CRESCENT ORGANICS P.LTD, MUMBAI V. ASST CIT 10(1), MUMBAI

ITA 3542/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2438 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUSH CHHAJED SH B D MALIK
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 M/S. CRESCENT ORGANICS PRIVATE LIMITED, WINDSOR, 2 ND FLOOR,CST ROAD, KALINA, SANTACRUZ(E) , MUMBAI-400 098 V. ASST COMMISSIONER OF INCOME TAX, 10(1), MUMBAI PAN/GIR NO. AAACC1690D APPELLANT RESPONDENT ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE COMPANY IS DIRECTED AGA INST THE ORDER DATED 14.02.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI (HEREINAFTER CALLED THE CIT(A)) FOR THE AS SESSMENT YEAR 2009-10. ASSESSEE BY SHRI PIYUSH CHHAJED REVENUE BY SH. B.D.MALIK DATE OF HEARING 12.11.2015 DATE OF PRONOUNCEMENT 18 .11.2015 2 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 2 OF 8 THE ASSESSEE COMPANY HAS RAISED THE FOLLOWING GROUN DS OF APPEAL IN MEMO OF APPEAL FILED:- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.9,58,626/- TREATING T HE SAME AS CAPITAL EXPENDITURE WITHOUT APPRECIATING THAT THE SAM E WAS TOWARDS REPAIRS AND THEREFORE SHOULD HAVE BEEN ALLOW ED AS REVENUE EXPENDITURE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS A CONSIGNMENT AGENT , INDENTING AGENT AND ENGAGED IN THIS BUSINESS OF AND TRADING IN CHEMICALS. THE ASSESSEE COMPANY FILED RE TURN OF INCOME OF THE RELEVANT ASSESSMENT YEAR DECLARING INCOME OF RS.3,9 2,53,800/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(2) READ WITH SECTION 143(3) OF THE INCOME TAX ACT,1961 (HEREINAF TER CALLED THE ACT) , THE ASSESSING OFFICER (HEREINAFTER CALLED THE AO) NOTICED THAT THE ASSESSEE COMPANY HAS INCURRED REPAIRS AND MAINTENAN CE EXPENDITURE OF RS.32,14,769/-(ON BUILDING RS18,55,039/- AND OTHERS RS.13,59,730/-) . THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN THE SAME. THE ASSESSEE COMPANY SUBMITTED THE DETAILS AND ON PERUSAL , THE AO OBSERVED THAT SOME OF THE EXPENSES ARE INCURRED ON ACQUISITION OF CERT AIN ASSETS AND FOR CARRYING ON ADDITION TO OR MODIFICATION OF THE ASSE TS RESULTING INTO BENEFIT 3 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 3 OF 8 OF ENDURING NATURE. THE AO OBSERVED THAT RS.10,09,0 80/- IS SPENT ON EXTENSIVE RENOVATION TO BUILDING WHICH ARE NOT IN THE NATURE OF CURRENT REPAIRS ALLOWABLE U/S 30 AND 31 OF THE ACT AS THE A SSESSEE COMPANY HAS DERIVED BENEFIT OF ENDURING NATURE WHILE THE ASSESS EE COMPANY CONTENDED THAT THE SAID EXPENSES HAVE BEEN INCURRED ON CARRYI NG OUT REPAIRS AND MAINTENANCE OF EXISTING ASSETS AND NO NEW ASSET IS CREATED OR BROUGHT INTO EXISTENCE. THUS, THE AO MADE ADDITION OF THESE EXPE NSES OF RS.10,09,080/- AND TREATED AS BEING CAPITALIZED AS PART OF RESPECT IVE BLOCK OF ASSET AND ALLOWED DEPRECIATION OF RS. 50,454 /- AS PER THE AC T. THE BALANCE AMOUNT OF RS.9,58,626/- WAS ADDED TO INCOME OF THE ASSESSEE C OMPANY AND BROUGHT TO TAX BY THE AO IN HIS ASSESSMENT ORDER DATED 30.1 2.2011 PASSED U/S 143(3) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 30.12.2 011 OF THE AO PASSED U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY FILED F IRST APPEAL WITH THE CIT(A) AND CONTENDED THAT THE ASSESSEE COMPANY HAS SUBMITTED VARIOUS EVIDENCES BEFORE THE AO DURING ASSESSMENT PROCEEDIN GS FOR CONSIDERATION AND THE AO HAS NOT GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE COMPANY. THE CIT(A) FORWARDED THESE EVIDENCES TO THE AO AND CALLED FOR REMAND REPORT FROM AO BUT THE AO DID NOT SUBMITTED REMAND REPORT DESPITE SEVERAL REMINDERS. THE CIT(A) ACCEPTED THE FINDINGS OF THE AO THAT THESE EXPENSES ON EXTENSIVE REPAIRS OF ENDURING NATURE AR E TO BE CAPITALIZED AND DISMISSED THE APPEAL OF THE ASSESSEE COMPANY.THE C IT(A) DIRECTED THE AO 4 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 4 OF 8 VIDE ORDERS DATED 14.02.2014 TO HOWEVER DISALLOW RS .9,58,626/- AND ALLOW DEPRECIATION @10% ON THIS AMOUNT INSTEAD OF DISALLO WANCE OF RS.10,09,090/- AS MADE BY THE AO AS IN THE OPINION OF THE CIT(A) , THE AO HAS HIMSELF MENTIONED THIS AMOUNT TO BE DISALLOWED AS PER PARA 6.3 OF THE ASSESSMENT ORDER. 5. AGGRIEVED BY THE ORDERS DATED 14.02.2014 PASSED BY THE CIT(A) , THE ASSESSEE COMPANY IS IN APPEAL BEFORE US AND THE ASS ESSEE COMPANY SUBMITTED THAT THESE EXPENSES WHICH ARE DISALLOWED BY AO AND DISALLOWANCE THEREOF WAS SUSTAINED BY THE CIT(A) AR E INCURRED ON REPAIRS OF BUILDING WHICH ARE IN THE NATURE OF CURRENT REP AIRS AS DEFINED U/S 30 AND 31 OF THE ACT AND THESE EXPENSES SHOULD BE ALLO WED AS REVENUE EXPENDITURE. THE ASSESSEE COMPANY FILED PAPER BOOK AND SHOWED US THE INVOICE NO 46-2008/2009 OF KSHITIJ INTERIORS PRIVAT E LIMITED , 210, NEW APPOLLO ESTATE PREMISES CO-OP. SOCIETY LTD, OLD NAG ARDAS ROAD, ANDHERI(E), MUMBAI 400 069 FOR RS.10,09,080/- ( I NVOICE VALUE RS. 9,00,000 + MVAT@8% 72,000/- + SERVICE TAX @4.12% RS .37,080/- ) WHICH IS PLACED AT PAGE NUMBER 1 OF PAPER BOOK WHEREBY IT IS STATED IN THE INVOICE TO BE FINAL BILL FOR REPAIRING WORK DONE AT 2 ND FLOOR WINDSOR, KALINA, SANTACRUZ(EAST) . THE ASSESSEE COMPANY SHOWED US T HAT THE BIFURCATION OF THE INVOICE WILL REVEAL THAT THE REPAIR WORK HAS BE EN DONE ALONG WITH CLEANING , PAINTING , POLISHING ETC WHICH CANNOT BE SAID THAT ANY ASSET IS ADDED OR MODIFIED OR BENEFIT OF THE ENDURING NATURE IS OBTAINED BY THE 5 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 5 OF 8 ASSESSEE COMPANY RATHER IT IS AN INTERIOR RENOVATIO N WORK DONE FOR THE ASSESSEE COMPANY BY KHITIJ INTERIORS PRIVATE LIMITE D. THE ASSESSEE COMPANY SUBMITTED THAT THE PAYMENTS ARE MADE THROUG H BANKING CHANNEL OF THIS INVOICE AND THE TDS IS ALSO DEDUCTED BY SHO WING US THE COPY OF LEDGER ACCOUNT OF KSHITIJ INTERIORS PRIVATE LIMITED WHICH IS AT PAGE -2 OF PAPER BOOK FILED BY THE ASSESSEE COMPANY. WITHOUT P REJUDICE, THE ASSESSEE COMPANY SUBMITTED THAT IF DISALLOWANCE IS TO BE MAD E , IT SHOULD BE OF RS.9,00,000/- WHICH IS THE AMOUNT OF INTERIOR WORK DONE AND DEBITED TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD REPAIRS AND MAINTENANCE (PAGE 5- 8 OF PAPER BOOK) AS THE BALANCE AMOUNT OF RS.37,080 /- IS CLAIMED AS CENVAT CREDIT(AS SERVICE TAX ) AND RS.72,000/- IS CLAIMED AS MVAT CREDIT BY THE ASSESSEE COMPANY AND THEN DEPRECIATION SHOULD BE AL LOWED AS PER ACT ON THE AMOUNT OF RS.9,00,000.00 . 6. THE LD. DR ALSO RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY HAS DONE REPAIR WORK OF THE PREMISES 2 ND FLOOR , WINDSOR , KALINA, SANTACRUZ(EAST) WHICH I S EVIDENT FROM THE INVOICE NO 46-2008/2009 OF KSHITIJ INTERIORS PRIVATE LIMITED , 210, NEW APPOLLO ESTATE PREMISES CO-OP. S OCIETY LTD, OLD NAGARDAS ROAD, ANDHERI(E), MUMBAI 400 069 FOR RS. 10,09,080/- ( INVOICE VALUE RS. 9,00,000 + MVAT@8% 72,000/- + SERVICE TAX @4.12% 6 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 6 OF 8 RS.37,080/- ) WHICH IS PLACED AT PAGE NUMBER 1 OF P APER BOOK WHEREBY IT IS STATED IN THE INVOICE TO BE FINAL BILL FOR REPAIRI NG WORK DONE AT 2 ND FLOOR WINDSOR, KALINA, SANTACRUZ(EAST) , PERUSAL OF THE SAID INVOICE AND THE ITEMIZED BIFURCATION WILL REVEAL THAT MOSTLY THE WO RK DONE IS REPAIRS/POLISH TO EXISTING PARTITIONS , PANELING , SHUTTERS CEILINGS ETC AS WELL PAINTING, CLEANING WORK WHICH ARE MAINLY IN THE NAT URE OF CURRENT REPAIRS AND NO NEW ADDITION TO CAPITAL ASSET OR MODIFICATIO N IN THE EXISTING ASSET HAS TAKEN PLACE AND IN OUR OPINION, THE ASSESSEE CO MPANY HAS NOT DERIVED ANY BENEFIT OF ENDURING NATURE BY UNDERTAKING THIS REPAIRS WORK WHICH IS IN THE NATURE OF CURRENT REPAIRS ALLOWABLE U/S 30 A ND 31 OF THE ACT. THE AO HAS MERELY STATED THAT SOME OF THE EXPENSES ARE INC URRED ON ACQUISITION OF CERTAIN ASSETS AND FOR CARRYING ON ADDITION TO OR M ODIFICATION OF THE ASSETS RESULTING INTO BENEFIT OF ENDURING NATURE BUT HAS N OT BROUGHT ON RECORD AS TO WHAT ASSETS ARE ACQUIRED OR ADDED OR MODIFIED AN Y ASSET TO BRING BENEFIT OF ENDURING NATURE TO THE ASSESSEE COMPANY . THE CI T(A) FORWARDED ALL EVIDENCES SUBMITTED BY THE ASSESSEE COMPANY TO THE AO FOR REMAND REPORT BUT THE AO CHOSE NOT TO SUBMIT REMAND REPORT DESPIT E SEVERAL REMINDERS FOR THE REASONS BEST KNOWN TO AO. THE CIT(A) WHOSE POWERS ARE CO- TERMINUS WITH THE AO ALSO CHOSE NOT TO MAKE ANY FUR THER ENQUIRY TO BRING ON RECORD COGENT MATERIAL TO ESTABLISH THAT THE AS SESSEE COMPANY HAS ACQUIRED OR ADDED OR MODIFIED ANY ASSET TO BRING BE NEFIT OF ENDURING NATURE TO THE ASSESSEE COMPANY . IN VIEW OF OUR ABO VE DISCUSSIONS AND 7 ITA NO 3542/MUM/2014 ASSESSMENT YEAR: - 2009-10 PAGE 7 OF 8 REASONS CITED ABOVE , WE ACCORDINGLY DELETE THIS AD DITION OF RS.9,58,626/- MADE BY THE AO AND AS SUSTAINED BY THE CIT(A). WE O RDER ACCORDINGLY. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF NOVEMBER 2015. SD/ - (JOGINDER SINGH) SD/ - (RAMIT KOCHAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; ' ( DATED : 18/11/2015 PS POOJA ! '#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. 9:;< / THE APPELLANT 2. CD;< / THE RESPONDENT. 3. H H I ( 9: ) / THE CIT, MUMBAI. 4. H H I / CIT(A) - , MUMBAI 5. OPQ C(R , H 9:S 9R T , / DR, ITAT, MUMBAI 6. VW X / GUARD FILE. 6 / BY ORDER, DO: C //TRUE COPY// 8/9 : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI