EMPRESS ADVERTISING, MUMBAI V. ITO 12(3)(4), MUMBAI

ITA 4184/MUM/2012

• Counselvise Citation: 418419914 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: HEMANT VORA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI H.L. KARWA, HONBLE PRESIDENT AND P.M . JAGTAP, AM .. , .. , ./ I.T.A. NO.4184 /MUM/2012 ( / ASSESSMENT YEAR : 2007-2008 M/S EMPRESS ADVERTISING, 2, PAREKH VORA CHAMBERS, 66, NAGINDAS MASTER ROAD, FORT, MUMBAI 400 001. / VS. INCOME TAX OFFICER 12(3)(4), MUMBAI. ./ PAN : AAAFE0280C ( ! / APPELLANT ) .. ( '#! / RESPONDENT ) A PPELLANT BY SHRI HEMANT VORA R E SPONDENT BY : SHRI PITAMBAR DAS ' ( / DATE OF HEARING : 15-07-2014 ' ( / DATE OF PRONOUNCEMENT : 31-07-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) - 21 MUMBAI DATED 2-3-2012 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE MADE BY THE A.O. A ND CONFIRMED BY THE LD. CIT (A) BY TREATING THE HOARDING EXPENSES AMOUNTIN G TO RS. 8,82,666/- AS CAPITAL IN NATURE. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED, INTER ALIA, IN THE BUSINESS OF OUTDOOR ADV ERTISING. DURING THE YEAR UNDER CONSIDERATION, IT HAD RECEIVED INCOME FROM HO ARDING SITES AMOUNTING TO RS. 88.23 LACS AND AFTER CLAIMING THE EXPENSES AGAI NST THE SAID INCOME, NET ITA 4184/M/12 2 PROFIT OF RS. 18,87,105/- WAS SHOWN BY THE ASSESSEE AS PER P&L ACCOUNT. THE EXPENSES DEBITED TO THE P&L ACCOUNT INCLUDED A SUM OF RS. 8.83 LACS CLAIMED BY THE ASSESSEE ON ACCOUNT OF HOARDING EXPENSES. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE F OR HOARDING EXPENSES WAS EXAMINED BY THE A.O. AND ON SUCH EXAMINATION, HE FO UND THAT THE HOARDING EXPENSES CLAIMED BY THE ASSESSEE WERE FOR HEAVY AND EXTENSIVE REPAIR TO THE EXISTING STRUCTURES WHICH WAS MAINLY INCLUSIVE OF P AINTING AND APPLYING RED OXIDE AND OTHER TREATMENTS TO PREVENT CORROSION AND WEATHERING OVER A LONG PERIOD. ACCORDING TO THE A.O., THE HOARDING EXPENSE S CLAIMED BY THE ASSESSEE THUS RESULTED IN ENDURING BENEFIT TO THE ASSESSEE A ND THE SAME WERE NOT IN THE NATURE OF CURRENT REPAIRS. HE ACCORDINGLY TREA TED THE HOARDING EXPENSES OF RS. 8,82,666/- INCURRED BY THE ASSESSEE AS CAPIT AL EXPENDITURE AND ALLOWED ONLY DEPRECIATION THEREON AT 10% WHICH RESULTED IN THE NET DISALLOWANCE OF RS. 7,94,399/-. ON APPEAL, THE LD. CIT(A) CONFIRME D THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF HOARDING EXPENSES FOR THE FOLLOWING REASONS GIVEN IN PARA 5.3 OF HIS IMPUGNED ORDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE A PPELLANT CLAIMED REPAIRS AND MAINTENANCE OF RS.8.83 LAKHS. THE AO CA LLED FOR THE BILLS, INVOICES AND SUPPORTING DOCUMENTS OF SUCH EXPENSES. AFTER EXAMINATION OF SUCH BILLS AND NARRATIONS MADE THERE IN, THE AO CONCLUDED THAT THE EXPENSES WERE INCURRED FOR EXTEN SIVE REPAIRS AND MAINTENANCE OF EXISTING STRUCTURES AND EVEN REPLACI NG THE SUBSTANTIAL PORTION OF EXISTING STRUCTURES (M.S. ANGLES). ON TH E BASIS OF THESE FACTS, THE AO HELD THAT THE EXPENSES WERE NOT IN THE NATUR E OF NORMAL REPAIRS, BUT WERE CAPITAL IN NATURE. 1 AM IN AGREEMENT WITH THE AO THAT CONSIDERING THE FACTS DISCUSSED IN PARA-7 OF THE AS SESSMENT ORDER THE EXPENDITURE INCURRED WERE ON ACCOUNT OF MAJOR AND E XTENSIVE REPAIRS & MAINTENANCE AND EVEN REPLACEMENT OF MAJOR PORTIONS OF EXISTING STRUCTURES AND THEREFORE, WERE NOT NORMAL/ROUTINE R EPAIRS & MAINTENANCE EXPENSES. THESE EXPENSES WERE IN THE NA TURE OF CAPITAL EXPENDITURE GIVING BENEFIT OF ENDURING NATURE WHICH WAS IN CAPITAL FIELD. THE AO WAS THEREFORE, JUSTIFIED IN HOLDING THE EXPE NDITURE AS CAPITAL EXPENDITURE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL:- ITA 4184/M/12 3 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE WAS HAVING 15 HOARDINGS INST ALLED IN THE CITY DURING THE COURSE OF ITS BUSINESS OF OUTDOOR ADVERTISEMENT AND TOTAL INCOME OF ABOUT RS. 88 LACS WAS GENERATED FROM THIS ACTIVITY GIVING A NET PROFIT OF ABOUT RS. 18 LACS AS SHOWN BY THE ASSESSEE IN THE P&L ACCOUNT. THESE HOARDINGS WERE REQUIRED TO BE MAINTAINED BY THE ASSESSEE AND IN OR DER TO AVOID CORROSION OF THE STRUCTURE AND OTHER ADVERSE WEATHERING EFFECTS, APPLICATION OF RED OXIDE AND PAINTING WAS REGULARLY REQUIRED TO BE DONE. SI MILARLY, CEMENTING AND PLASTERING OF FOUNDATION WAS ALSO REQUIRED TO BE DO NE REGULARLY IN ORDER TO MAINTAIN THE HOARDING STRUCTURES. KEEPING IN VIEW T HE NATURE OF BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TO MAINTAIN THE STRUCTURES USED FOR HOARDINGS IS OF REVENUE IN NATURE ESPECIALLY WHEN THE QUANTUM OF EX PENDITURE INCURRED IS CONSIDERED IN THE LIGHT OF THE FACT THAT THERE WERE 15 HOARDINGS WHICH WERE EXPOSED TO CLIMATE. IT IS ALSO RELEVANT TO NOTE THA T SUCH EXPENDITURE IS A RECURRING EXPENDITURE WHICH IS REQUIRED TO BE INCUR RED BY THE ASSESSEE REGULARLY AND THE SAME THEREFORE CANNOT BE SAID TO HAVE GIVEN ANY ENDURING BENEFIT TO THE ASSESSEE IN CAPITAL FIELD. MOREOVER, EVEN IF THE HOARDING EXPENDITURE CLAIMED BY THE ASSESSEE IS INCLUSIVE OF REPLACEMENT OF M.S. ANGLES ETC., AS NOTED BY THE A.O., THE SAME IS IN T HE NATURE OF REPLACEMENT OF PARTS OF THE HOARDING STRUCTURE WHICH CANNOT BE TRE ATED AS CAPITAL EXPENDITURE. AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSE IS ENTITLED TO DEDUCTION ON ACCOUN T OF HOARDING EXPENDITURE BEING IN THE NATURE OF REVENUE EXPENDITURE. IN THA T VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIR MED BY THE LD. CIT(A) ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. ITA 4184/M/12 4 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2014. ' . / 0 31-7-2014 ' SD/- SD/- (H.L. KARWA) (P.M. JAGTAP ) /PRESIDENT ACCOUNTANT MEMBER MUMBAI ; 0 DATED 31=7=2014 [ .B../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. C () / THE DIT(E), MUMBAI 4. C / DDIT (E)-1(2), MUMBAI 5. F 'BBH , ( H , / DR, ITAT, MUMBAI E BENCH 6. / GUARD FILE. / BY ORDER, #F 'B //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI