LOKMAT NEWSPAPERS PVT.LTD, MUMBAI V. DY.C.I.T., RANGE-3(2), MUMBAI

ITA 2684/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1191 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 27-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: KISHOR PATEL
• Keywords: Depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER I T A NO: 2684/MUM/2009 (ASSESSMENT YEAR: 2004-05) LOKMAT NEWSPAPERS PRIVATE LTD., MUMBAI APPELLANT (PAN: AAACL1888J) VS DEPUTY COMMISSIONER OF INCOME TAX 3(2) RESPONDEN T MUMBAI APPELLANT BY: SHRI KISHOR PATEL RESPONDENT BY: SHRI O P SHARMA O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN PRINTING AND PUBLISHING NEWSPAPE RS. THE APPEAL ARISES OUT OF THE ASSESSMENT ORDER PASSED ON 05.12. 2006 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND IN THE APPEAL IS AGAINST THE DIS ALLOWANCE OF THE EXPENDITURE OF RS.2,83,146/- ON REPAIRS AND MAINTEN ANCE OF THE BUILDING, BY TREATING THE SAME AS CAPITAL EXPENDITU RE. THE ASSESSEE DEBITED RS.15,17,246/- ON ACCOUNT OF REPAIRS AND MA INTENANCE TO BUILDINGS AND SUBMITTED A BREAK-UP FOR THE SAME, WH ICH INCLUDED SIX ITEMS OF EXPENDITURE TOTALING TO RS.5,16,597/-, WHI CH IS REPRODUCED IN PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFI CER CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM OF RS.5,16,597/- AS REVENUE IN NATURE. ON THE GROUND THAT THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY ITA NO: 2684/MUM/2009 2 EXPLANATION OR SUBSTANTIATE ITS CLAIM, THE ASSESSIN G OFFICER DISALLOWED THE CLAIM, HOLDING THE EXPENDITURE TO BE CAPITAL IN NATURE. HE, HOWEVER, ALLOWED 10% DEPRECIATION. THUS THE EFFECT IVE DISALLOWANCE WAS RS.4,91,875/-. 3. ON APPEAL IT WAS SUBMITTED BY THE ASSESSEE THAT THE EXPENDITURE REPRESENTED DAY-TO-DAY REPAIRS AND REPL ACEMENT AND NO NEW ASSET CAME INTO EXISTENCE BY REASON OF THE EXPE NDITURE. IT WAS POINTED OUT THAT THE VERY NARRATION OF THE NATURE O F THE WORK CARRIED OUT WOULD SHOW THAT THE EXPENDITURE WAS REVENUE IN NATU RE. IT WAS SUBMITTED THAT THE EXPENDITURE WAS INCURRED MERELY TO MAINTAIN AND PRESERVE EXISTING ASSETS. THE CIT(A) NOTED THAT TH E EXPENDITURE OF RS.1,94,738/- WAS INCURRED NOT FOR MAINTENANCE OF A SSETS ALREADY IN EXISTENCE, BUT THAT IT WAS INCURRED ON ELECTRIC POI NTS BEING INSTALLED FOR THE FIRST TIME. HE THEREFORE HELD THE SAME TO BE C APITAL IN NATURE. AS REGARDS THE EXPENDITURE OF RS.88,408/- WHICH WAS ST ATED TO BE ON FABRICATION WORK FOR GARDEN AND SUPPLY OF PLANTS, H E HELD THAT NEW ASSETS HAD COME INTO EXISTENCE BY REASON OF THE EXP ENDITURE AND UPHELD THE DISALLOWANCE OF THE SAME AS CAPITAL IN N ATURE. THE OTHER FOUR ITEMS OF EXPENDITURE WAS ALLOWED AS REVENUE EX PENDITURE, WITH THE RESULT THAT THE DISALLOWANCE SUSTAINED AGGREGATED T O RS.2,83,146/-, CONSISTING OF THE AFORESAID TWO ITEMS OF RS.1,94,73 8/- AND RS.88,408/-. 4. THE ASSESSEE IS IN FURTHER APPEAL AND WE HAVE HE ARD THE RIVAL CONTENTIONS. THE SUBMISSION OF THE ASSESSEE IS THA T IT WAS ENGAGED IN THE PUBLISHING OF NEWSPAPER SINCE 1973, THAT THE BU ILDING BLOCK AGGREGATED TO RS.15.00 CRORES, THAT A SUM OF RS.9.8 7 CRORES WAS ITA NO: 2684/MUM/2009 3 CAPITALIZED AS BUILDING IN THE APPEAL YEAR ITSELF A ND THAT NO NEW ASSET OR ENDURING ADVANTAGE WAS CREATED BY INCURRING THE EXPENDITURE AND, THEREFORE, IT SHOULD BE ALLOWED AS REVENUE EXPENDIT URE. THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. OXFORD UNIVERSITY PRESS (1977) 108 ITR 166 (BOM) AND NEW S HORROCK SPINNING & MANUFACTURING CO. LTD. VS. CIT (1956) 30 ITR 388 (BOM) WERE CITED BEFORE US. ON THE OTHER HAND, THE SUBMI SSION OF THE DEPARTMENT IS THAT THERE IS SOME DIFFERENCE IN THE DESCRIPTION OF THE AMOUNTS DISALLOWED BY THE CIT(A) BETWEEN WHAT WAS S UBMITTED BEFORE THE ASSESSING OFFICER AND WHAT WAS SUBMITTED BEFORE THE CIT(A) REGARDING THE NATURE OF THE WORK. IT WAS FURTHER C ONTENDED THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM BEFORE TH E ASSESSING OFFICER AS WELL AS THE CIT(A). IT WAS ARGUED THAT IN ANY C ASE THE EXPENDITURE INCURRED ON INSTALLATION OF ELECTRIC POINTS FOR THE FIRST TIME CANNOT BE CONSIDERED TO BE REVENUE EXPENDITURE. 5. ON A CAREFUL CONSIDERATION OF THE RIVAL CONTENTI ONS, WE FIND THAT THE EXPENDITURE OF RS.1,94,738/- IS UNDER ONE BILL DATED 09.12.2003 AND HAS BEEN DESCRIBED AS ELECTRIC FLEETING WORK BEFORE THE ASSESSING OFFICER AND AS ELECTRIC WORK FOR POWER P OINT AND ELECTRIC FITTINGS BEFORE THE CIT(A). FROM THE NARRATION GI VEN BY THE ASSESSEE, THE CIT(A) HAS INFERRED THAT THE EXPENDITURE RELATE D TO INSTALLATION OF ELECTRIC POINTS FOR THE FIRST TIME. NO MATERIAL WA S BROUGHT BEFORE US ON BEHALF OF THE ASSESSEE TO CONTRADICT THE FINDING OF THE CIT(A) THAT THE EXPENDITURE RELATED TO INSTALLATION OF ELECTRIC POI NT FOR THE FIRST TIME WHICH CANNOT BE CHARACTERIZED AS MAINTENANCE EXPEND ITURE OF ASSETS ITA NO: 2684/MUM/2009 4 ALREADY IN EXISTENCE. IN THIS VIEW OF THE MATTER, WE UPHOLD THE DISALLOWANCE OF RS.1,94,738/-. 6. HOWEVER, AS REGARDS THE EXPENDITURE OF RS.88,408 /-, IT HAS BEEN INCURRED ON FABRICATION WORK FOR GARDEN AND SUPPLY OF PLANTS. THESE CANNOT BE CONSIDERED AS ASSETS OF ENDURING NATURE O R TO BRING ANY ENDURING ADVANTAGE TO THE ASSESSEE IN THE CAPITAL F IELD. THEY ARE ROUTINE BEAUTIFICATION EXPENSES OF THE PREMISES AND SHOULD BE CONSIDERED AS EXPENDITURE IN THE REVENUE FIELD HAVI NG BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITU RE AS DEDUCTION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE 2010. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATED 29 TH JUNE 2010 SALDANHA COPY TO: 1. LOKMAT NEWSPAPERS PRIVATE LTD. 413/414, BUSSA INDUSTRIAL ESTATE, 1 ST FLOOR CENTURY BAZAR LANE, PRABHADEVI, MUMBAI 400 025 2. DCIT 3(2) 3. CIT-3 4. CIT(A)-III 5. DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI