRINGING INTO EXISTENCE ANY SUCH ASSET OR ADVANTAGE BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE T HE PROFIT IT IS A REVENUE EXPENDITURE. IF ANY SUCH ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF T HE BUSINESS IS THUS ACQUIRED OR BROUGHT INTO EXISTENCE IT WOULD BE IMMATERIAL WHETHER THE SOURCE OF THE PAYMENT WAS THE CAPITAL OR THE INCOME OF THE CONCERN OR WHETHER THE PAYMENT WAS MADE ONCE AND FOR ALL OR WAS MADE PERIODICALLY. THE AIM AND OBJECT OF THE EXPENDITURE WOULD DETERMINE THE CHARACTER OF THE EXPENDITURE WHETHER IT IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. THE SOURCE OR THE MANNER OF THE PAYMENT WOULD THEN BE OF NO CONSEQUENCE. IT IS ONLY IN THOSE CASES WHERE THIS TEST IS OF NO AVAIL THAT ONE MAY GO TO THE TEST OF FIXED OR CIRCULATING CAPITAL AND CONSIDER WHETHER THE EXPENDITURE INCURRED WAS PART OF THE FIXED CAPITAL OF THE BUSINESS OR PAR T OF ITS CIRCULATING CAPITAL. IF IT WAS PART OF THE FIXED CAPITAL OF THE BUSINESS IT WOULD BE OF THE NATURE OF CAPITAL EXPENDITURE AND IF IT WAS PART OF ITS CIRCULATING CAPITAL IT WOULD BE OF THE NATURE OF REVENUE EXPENDITURE. THESE TESTS ARE THUS MUTUALLY EXCLUSIVE AND HAVE TO BE APPLIED TO THE FACTS OF EACH PARTICULAR CASE IN THE MANNER ABOVE INDICATED. IT HAS BEEN RIGHTLY OBSERVED THAT IN THE GREAT DIVERSITY OF HUMAN AFFAIRS AND THE COMPLICATED NATURE OF BUSINESS OPERATIONS IT IS DIFFICULT TO LAY DOWN A TEST WHICH WOULD APPLY TO ALL SITUATIONS. ONE HAS, THEREFORE, GOT TO APPLY THESE CRITERIA ONE AFTER THE OTHER FROM THE BUSINESS POINT OF VIEW AND COME TO THE CONCLUSION WHETHER ON A FAIR APPRECIATION OF THE WHOLE SITUATION THE EXPENDITURE INCURRED IN A PAR TICULAR CASE IS OF THE NATURE OF CAPITAL EXPENDITURE OR REVENUE EXPENDITURE IN WHICH LATTER PAGE NO. 7 EVENT ONLY IT WOULD BE A DEDUCTIBLE ALLOWANCE UNDER SECTION 10(2)(XV) INCOME - TAX ACT. ' 14. IN THE CASE OF LAKSHMIJI SUGAR MILLS CO PVT LIMITED VS COMMISSIONER OF INCOME TAX NEW DELHI, 82 ITR 376, THE HON'BLE SUPREME COURT ANSWERED TO THE QUESTION WHETHER EXPENDITURE INCURRED BY SUGAR MILLS TOWARDS CONTRIBUTIONS TO CANE DEVELOPMENT COUNCIL FOR DEVELOPMENT OF ROADS BETWEEN SUGAR - CANE P RODUCING CENTERS AND THE MILLS WO ULD BE CAPITAL EXPENDITURE? THE APEX COULD HELD THAT THE EXPENDITURE WAS NOT OF CAPITAL NATURE AND REASONED THAT IT WAS INCURRED FOR FACILITATING THE RUNNING OF ASSESSEE'S MOTOR VEHICLES AND OTHER MEANS EMPLOYED FOR TRANSPO RTATION OF SUGARCANE TO ITS FACTORIES AND THEREFORE INCURRED FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCING PROFITS WITHOUT THE ASSESSEE GAINING ANY ADVANTAGE O F AN END URING BENEFIT TO ITSELF . 1 5 . LD DR REFERRED TO THE FOLLOWING DECISIONS 224 ITR 414, 303 ITR 93, 267 ITR 64 TO SUBSTANTIATE HER ARGUMENT THAT THE LD CIT(A) HAS ERRED IN ALLOWING CERTAIN EXPENSES AS REVENUE, WHEREAS IT WAS CAPITAL IN NATURE. 16 . WE HAVE GONE THROUGH THE CITATIONS STATED BY BOTH THE SIDES AS WELL AS THE CONTENTIONS OF BOTH THE PARTIERS WE FIND THAT LD CIT(A) HAS EXAMINED AL L THE DETAILS OF EXPENSES AND HAS LISTED THE FOLLOWING ITEMS AND ALLOWED IT AS REVENUE EXPENDITURE FOR RELEVANT ASSESSMENT YEAR 2004 - 05 UNDER CONSIDERATION AND SOME OF WHICH ARE AS FOLL OWS: - 1. MAJOR REPAIR/ REMODELING OF ROADS 2. MAJOR REPAIR OF PATHWAYS/ FOOTHPATH AT OKHLA MANDI 3. MAJOR REPAIR OF PATHWAYS AND FOOTPATH OF NFM AND NSM, AZADPUR 4. MAJOR REPAIR OF FLOORING AT POMA SHED, NSM 5. WIDENING OF ROAD 6. MAJOR REPAIR OF R OADS AT OKHLA MANDI 7. REPAIR OF STEPS OF NSM/ NFM 8. MAJOR REPAIR OF BYE - LANE AND ROADS AT NSM AND NFM, AZADPUR 9. MAJOR REPAIR OF BOUNDARY WALL AND FOOTPATH OF TOMATO SHED 10. BUILDING PLAN CHARGES 11. RECONSTRUCTION OF GULLY CHAMBER IN NSM, AZADP UR 12. MAJOR REPAIR OF STEEL BUFFERS AT NSM, AZADPUR 13. PAINTING MARKING OF ROADS AT NSM, NFM, OKHLA MANDI 14. COVERING OF OPEN PORTION OF DRAIN AT NSM, AZADPUR 15. REPAIR AND RECONSTRUCTION OF BOUNDARY WALL 16. IMPROVEMENT OF DHALLOW AT AZADPUR 17 . CONNECTING PUMP WELL TO DRAIN 18. CONSULTANT CHARGES PAGE NO. 8 1 7 . FOR THE RELEVANT AY 2006 - 07, UNDER CONSIDERATION THE LD CIT(A) AFTER APPRECIATING THE FACTS AND LAW ON THE SUBJECT HAS ALLOWED THE FOLLOWING EXPENDITURE TO BE REVENUE IN NATURE: - 1. OPERATION CHARGE FOR CCTV SYSTEM 2. OPERATION AND MAINTENANCE OF ALL PUMPS AT NSM/NFM + OPERATION/ MAINTENANCE OF PUMPS 3. REPAIR OF CHILLER PLANT AT NFM + ENERGISATION OF EXISTING CHILLER PLANT 4. SPECIAL REPAIR AND WHITEWASHING OF RCC SHEDS IN NSM 5. IMPROVEMEN T OF URINALS 6. CLEANING OF UNDER GROUND TANK BETWEEN OLD & NEW WATER LINE ON EXIT LANE ROAD AT NFM 7. OPERATION AND MAINTENANCE OF BOOSTER PUMP AT NSM 1 8 . THE EXPENSES INCURRED IN FOR THE RESPECTIVE YEAR S IS LISTED IN THE CIT(A) S ORDER . AS PER THE RATIO LAID BY THE HONBLE SUPREME COURT, WE HAVE TO LOOK AT THE AIM AND OBJECT OF THE EXPENDITURE , WHICH WOULD DETERMINE THE CHARACTER OF THE EXPENDITURE, WHETHER IT IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. IN THE PRESENT CASE THE ASS ESSEE EARNS INCOME BY MAKING A VAILABLE MARKETING SITES (MANDI S) IN VARIOUS MARKETING YARDS. THE EXPENSES INCURRED ABOVE ARE INCURRED FOR FACILITATING PROPER MAINTENANCE OF THE SAME AND THUS THE ASSESSEE EARNS INCOME BY DOING SO. THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR AY 2003 - 04 AND 2005 - 06 HAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ( AS REPRODUCED ABOVE) , WAS