Upkar Prakashan, Agra V. A.C.I.T., Circle-1, Agra

ITA 336/AGR/2013

• Counselvise Citation: 33620314 RSA 2013
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: K C AGARWAL
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO. 336/AGRA/2013 ASSTT. YEAR : 2009-10 UPKAR PRAKASHAN, VS. A.C.I.T., CIRCLE-1, 2/11 A SWADESHI BIMA NAGAR, AGRA. M.G. ROAD, AGRA. (PAN: AAAFU 7319 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C. AGARWAL, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 26.11.2013 DATE OF PRONOUNCEMENT OF ORDER : 29.11.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-I, AGRA DATED 22.08.2013 FOR THE ASSESSMENT YEAR 2009- 10 ON THE FOLLOWING GROUNDS : 1. BECAUSE DISALLOWANCE OF RS. 10,63,925.00 ON ACCOUN T OF REPAIR MADE BY THE ASSESSEE TO THE BUILDING BEING CAPITAL EXPEN DITURE IS UNJUSTIFIED. 2. BECAUSE THE ASSESSEE FIRM IS A LARGE BUSINESS ESTAB LISHMENT HAVING A TURNOVER OF OVER RS. 21.00 CRORES AND CARRYING ON B USINESS OF PRINTING AND PUBLICATION OF BOOKS WHICH CONSISTS OF VARIOUS ACTIVITIES LIKE PURCHASE OF HUGE REAMS OF PAPERS AND THEREAFTER PRI NTING PROCESS, BINDING PROCESS, PACKING PROCESS AND VARIOUS OTHER MARKETING WORKS ETC. ON ACCOUNT OF CONSTANT HANDLING OF GOODS AND C ONSTANT USE BY LABOUR, THE BUILDING, WALLS AND FLOORS AND TOILETS GET DAMAGED AND THE NUMBERS OF LABOURS EMPLOYED ARE MORE THAN 300 TO 40 0. THE QUANTUM OF EXPENDITURES IN REPAIR OF RS. 10,63,925.00 WAS N OT MUCH. THE MERE FACTS THAT THE CEMENT ETC. WAS PURCHASED AT ONE PLA CE, WHERE THE NEW ITA NO. 336/AGRA/2013 2 CONSTRUCTION WAS BEING DONE IS NOT A GROUND OF PRES UMING THAT THE. CEMENT WAS PURCHASED FOR NEW CONSTRUCTION AS THE AS SESSEE HAS SEVERAL COMMERCIAL VEHICLES FOR TRANSPORTING THE GO ODS FROM ONE PLACE TO OTHER PLACES WHICH TRANSFER THE GOODS AS P ER REQUIREMENT OF USE. THE ENTIRE PRESUMPTION MADE BY THE AO AND CIT APPEAL IS WHOLLY UNJUSTIFIED AND AGAINST THE FACTS. 3. BECAUSE DISALLOWANCE OF RS. 10,63,925.00 AS CAPITAL EXPENDITURE ON THE FACTS AND CIRCUMSTANCES OF THE CASE IS UNJUSTIF IED AND UNREASONABLE AND IN ANY CASE IS EXCESSIVE. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A FIRM AND DERIVES ITS INCOME FROM PUBLICATION OF COMPETITION BOOKS AND GE NERAL BOOK. THE ASSESSEE HAS INCURRED RS.10,63,925/- ON THE BUILDING MAINTENANCE ACCOUNT. THE ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE MATERIAL WAS DELIVERED AT A SITE WHERE CONSTRUCTION WAS ALREADY GOING ON AND BUILDING WAS NOT IN USE. THE R EPLY OF THE ASSESSEE IS QUOTED IN THE ASSESSMENT ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT IT HELD EIGHT BUILDINGS, OUT OF WHICH ONE BUILDING AT 634, NEAR P ANKAJ APOLLO HOSPITAL, MATHURA ROAD, ARTONI, IN THE FIRST HALF OF THE YEAR WAS UND ER CONSTRUCTION AND WAS USED FOR THE BUSINESS PURPOSES FOR SECOND HALF OF THE YEAR. CEMENT WAS PURCHASED IN BULK AND WAS DELIVERED AT THIS SITE BUT REPAIRING WORK W AS GOING ON IN ALL OTHER BUILDINGS THROUGHOUT THE YEAR. THE TURNOVER OF THE ASSESSEE I S VERY HUGE AND MOVEMENT OF HEAVY GOODS IS THERE FOR THE PURPOSE OF BUSINESS, I N WHICH BUSINESS PREMISES GOT DAMAGED. THEREFORE, REPAIR AND MAINTENANCE OF BUILD ING WAS CARRIED OUT FOR THE PURPOSE OF BUSINESS. REPLY OF THE ASSESSEE WAS NOT CONSIDERED FAVOURABLY BECAUSE THE BUILDING MATERIAL WAS STORED AT ONE SITE WHERE CONSTRUCTION WAS GOING ON. ITA NO. 336/AGRA/2013 3 THEREFORE, IT WAS CONSIDERED TO BE CAPITAL EXPENDIT URE AND RS.10,63,925/- WAS DISALLOWED. THE LD. CIT(A) ON THE SAME REASONING AL SO CONFIRMED THE ADDITION. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT DUE TO HUGE VO LUME OF BUSINESS OF ASSESSEE, THE BUSINESS PREMISES USED TO GET DAMAGED, WHICH WA S REPAIRED. THEREFORE, IT WAS REVENUE EXPENDITURE IN NATURE. THE DETAILS OF THE S AME ARE FILED AT PAGE 7 OF THE PAPER BOOK. IT WAS SUBMITTED, IN SUBSEQUENT ASSESSM ENT YEAR 2010-11, THE AO ALLOWED 50% OF THE EXPENDITURE VIDE ORDER DATED 15. 03.2013. HE HAS SUBMITTED THAT IN ASSESSMENT YEAR 2011-12 AND 2012-13, NO DIS ALLOWANCES HAVE BEEN MADE OF SUCH EXPENDITURE. HE HAS RELIED UPON THE FOLLOWING DECISIONS : (I). DECISION OF DELHI HIGH COURT IN THE CASE OF CI T VS. VOLGA RESTAURANT, 253 ITR 405, IN WHICH IT WAS HELD THAT EXTENSIVE DA MAGES TO BUSINESS PREMISES AND AIR CONDITIONING PLANT AND CERTAIN OTHER EQUIPMENTS WERE REPLACED. THE EXPENDITURE INCURRED FOR REPLACEMENT AND REPAIR OF DAMAGED PARTS OF AIR CONDITIONING PLANT ARE REVENUE EXPENDITURE IN NATUR E. (II). DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MADRAS AUTO SERVICE (P) LTD., 233 ITR 468, IN WHICH IT WAS HELD THAT ASSESSEE TAKEN PREMISES ON LEASE, WHICH WAS DEMOLISHED AND NEW BUI LDING WAS CONSTRUCTED AT THE EXPENSE OF ASSESSEE. THE BUILDING REMAINED BELONGIN G TO LESSOR AND LESSER RENT WAS ITA NO. 336/AGRA/2013 4 CHARGED. THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL A SSET, THEREFORE, THE AMOUNT SPENT ON CONSTRUCTION WAS DEDUCTIBLE AS REVENUE EXPENDITU RE. (III). DECISION OF MADRAS HIGH COURT IN THE CASE OF THIRU AROORAN SUGARS LTD. VS. CIT, 350 TR 324, IN WHICH IT WAS HELD THAT REPAIRS AND RENOVATION ON LEASED PREMISES IS REVENUE EXPENDITURE IN NATURE. (IV). JUDGMENT OF UTTARANCHAL HIGH COURT IN THE CAS E OF CIT VS. HOTEL CONTROL (P) LTD., 136 TAXMAN 312, IN WHICH IT WAS H ELD THAT EXPENDITURE INCURRED AT REGULAR INTERVALS IN ORDER TO MAINTAIN AND UPKEE P ITS HOTEL SITUATED IN HILLY AREA DUE TO SEVERE CLIMATIC CONDITIONS IN THAT REGION WO ULD BE IN THE NATURE OF REVENUE EXPENDITURE. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE JUDGMENTS ABOVE, WE ARE OF THE VIEW, THE ADDITION I S WHOLLY UNJUSTIFIED. THE MAJOR REASON GIVEN BY THE AO FOR DISALLOWING THE REVENUE EXPENDITURE WAS THAT THE BUILDING MATERIAL WAS DELIVERED AT ONE SITE OF CONS TRUCTION, WHERE THE CONSTRUCTION ACTIVITY WAS GOING ON AND BUILDING WAS NOT IN USE. THE AO, THEREFORE, PRESUMED THAT THE BUILDING MATERIAL DELIVERED AT ONE SITE WA S NOT USED FOR THE PURPOSE OF ITA NO. 336/AGRA/2013 5 REPAIR AND MAINTENANCE. THE FINDINGS OF THE AO ARE, THEREFORE, NOT BASED ON ANY FACTS OR EVIDENCE AND ARE MERELY PRESUMPTION OF THE AO THAT NO ACTUAL EXPENDITURE HAVE BEEN INCURRED FOR REPAIR AND MAINTENANCE. THE ASSESSEE HAS EXPLAINED THAT DURING THE COURSE OF BUSINESS ACTIVITIES, WHEN HUGE VOLUME OF OPERATION WAS GOING ON, THE BUSINESS PREMISES GOT DAMAGED, WHICH WAS RE PAIRED. THE AO, THEREFORE, EITHER SHOULD HAVE MADE A LOCAL INSPECTION OR SHOUL D HAVE DEPUTED SOME EXPERT TO EXAMINE THE CORRECTNESS OF CLAIM OF ASSESSEE. THE A O WITHOUT DONG ANY ACTUAL INVESTIGATION OF FACTS HAS PRESUMED THAT WHEN MATER IAL WAS DELIVERED AT ONE SITE, IT WAS NOT USED FOR THE PURPOSES OF REPAIR AND MAINTEN ANCE. THE AO, THEREFORE, PRESUMED CERTAIN FACTS, WHICH COULD NOT BE THE BASI S OF HOLDING THAT THE EXPENDITURE WAS CAPITAL IN NATURE. THIS REASON ITSE LF IS NOT SUSTAINABLE IN LAW AND THE ADDITION SHOULD HAVE BEEN DELETED. FURTHER, IN ASSESSMENT YEAR 2010-11, THE ASSESSING OFFICER IN THE ORDER U/S. 143(3) HAS ALLO WED 50% OF THE EXPENDITURE OF THE SAME NATURE. ACCORDING TO THE ASSESSEE, IN FURT HER ASSESSMENT YEARS 2011-12 AND 2012-13, NO SUCH DISALLOWANCES HAVE BEEN MADE B Y THE DEPARTMENT. THESE FACTS WOULD SHOW THAT EVEN IN SUBSEQUENT YEARS, THE DEPARTMENT HAS ACCEPTED THE CLAIM OF ASSESSEE THAT SUCH TYPE OF EXPENDITURE, I. E., REPAIR AND MAINTENANCE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND ARE R EVENUE IN NATURE. THE AO HAS NOT POINTED OUT ANYTHING IN ASSESSMENT ORDER AS TO WHICH NEW ASSETS HAVE BEEN GENERATED OUT OF THE REPAIR AND MAINTENANCE EXPENDI TURE. SINCE NO NEW ASSET WAS BROUGHT INTO EXISTENCE BY REPAIR AND MAINTENANCE, T HE FINDING OF THE AO WOULD NOT ITA NO. 336/AGRA/2013 6 BE SUSTAINED. SINCE THE ASSESSEE HAS GIVEN THE DETA ILS OF REPAIR AND MAINTENANCE AND ACCORDING TO THE NATURE OF BUSINESS OF ASSESSEE , THE BUILDING PREMISES REQUIRE REPAIR AND MAINTENANCE, THEREFORE, THE CLAIM OF ASS ESSEE SHOULD NOT HAVE BEEN REJECTED BY THE AUTHORITIES BELOW. THE JUDGMENTS CI TED ABOVE CLEARLY SUPPORT THE CLAIM OF ASSESSEE FOR CLAIMING THE EXPENDITURE TO B E REVENUE IN NATURE. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND HOLD THAT THE EXPENDITURE ARE REVENUE IN NATURE. ACCORDINGLY, THE ADDITION IS DELETED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY