M/s Liberty Group Marketing Division, Karnal V. ACIT, Karnal

ITA 3502/DEL/2011

• Counselvise Citation: 350220114 RSA 2011
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-11-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 11-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Procedural lapse; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3502/DEL./2011 (ASSESSMENT YEAR :1996-97) M/S. LIBERTY GROUP MARKETING DIVISION, VS. DCIT, LIBERTY HOUSE, RAILWAY ROAD, CENTRAL CIRCLE, KARNAL. KARNAL. (PAN : AAAFL5273E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATISH GOEL, ADVOCATE REVENUE BY : MS. PRATIMA KAUSHIK, DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF TH E ORDER OF THE CIT (APPEALS), KARNAL DATED 18.03.2011 FOR THE ASSESSME NT YEAR 1996-97. THE GROUNDS OF APPEAL READ AS UNDER :- 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IS AGAINST LAW AND FACTS. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FIRM THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) IN HOLDING AND CONFIRMING THE ORDER O F THE ASSESSING OFFICER WITH REGARD TO CAPITALIZATION EXP ENSES OF RS.5,81,435/- WHICH WERE INCURRED BY THE APPELLANT TENANT ON STRUCTURE OF TEMPORARY NATURE AND ON RENOVATION OF FLOORING AND WOODEN STRUCTURE CABIN AS ALSO ON CURRENT REPAIRS IS HIGHLY ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. ITA NO.3502/DEL./2011 2 2. THE ONLY ISSUE INVOLVED IN THE APPEAL IS CONFIRM ING THE ADDITION MADE BY ASSESSING OFFICER TO CAPITALIZE EXPENDITURE TO T HE TUNE OF RS.5,81,435/-. THE APPELLANT IS A REGISTERED PARTNERSHIP FIRM AND IS ENGAGED IN MANUFACTURE AND SALE OF FOOTWEAR, ETC. WITH HEAD OFFICE AT KARN AL. TOTAL EXPENDITURE CLAIMED BY ASSESSEE FOR REPAIRS OF RS.7,35,249/- OU T OF IT ASSESSING OFFICER TREATED RS.70,000/- TOWARDS TEMPORARY STRUCTURE WHE RE 100% DEPRECATION WAS ALLOWED. EXPENDITURE UPTO RS.1,20,000/- WERE ALLOW ED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER TREATED THE BAL ANCE EXPENDITURE AS CAPITAL IN NATURE AND DISALLOWED A SUM OF RS.5,81,435/-. T HE ASSESSEE FILED AN APPEAL AND THIS ADDITION WAS DELETED BY THE CIT (A) RELYIN G ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. HA RIDAS BHAGATH & CO. PVT. LTD. REPORTED IN 240 ITR 169. IN THE FURTHER APPEAL, THE ITAT RESTORED THE ISSUE TO THE FILE OF CIT (A) WITH THE FOLLOWING DIRECTION TO DECIDE AFRESH :- 9. THE AO HAS RECORDED FINDING THAT CERTAIN EXPEN SES ARE NOT ONLY FOR REPAIRS BUT ARE ALSO IN RESPECT OF SOM E NEW CONSTRUCTION, AS CEMENT, IRON SHEET, IRON ANGEL, WO OD ETC. HAVE ALSO BEEN USED. THE TOTAL EXPENDITURE CLAIMED BY TH E ASSESSEE WAS RS.7,35,249/-. ITEMS (C), (D) & (E) AS LISTED B ELOW PARA 14.3 OF HIS ORDER WHICH BEING CAPITAL IN NATURE, 10 0% DEPRECIATION WAS ALLOWABLE. THE AGGREGATE EXPENDITU RE FOR THESE ITEMS WAS RS.67,122/- BUT THE AO TREATED RS.7 0,OOO/- AS ESTIMATED AMOUNT UNDER THE HEAD TEMPORARY STRUCT URE ON WHICH 100% DEPRECIATION IS ADMISSIBLE. LIKE-WISE IT EM (H) & (K) WERE TREATED AS THAT OF REVENUE IN NATURE AND A GGREGATE SUM OF RS.L,20,0001-WAS ALSO TREATED AS DEDUCTIBLE EXPE NDITURE. THUS THE AD TREATED THE BALANCE AMOUNT OF RS.5,81,7 35/- ONLY AS BEING OF CAPITAL IN NATURE AFTER DUE APPLICATION OF MIND. EXPLANATION-L APPENDED BELOW SECTION 32 OF THE IT A CT DEEMS ITA NO.3502/DEL./2011 3 CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IN THE LEASED PREMISES TO BE A STRUCTURE OR WORK IN THE BUILDING AS IF OWNED BY THE ASSESSEE HIMSELF. SUCH EXPLANATION HAS BEEN BROUGHT IN TO STATUTE BOOKS BY THE TAXATION LAWS (AMENDMENT & MISC.) PROVISION ACT 1986 W.E.F. 1.4.1988. THE LD. CIT ((A ) DID NOT ASSIGN ANY REASON AS TO HOW THE DECISION OF THE HON 'BLE MADRAS HIGH IN THE CASE OF CIT V. HARIDAS BHAGATH & CO. LT D. REPORTED IN 240 ITR 169 WAS APPLICABLE ON THE FACTS OF THE ASSESSEE'S CASE THOUGH THE SAME WAS DIFFERENT ON FA CTS AND FINDINGS. THE LD CIT (A) ALSO DID NOT EVALUATE NATU RE OF EXPENDITURE VIS-A-VIS TERMS OF AGREEMENT BEFORE DIR ECTING THE AO TO ALLOW THE SAME AS REVENUE EXPENDITURE. THUS T HERE HAS BEEN A PROCEDURAL LAPSE IN COMING TO THE CONCLUSION BY THE LD. CIT (A). THE DECISION TAKEN BY HIM THEREFORE STAND S SET ASIDE AND THE ISSUE IS RESTORED BACK TO HIM WITH A DIRECT ION TO TAKE A DECISION AFRESH. HE SHALL EVALUATE THE COMPLETE FA CTS BEFORE ARRIVING AT A DECISION IN ACCORDANCE WITH LAW. REAS ONABLE OPPORTUNITY OF BEING HEARD SHALL BE GIVEN TO THE AS SESSEE. THUS, THE CIT (A) WAS DIRECTED TO EVALUATE THE COMP LETE FACTS BEFORE ARRIVING AT A DECISION IN ACCORDANCE WITH LAW AND HE WAS ALS O DIRECTED TO PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 3. THE CIT (A) RE-DECIDED THE ISSUE BY HOLDING AS U NDER :- 1.04 THE DEPARTMENT PREFERRED AN APPEAL AGAINST TH E ORDER OF CIT(A). THE ITAT W.R.T. RELIEF ALLOWED BY THE CIT(A ) ON ACCOUNT OF THE EXPENDITURE CLAIMED ON REPAIR, RESTO RED THE MATTER BACK TO THE FILE OF' CIT(A) WITH THE FOLLOWING DIRE CTION:- 'IN GROUND NO. 4 THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.581435/- BY DIRECTING TO ALLOW THE EXPENDITURE ON ACCOUNT OF CLAIM OF ASSESSEE FOR REPAIRS AND RENOVATION AND FOR PROVIDING TEMPORARY STRUCTURE IN THE ELAPSED PREMISES. THE AO HAS RECORDED FINDING THAT CERTAIN EXPENSES ARE NOT ONLY FOR REPAIRS BUT ARE ALSO IN RESPECT OF SOME NEW CONSTRUCTION, AS CEMENT, IRON SHEET, IRON ANGEL , WOOD ITA NO.3502/DEL./2011 4 ETC. HAVE ALSO BEEN USED. THE TOTAL EXPENDITURE CLA IMED BY THE ASSESSEE WAS RS. 735249/ -. ITEMS (C), (D) & (E ) AS LISTED BELOW PARA 14.3 OF HIS ORDER WHICH BEING CAP ITAL IN NATURE, 100% DEPRECIATION WAS ALLOWABLE. THE AGGREG ATE EXPENDITURE FOR THESE ITEMS WAS RS. 67,122/ - BUT T HE AO TREATED RS. 70000/ - AS ESTIMATED AMOUNT UNDER THE HEAD TEMPORARY STRUCTURE ON WHICH 100% DEPRECATION IS ADMISSIBLE. LIKE-WISE ITEM (H) & (K) WERE TREATED A S THAT OF REVENUE IN NATURE AND AGGREGATE SUM OF RS.1,20,0 00/- WAS ALSO TREATED AS DEDUCTIBLE EXPENDITURE. THUS TH E AD TREATED THE BALANCE AMOUNT OF RS. 581735/ - ONLY AS BEING OF CAPITAL IN NATURE AFTER DUE APPLICATION OF MIND EXPLANATION-1 APPENDED BELOW SECTION 32 OF THE IT A CT DEEMS CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IN THE LEASED PREMISES TO BE A STRUCTURE OR WORK IN THE BU ILDING AS IF OWNED BY THE ASSESSEE HIMSELF. SUCH EXPLANATI ON HAS BEEN BROUGHT IN TO STATUE BOOKS BY THE TAXATION LAW S (AMENDMENT & MISC.) PROVISION ACT 1986 W.E.F. 1.4.8 8. THE LD. CIT(A) DID NOT ASSIGN ANY REASON AS TO HOW THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT V. HARIDAS BHAGATH & CO. LTD. REPORTED IN 240 I TR 169 WAS APPLICABLE ON THE FACTS OF THE ASSESSEE}S C ASE THOUGH THE SAME WAS DIFFERENT ON FACTS AND FINDINGS . THE LD. CIT(A)ALSO DID NOT EVALUATE NATURE OF EXPENDITU RE VIS-A-VIS TERMS OF AGREEMENT BEFORE DIRECTING THE A D TO ALLOW THE SAME AS REVENUE EXPENDITURE. THUS THERE H AS BEEN A PROCEDURAL LAPSE IN COMING TO THE CONCLUSION BY THE LD. CIT(A). THE DECISION TAKEN BY HIM THEREFORE STANDS SET ASIDE AND THE ISSUE IS RESTORED BACK TO HIM WITH A DIRECTION TO TAKE A DECISION A FRESH. HE SHALL EV ALUATE THE COMPLETE FACTS BEFORE ARRIVING AT A DECISION IN ACC ORDANCE WITH LAW. REASONABLE OPPORTUNITY OF BEING HEARD SHA LL BE GIVEN TO THE ASSESSEE. 1.05 FRESH OPPORTUNITY WAS ALLOWED TO THE APPELLAN T. THE COUNSEL OF THE APPELLANT FILED WRITTEN SUBMISSIONS WHEREIN IT IS SUBMITTED :- 'THAT THE HON'BLE ITAT BENCH WHILE SETTING ASIDE TH E MATTER TO YOUR GOODSELF HAS ALSO COMMENTED UPON W. R. T. CITATION 240 ITR 169 THAT CIT(A) DIDNT ASSIGN ANY REASON HOW THE SAID DECISION WAS APPLICABLE TO ASSESSEE'S CASE. IT ITA NO.3502/DEL./2011 5 IS WITH DUE RESPECT TO OBSERVATIONS OF HON'BLE ITAT BENCH, IT IS SUBMITTED THAT HON'BLE CIT(A) REFERRED AND RELIED UPON A JUDGMENT WHICH WAS VERY RELEVANT TO F ACTS & CIRCUMSTANCES OF ASSESSEE'S CASE. KINDLY PERUSE T HE SAID DECISION. THE LD. CIT(A) DID ASSIGN REASONS AS NARR ATED IN ORDER. 1.06 THE FACTS ARE THAT THE APPELLANT CLAIMED BUILD ING REPAIR EXPENSES AT RS.830468/ -. THE ISSUE OF CURRENT REPA IR HAS BEEN DEALT WITH BY THE COURTS FROM TIME TO TIME AND IT I S HELD THAT THE BASIC TEST IS TO FIND OUT WHETHER EXPENDITURE WERE INCURRED TO 'PRESERVE AND MAINTAIN' AN ALREADY EXISTING ASSET, AND THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO E XISTENCE OR TO OBTAIN A NEW ADVANTAGE. REFERENCE IS MADE TO THE DE CISION OF THE SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINN ING P. LTD., 293 ITR 201(SC) WHEREIN THE HON'BLE COURT HELD AS U NDER : REVERSING THE DECISION OF THE HIGH COURT, (I) THA T THE MANUFACTURING PROCESS IN THE TEXTILE MILL WAS N OT ONE CONTINUOUS INTEGRATED PROCESS; (II) THAT TO DECIDE THE APPLICABILITY OF SECTION 3 1 (I) THE TEST WAS NOT WHETHER THE EXPENDITURE WAS REVENU E OR CAPITAL IN NATURE, BUT WHETHER THE EXPENDITURE WAS CURRENT REPAIRS. THE BASIC TEST WAS TO FIND OUT W HETHER EXPENDITURE WAS INCURRED TO PRESERVE AND MAINTAIN' AN ALREADY EXISTING ASSET, AND THE EXPENDITURE MUST NO T BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN NEW ADVANTAGE. (III) THAT EACH MACHINE INCLUDING THE RING FRAME WAS AN INDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPENDENT AND SPECIFIC FUNCTION AND, THEREFORE, T HE EXPENDITURE INCURRED FOR REPLACEMENT THEREOF WOULD NOT COME WITHIN THE MEANING OF CURRENT REPAIRS'. THE REPLACEMENT OF THE RING FRAME CONSTITUTED SUBSTITUT ION OF AN OLD ASSET BY A NEW ASSET, AND THEREFORE, THE EXP ENDITURE INCURRED BY THE ASSESSEE DID NOT FALL WITHIN THE ME ANING OF CURRENT REPAIRS' IN SECTION 31 (I). UNDER SECTION 31 (I) THE DEDUCTION ADMISSIBLE IS ONLY FOR CURRENT REPAIRS. THEREFORE, THE QUESTION A S TO ITA NO.3502/DEL./2011 6 WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUALLY IS REVENUE OR CAPITAL IN NATURE I NOT RELEVANT FOR DECIDING THE QUESTION WHETHER SUCH EXPENDITURE COMES WITHIN THE ETYMOLOGICAL MEANING OF THE EXPRESSION CURRENT REPAIR'. IN OTHER WORDS, EVEN IF THE EXPEN DITURE IS REVENUE IN NATURE, IT MAY FALL IN THE CONNOTATION O F CURRENT REPAIRS'. 1.07 THIS ISSUE ALSO BEEN DEALT WITH BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF UTTAR BHARAT EXCHANGE LTD . VS CIT DELHI 54 ITR 13( P&H) THE CATCH NOTE FROM THAT ORDE R IS REPRODUCED BELOW:- 'THE ASSESSEE TOOK ON LEASE FOR A PERIOD OF 2 YEARS , WITH AN OPTION FOR RENEWAL AT THE END OF THE PERIOD, THE FIRST AND SECOND FLOORS OF A HOTEL BUILDING. HE WAS PERMITTED TO ERECT SHADES, PARTITIONS AND OTHER TEMPORARY STRUCT URES FOR CARRYING ON HIS EXCHANGE BUSINESS BUT HE WAS NOT AL LOWED TO REMOVE THESE STRUCTURE AT THE END OF THE LEASE. THE ASSESSEE SPENT A SUM OF RS.17,917 IN ALL DURING THE YEARS 1954-55, 1955-56 AND 1956-57 FOR ERECTING SUCH STRUCTURES AND CLAIMED THE AMOUNT AS BUSINESS EXPENDITURE IN THE RESPECTIVE YEARS, BUT HIS CLAIM WAS DISALLOWED : HELD, THAT THE EXPENDITURE WAS ESSENTIALLY ONE OF A CAPITAL NATURE AND ITS NATURE WAS NOT CHANGED BY TH E FACT THAT THE LEASE WAS IN THE FIRST INSTANCE ONLY FOR A PERIOD OF TWO YEARS. IT CANNOT ALSO BE TREATED AS AN ADDITION TO THE RENT MERELY BECAUSE THE LESSEE HAD NO RIGHT TO REMO VE THEM.' 1.08 FURTHER REFERENCE IS MADE TO THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF RAJDEV SINGH CO VS CIT, 1 81 ITR 38. CATCH NOTE FROM THAT ORDER IS REPRODUCED BELOW:- ' THE ASSESSEE HAD TAKEN ON LEASE A BUILDING AND CARRIED ON HOTEL BUSINESS. THE ASSESSEE INCURRED EX PENSES OF RS.17,24,480/ - IN REPAIRING AND RENOVATING THE BUILDING AND CLAIMED IT AS DEDUCTION. THE INCOME TA X OFFICER TREATED ONE-FOURTH OF THE EXPENDITURE CLAIM ED AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME WHICH WAS ITA NO.3502/DEL./2011 7 UPHELD BY THE TRIBUNAL. ON AN APPLICATION U/S 256(2 ) OF THE I.T.ACT,. 1961. HELD, THAT SECTION 32(1A) OF THE I.T. ACT, 1961, PROVIDED THAT, ON CAPITAL EXPENDITURE INCURRED BY A TENANT, DEPRECATION WAS TO BE ALLOWED. SECTION 32(1A) INDIC ATED THAT RENOVATION OR EXTENDING OR IMPROVING THE BUILD ING WOULD BE REGARDED AS CAPITAL EXPENDITURE. IN THE PR ESENT CASE, ONE-FOURTH OF THE EXPENDITURE HAS BEEN HELD T O BE CAPITAL EXPENDITURE. THE EXTENT TO WHICH EXPENDITUR E IS OF A CAPITAL NATURE, NAMELY, WHICH IS IN THE CATEGORY WHICH COMES WITHIN THE PROVISIONS OF SECTION 32(1 A), WAS A PURE QUESTION OF FACT. THEREFORE, NO QUESTION OF LA W AROSE AND THE APPLICATION U/ S 256(2) WAS LIABLE TO BE DISMISSED.' 1.09 THIS ISSUE HAS ALSO BEEN DEALT WITH BY THE IT AT, DELHI 'C' BENCH IN THE CASE OF ACIT VS. EJ.DUPONT INDIA LTD. [2007] 107 ITD 63 ( DEL). THE HEAD NOTE FROM THIS ORDER IS REP RODUCED BELOW:- ' BUSINESS EXPENDITURE- CAPITAL OR REVENUE EXPENDITURE- EXPENDITURE IN CONNECTION WITH LEASED PREMISES- IN VIEW OF EXPLN.1 TO S. 32(1) FOR THE PU RPOSE OF DETERMINATION OF THE NATURE OF EXPENDITURE, THE FAC T THAT THE PREMISES ARE LEASE-HOLD MUST BE IGNORED AND IT SHOULD BE ASSUMED THAT THE PREMISES BELONGED TO THE ASSESS EE- EXPENDITURE INCURRED BY ASSESSEE ON LEASED PREMISES , WHICH LEASE WAS EXTENDABLE TO A PERIOD OF 9 YEARS, IN THE VERY FIRST YEAR OF ACQUISITION IN ORDER TO MAKE THE PREMISES MORE POSH AND IMPRESSIVE WITH A VIEW TO BR ING A FRESH ADVANTAGE NOT ALREADY THERE, PREDOMINANTLY RE LATED TO FIXED ASSET OF THE ASSESSEE AND SO DESCRIBED IN THE ACCOUNTS OF THE ASSESSEE WAS CAPITAL IN NATURE. ' 1.10 IN VIEW OF THE VARIOUS CASE LAWS DISCUSSED AB OVE, IT IS NOTED THAT EXPENDITURE INCURRED TO 'PRESERVE AND MA INTAIN' THE EXISTING ASSET IS TO BE TAKEN AS CURRENT REPAIR BUT IF AS A RESULT OF EXPENDITURE, THE NEW ASSET CAME INTO EXISTENCE OR N EW ADVANTAGE IS OBTAINED BY THE ASSESSEE, THE SAME IS TO BE TAKE N AS CAPITAL EXPENDITURE. IN VIEW OF THE FACTUAL AND LEGAL POSIT ION DISCUSSED ABOVE, THE ISSUE IS EXAMINED. DETAILS OF EXPENSES I NCURRED BY THE ITA NO.3502/DEL./2011 8 ASSESSEE WAS GIVEN BY THE AO IN PARA 14(II) OF THE ASST. ORDER WHICH IS REPRODUCED AS UNDER: 'THE DETAILS OF EXPENSES INCURRED BY THE ASSESSEE HAS FURNISHED AT PAGE 1016 AS UNDER:- TEAK/PLY WOOD RS.154564 GLASS RS 37613 PAINTS RS. 81017 ELEC. FITTINGS RS. 76529 SANITARY FITTINGS RS. 43902 ALUMINIUM SECTIONS RS. 55985 HANDLES/KNOBS, LOCKS CHITKHANI ETC. RS. 21180 CEMENT RS. 32928 GRANITE/TILES RS. 25660 POP RS. 9262 IRON SHEETS RS. 29830 SARIA/LNGOTS/ JALI RS. 12906 FLOORING RS. 15354 LABOUR RS. 74662 MISC. PETTY REPAIRS RS.100342 TOTAL RS.731734 1.11 FROM THE ABOVE DETAILS OF EXPENSES CLAIMED UND ER THE HEAD 'BUILDING REPAIRS', IT IS NOTED THAT CEMENT WA S PURCHASED FOR RS.32,928/-. THE YEAR UNDER CONSIDERATION IS A.Y. 1 996-97 I.E. PREVIOUS YEAR 1995-96. THE CEMENT IN THAT YEAR WAS ABOUT RS.100/- PER BAG AND AS SUCH, MORE THAN 300 BAGS OF CEMENTS WOULD HAVE BEEN PURCHASED BY THE APPELLANT. IT IS D IFFICULT TO APPRECIATE THAT SO MUCH CEMENT WOULD BE USED FOR RE PAIRS SPECIFICALLY IN VIEW OF THE NATURE OF REPAIR STATED TO BE CARRIED OUT BY THE ASSESSEE. MOREOVER LOOKING INTO THE OTHE R EXPENSES CLAIMED SUCH AS IRON SHEETS, SARIA/INGOTS/JALI, ALU MINUM SECTIONS, TEAK/PLYWOOD, GLASS, SANITARY FITTINGS, ELECT. FITT INGS, POP, GRANITE/TILES AND PAINTS ETC., THE ONLY INFERENCE W HICH CAN BE DRAWN IS THAT SOME CONSTRUCTION WERE CARRIED OUT AN D AS SUCH, THE EXPENDITURE CANNOT BE SAID TO BE INCURRED ON CU RRENT REPAIRS. IN VIEW OF THE DECISION OF THE APEX COURT MENTIONED ABOVE, IN RESPECT OF THE ISSUE OF CURRENT REPAIRS, DECISION O F THE MADRAS HIGH COURT IS NOT APPLICABLE AND HENCE ACTION OF TH E AO IS CONFIRMED. THE APPEAL IS AS SUCH DISMISSED. ITA NO.3502/DEL./2011 9 4. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AFTE R HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT IN CASE OF CURRENT R EPAIRS, THE BASIC TEST TO DECIDE THE NATURE OF THE EXPENDITURE IS THAT THE EXPENDITU RE MUST BE INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET THE N ONLY THE EXPENDITURE CAN BE SAID AS REVENUE IN NATURE. WHENEVER AN EXPENDIT URE BRINGS A NEW ASSET INTO EXISTENCE OR THE EXPENDITURE IS MADE TO OBTAIN A NEW ADVANTAGE, THEN THE EXPENDITURE IS DEFINITELY OF CAPITAL IN NATURE. TH IS TEST HAS BEEN DECIDED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SARAVA NA SPINNING MILLS P. LTD., 293 ITR 201 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS UNDER:- HELD, REVERSING THE DECISION OF THE HIGH COURT, (I) THAT THE MANUFACTURING PROCESS IN THE TEXTILE MILL WAS NOT O NE CONTINUOUS INTEGRATED PROCESS; (II) THAT TO DECIDE THE APPLICABILITY OF SECTION 3 1(I) THE TEST WAS NOT WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE, BUT WHETHER THE EXPENDITURE WAS 'CURRENT REPAIRS'. THE BASIC TEST WAS TO FIND OUT WHETHER EXPENDITURE WAS INCURRED TO 'PRESE RVE AND MAINTAIN' AN ALREADY EXISTING ASSET, AND THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN NEW ADVANTAGE . (III) THAT EACH MACHINE INCLUDING THE RING FRAME W AS AN INDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPEN DENT AND SPECIFIC FUNCTION AND, THERE-FORE, THE EXPENDITURE INCURRED FOR REPLACEMENT THEREOF WOULD NOT COME WITHIN THE MEANI NG OF 'CURRENT REPAIRS'. THE REPLACEMENT OF THE RING FRAME CONSTI- TUTED SUBSTITUTION OF AN OLD ASSET BY A NEW ASSET, AND, THEREFORE, THE EXPEN-DITURE INCURRED BY THE ASSESSEE DID NOT FALL WITHIN THE ME ANING OF 'CURRENT REPAIRS' IN SECTION 31(I). UNDER SECTION 31(I) THE DEDUCTION ADMISSIBLE IS ON LY FOR CURRENT REPAIRS. THEREFORE, THE QUESTION AS TO WHE THER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUALLY IS REVENUE OR CAPITAL IN NATURE IS NOT RELEVANT FOR DECIDING THE QUESTION WHETHER SUCH EXPENDITURE ITA NO.3502/DEL./2011 10 COMES WITHIN THE ETYMOLOGICAL MEANING OF THE EXPRES SION CURRENT REPAIRS. IN OTHER WORDS, EVEN IF THE EXPENDITURE IS REVENUE IN NATURE, IT MAY NOT FALL IN THE CONNOTATION OF CURRENT REPA IRS. FURTHER, THE ASSESSEES RELIANCE ON MADRAS HIGH COU RT DECISION IN THE CASE OF CIT VS. HARIDAS BHAGATH (P) LTD., CITED SUPRA, IS A LSO OF NOT OF ANY HELP. EXPLANATION I TO SECTION 32 OF INCOME-TAX ACT HAS N OT BEEN CONSIDERED IN THIS CASE. THE ERECTION OF THE SHEDS AND OTHER STRUCTUR ES ON LEASED PREMISES WERE ESSENTIALLY IN THE NATURE OF CAPITAL. THE DETAILS OF EXPENDITURE INCURRED SHOWS THAT A MAJOR EXPENDITURE HAS BEEN MADE ON THE TEAK /PLYWOOD, GLASS, ELECTRICAL FITTINGS, SANITARY FITTINGS, ALUMINUM SECTIONS, HAN DLES/KNOBS, LOCKS, CHITKHANI, CEMENT, GRANITE/TILES, POP, IRON SHEETS, SARIA/INGO T/JAIL, FLOORING AND LABOUR. ALL THESE FACTS SHOWS THAT THE STRUCTURE WHICH CAME INTO EXISTENCE WAS HAVING ENDURING BENEFITS, HENCE SUCH EXPENDITURE CANNOT BE TERMED EXPENDITURE ON CURRENT REPAIRS. IN VIEW OF THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINNINGS MILLS P. LTD., CITED SUPRA, THE CIT (A) IS JUSTIFIED IN UPHOLDING THE ADDITION. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 9 TH DAY OF NOVEMBER, 2011. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 9 TH DAY OF NOVEMBER, 2011/TS ITA NO.3502/DEL./2011 11 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A), KARNAL. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.