ABSOLUTELY IN THE REALM OF REVENUE EXPENDITURE AS THERE HAS BEEN NO CONSTRUCTION WHICH HAD ENDURING BENEFIT TO TH E ASSESSEE. THE HONBLE HIGH COURT ALSO OBSERVED THAT IT WAS DIFFICULT TO SAY THAT THE REPAIRS CARRIED OUT BY THE ASSEESEE HAVE ANY ENDURING BENEFIT TO ITS ASSETS . AND ALSO OBSERVED THAT THE EXPENDITURE WAS RECURRING IN NATURE AND THE ASSESSEE WAS REQUIRED TO DO THE SAME TO CARRY OUT THE BUSINESS. IN THE LIGHT OF THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT WHICH UPHELD THE TRIBUNALS FINDING IN THIS MATTER, WE ARE FORTIFIED IN OUR DECISION TO UPHOLD THE DECISION OF THE CIT(A) IN TREATING THE AFORESAI D EXPENDITURE FOR THE AYS 2004 - 05 AND 2006 - 07 AS CORRECT AND LEGAL. 1 9 . THEREFORE, IN OUR CONSIDERED VIEW , ALL THESE EXPENSES ARE REVENUE IN NATURE AND WE FIND NO INFIRMITY IN T HE IMPUGNED ORDERS OF THE LD CIT(A) TO HAVE HELD SO, AND CONSEQUENTLY REVENUE S GROUNDS ON THIS ACCOUNT FOR BOTH THE ASSESSMENT YEARS ARE DIS MISSED. 20 . FOR THE AY 2006 - 07, THE ASSESSEE IS AGGRIEVED THAT LD CIT(A) AND AO, DID NOT ALLOW DEPRECIATION ON THE CAPITAL EXPENDITURE ADDED TO THE INCOME WHICH PAGE NO. 9 THE ASSESSEE IS ENTITLED AS CONSEQUENTIAL BENEFIT . NEEDLESS TO SAY, THE EXPENDITURE WHICH IS IN THE NATURE OF CAPITAL IS ENTITLED TO DEPRECIATION IN ACCORDANCE TO LAW AND THE AO IS DIRECTED TO GIVE CONS EQUENTIAL DEPRECIATION TO THE CAPITAL EXPENDITURE FOR WHICH DEPRECIATION WAS NOT G IVEN. OTHER THAN THAT WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE THAT CERTAIN ITEMS FOR WHICH EXPENSES WAS MADE BY THEM WAS ERRONEOUSLY HELD AS CAPITAL IN NATURE BY THE LD CIT(A). WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN T HIS BEHALF AND WE CONFIRM THE SAME. T H E R E F O R E , W E P A R T I A L L Y A L L O W T H E A P P E A L O F T H E ASSESSEE F O R ASSESSMENT YEAR 2 0 0 6 - 0 7 A N D D I S M I S S T H E A P P E A L O F T H E R E V E N U E F O R ASSESSMENT YEAR 2 0 0 6 - 0 7 . I N R E S P E C T O F T H E ASSESSMENT YEAR 2 0 0 4 - 0 5 , B O T H T H E A P P E A L S O F T H E ASSESSEE A N D T H E R E V E N U E I S D I S M I S S E D . 2 1 I N T H E R E S U L T B O T H T H E A P P E A L S O F T H E R E V E N U E A N D T H E ASSESSEE I S D I S M I S S E D F O R ASSESSMENT YEAR 2 0 0 4 - 0 5 A N D F O R T H E ASSESSMENT YEAR 2 0 0 6 - 0 7 T H E R E V E N U E S A P P E A L I S D I S M I S S E D A N D T H E A P P E A L O F T H E ASSESSEE I S P A R T I A L L Y A L L O W E D F O R S T A T I S T I C A L P U R P O S E S . ORDER PRONOUNCED IN THE OPEN COURT ON 20 .12.2013. - SD/ - - SD/ - ( S.V. MEHROTRA) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 20 / 12 /2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI