The DCITGNR Circle, Gandhinagar V. Vinayak Cold Storage Pvt.Ltd., Gandhinagar

ITA 3125/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6005 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: B K PATEL
• Keywords: Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVENESH SAINI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3125 / AHD/2010 (ASSESSMENT YEAR 2007-08) DCIT, GANDHINAGAR VS. VINAYAK COLD STORAGE P.LTD., VILL. AHMEDPURA, TEL. DEHGAM, DISTT. GANDHINAGAR-382305 PAN/GIR NO. : AAACV3827D (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S K MEENA, SR. DR RESPONDENT BY: SRI B K PATEL, AR O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 17.09.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF CAPITAL EXPENDITURE OF RS.10,66,744/-. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C IT(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE A BOVE EXTENT. 3. THE BRIEF FACTS OF THE CASE REGARDING THIS ISSUE ARE NOTED BY THE LD. CIT(A) IN PARA 4.1 OF HIS ORDER WHICH IS REPRODUCED AS UNDER: I.T.A.NO.3125 /AHD/2010 2 4.1 THE AO NOTICED FROM SCH.10 OF PAL ACCOUNT THAT ASSESSEE HAS DEBITED A SUM OF RS.10,66,744/- ON ACCOUNT OF REPAI RS TO BUILDINGS. THE ASSESSEE FURNISHED BEFORE THE AO, THE DETAILS O F EXPENSES MADE UNDER VARIOUS HEADS, BILLS AND VOUCHERS. FROM THE D ETAILS FURNISHED, THE AO NOTICED THAT EXPENDITURE FOR PURCHASE OF TIM BER ETC. IS AT RS.3,80,690/-, CEMENT AT RS.76,600/-, BRICKS RS.91, 450/-, STEEL AT RS.69,500/-, BARS AND GIRDERS AT RS.2,52,107/- AND RS.I,94,597/- ON CONSTRUCTION OF BOUNDARY WALL, PARTITIONS AND LABOU R CHARGES. THE ASSESSEE IN THE WRITTEN SUBMISSION BEFORE THE A.O. ASSERTED THAT THESE EXPENSES WERE MADE ON ACCOUNT OF NEW PARTITIONS IN THE COLD STORAGE CHAMBER. THE AO THEREFORE HELD THAT THE EXPENDITURE HAS ENHANCED THE VALUE OF COLD STORAGE AND WHEN AN OWNER INCURS EXPE NDITURE ON ADDITIONS OR ALTERATION IN A BUILDING WHICH ENHANCE S ITS VALUE, THE EXPENDITURE HAS TO BE HELD AS CAPITAL IN NATURE, AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF MODI SPINNING AND W EAVING MILLS CO., LTD VS. CIT CITED IN (1993) 200 ITR 544. THE A O HELD THAT SINCE THE EXPENDITURE WAS FOR CONSTRUCTION OF NEW PARTITI ONS AS ADMITTED BY THE ASSESSEE ITSELF, THERE WAS AN ADVANTAGE OF ENDU RING BENEFIT OF THE BUSINESS AND IT WAS NOT MADE FOR RUNNING DAY TO DAY BUSINESS OF THE ASSESSEE, IT WAS CAPITAL EXPENDITURE. THEREFORE, TH E AO TREATED THE EXPENDITURE OF RS.10,66,744/- AS CAPITAL EXPENDITUR E AND DISALLOWED THE SAME. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THE DISALLOWANCE AND NOW, TH E REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT A CLEAR FINDING IS GIVEN BY THE LD. CIT(A) THAT IT IS NOTED THAT EXPENSES REGARDING PART OF EXPENDITURE OF RS.3,80,690/- IS F OR REPLACEMENT OF WOODEN PLANKS, RACKS, HARDWARE & PAINTS AND MISCELLANEOUS EXPENSES AND THE SAME ARE INCURRED EVERY YEAR BECAUSE THE WOODEN PLANKS A ND RACKS ARE WORN OUT AND ARE TO BE CHANGED PERIODICALLY. REGARDING THE BALANCE AMOUNT OF EXPENDITURE OF RS.6,84,254/-, FINDING IS GIVEN BY T HE LD. CIT(A) THAT BY INCURRING THESE EXPENDITURE FOR MAKING PARTITION WA LL IN THE COLD STORAGE I.T.A.NO.3125 /AHD/2010 3 BUILDING, THERE IS NO ADDITION TO THE INSTALLED CAP ACITY AND THIS PARTITION IS ONLY FOR OPERATING CONVENIENCE SO THAT AS AND WHEN GOODS ARE TO BE TAKEN OUT, RELEVANT CHAMBER CAN BE OPERATED KEEPING OTHER CHAMBERS CLOSED SO THAT THERE IS NO LOSS OF ELECTRICITY AS THE POTATOES ARE TO BE PRESERVED AT A SPECIFIC TEMPERATURE. ON THE BASIS OF THESE FACTS, FINDING IS GIVEN BY LD. CIT(A) THAT THE PARTITION HAS BEEN ADDED TO INCREASE THE EFFICI ENCY OF COLD STORAGE AND FOR EASY OPERATION, WHICH LEAD TO SAVING ELECTRICIT Y TO THE ASSESSEE AND INCREASE EFFICIENCY OF THE BUSINESS. LD. CIT(A) HA S APPLIED THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MODI SPINNING & WEAVING MILLS CO. LT. VS CIT 200 ITR 544 AND ALSO ANOTHER J UDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF EMPIRE JUTE CO. VS CIT 124 ITR 01 AND DELETED THE DISALLOWANCE ON THE BASIS THAT THE ASSE SSEE HAS NOT BROUGHT INTO EXISTENCE A NEW ASSET BECAUSE THE ASSESSEE HAS SIMP LY CONSTRUCTED THE PARTITION WALL IN THE STORAGE PLACE, WHICH IN ITSEL F CANNOT BE AN INDEPENDENT ASSET IN THE NATURE OF ASSESSEES BUSINESS. NOTHIN G HAS BEEN BROUGHT ON RECORD BY THE LD. D.R. TO CONTROVERT THE FINDING OF LD. CIT(A) AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD./- SD./- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED :29 TH JULY, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE I.T.A.NO.3125 /AHD/2010 4 1. DATE OF DICTATION. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..