MANDPESHWAR HOSPITAL & CLINIC, MUMBAI V. ITO WD 11(3)(1), MUMBAI

ITA 4196/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7892 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MATHURIA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.4196/MUM/2010 - A.Y 2005-06 MANDPESHWAR HOSPITAL & CLINIC, GOMATI APARTMENTS, MANDPESHWAR R&D., BORIVLI (WEST), MUMBAI 400 092. PAN: AAAFM 5074 E VS. INCOME TAX OFFICER, WARD 11 (3)(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.S.MATHURIA, RESPONDENT BY : SHRI R.K.GUPTA. O R D E R IN THIS APPEAL ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) FOR CONFIRMING THE ADDITION AMOUNTING TO RS.1,76,850/- ON ACCOUNT OF PAYMENT OF SOCIETY CHARGES. 2. AFTER HEARING BOTH THE PARTIES, I FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD PAID A SUM OF RS.2,48, 022/- AS SOCIETY CHARGES. ON FURTHER EXAMINATION IT WAS NOTICED THAT RS.71,172/- WAS FOR SOCIETY CHARGES AND BALANCE OF RS.1,76,850/- WAS FOR REPAIR EXPENSES. A O OBSERVED THAT THIS WAS OF CAPITAL NATURE AND ON SAME DEPRECIATION @ 10% IS TO BE ALLOWED. HOWEVER, DURING THE YEAR HE ALLOWED 5% DEPRECIATION AND MADE ADDITION OF RS.1,68,008/-. 3. THE LD. CIT(A) DECIDED THE ISSUE VIDE PARA-4 WHI CH IS AS UNDER: 4. EVIDENTLY THE AMOUNT UNDER CONSIDERATION WHICH HAS BEEN DISALLOWED BY ASSESSING OFFICER IS THE SECOND ITEM DETAILED ABOV E. THIS IS NOT AN ANNUAL PAYMENT. IT IS A ONE TIME PAYMENT. IT IS NOT EXPEND ITURE TOWARDS REPAIR. IT IS A 2 CONTRIBUTION TOWARDS A FUND WHICH THE SOCIETY HAS C REATED. A CONTRIBUTION TO A FUND OF THE SOCIETY CANNOT BE SAID TO BE A HEAVY EX PENDITURE OF THE APPELLANT. THEREFORE, DISALLOWANCE MADE BY ASSESSING OFFICER I S PERFECTLY JUSTIFIED. COMING NOW TO THE SECOND PART OF THE GROUND OF APPEAL RELA TING TO DEPRECIATION, IT IS NOTICED THAT ASSESSING OFFICER HAS TREATED THIS AMO UNT AS A CAPITAL EXPENDITURE OR APPELLANT AND HAS CONSEQUENTLY ALLOWED DEPRECIATION . TO MY MIND THE AMOUNT UNDER CONSIDERATION IS NOT A CAPITAL EXPENDITURE SI NCE IT IS ONLY CONTRIBUTION TO FUND. THE REPRESENTATIVE OF APPELLANT WAS ASKED WHE THER HE HAD ANY EVIDENCE OF THE SOCIETY HAVING ACTUALLY UNDERTAKEN THE REPAIRS. IT IS SUBMITTED THAT HE HAD NO SUCH EVIDENCE AVAILABLE WITH HIM. TO MY MIND THE AM OUNT UNDER CONSIDERATION IS NOT A CAPITAL EXPENDITURE AND CONSEQUENTLY ASSESSIN G OFFICER OUGHT NOT TO ALLOW DEPRECIATION AS DONE BY HIM. ASSESSING OFFICER IS D IRECTED NOT TO GRANT DEPRECIATION ON THE AMOUNT OF CONSIDERATION. 4. BEFORE ME LD.COUNSEL OF THE ASSESSEE SUBMITTED T HAT THE BUILDING IN WHICH ASSESSEE WAS RUNNING ITS BUSINESS WAS VERY OLD AND LEAKING AT VARIOUS PLACES. IN THE ANNUAL GENERAL MEETING OF THE SOCIETY IT WAS DE CIDED TO CONTRIBUTE TOWARDS REPAIRS AND EVERY OCCUPANT WAS REQUIRED TO MAKE PAY MENT OF ` `` ` ..50/- PER SQ.FT. FOR THE REPAIR OF THE BUILDING. IN THIS REGARD HE R EFERRED TO THE COPY OF THE MINUTES OF THE AGM HELD ON 19 TH OCTOBER, 2003, COPY OF WHICH IS FILED AT PAGES 9 TO 13 OF THE PAPER BOOK. HE SUBMITTED THAT THE SOCI ETY IN TURN USED THIS MONEY FOR REPAIRING THE BUILDING AND SINCE THE ASSESSEE W AS MANDATORILY REQUIRED TO MAKE THIS PAYMENT, THIS SHOULD HAVE BEEN ALLOWED BE ING FOR THE PURPOSE OF BUSINESS. 5. ON THE OTHER HAND, LD.DR SUBMITTED THAT IT IS A CONTRIBUTION BY THE ASSESSEE TOWARDS THE SOCIETY AND, THEREFORE, SHOULD NOT HAVE BEEN ALLOWED. HE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULL Y AND FIND FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE ASS. A DECISIO N BY ALL THE MEMBERS OF THE 3 SOCIETY WAS TAKEN IN THE AGM TO RAISE FUNDS FOR STO PPING THE LEAKAGE. IN FACT, RESOLUTION NO.10 READS AS UNDER: RESOLUTION 10 - LEAKAGE PROBLEM IN THE FLATS WAS HOTLY DISCUSSED AND THE MEMBERS STRESSED THAT THE SUBJECT 8, 9 & 11 IN THIS AGENDA SHOULD FOLLOWING SUBJECT NO.10 DUE TO SERIOUSNESS OF THE SUBJECT AND THEREFORE SHOULD FORM PART OF SUBJECT NO.10 DISCUSSING TO MEET THE SITUATION. MEM BERS IMPRESSED THE HOUSE AND THE CHAIR TO RAISE FUNDS TO STOP LEAKAGE ETC, THE F UNDS SHOULD BE RAISED FOR ALL JOB AS PER THE SUBJECT REFERRED. THEREFORE THE SUBJECT NO. L8,9, 11 BEING ALL OF COMMON NATURE TAKEN UP FOR DISCUSSION SIMULTANEOUSLY AND A COMMON RESOLUTION ADOPTED. RESOLVED THAT THE WORK OF REPAIRS OF LEAKAGE AND O THER SUBJECTS REFER TO 8, 9, 10, 11 BE TREATED AS ONE FOR PURPOSE OF CONTRIBUTION FR OM MEMBERS. THE ESTIMATED EXPENDITURE FOR THESE WORKS WAS WORKED AROUND I.50 TO 9 LACS AND TO RECOVER THE SAID AMOUNT FROM THE MEMBERS DECIDED WAS ` `` ` .50 PER SQFT PER FLAT ON THE BASIS OF THE FOLLOWING MEASUREMENT OF THE FLATS THE ABOVE CLEARLY SHOWS THAT EVERY MEMBER WAS REQUE STED TO CONTRIBUTE TOWARDS REPAIRS OF THE BUILDING. SINCE ASSESSEE HAS ALSO CONTRIBUTED FOR THE REPAIRS OF BUILDING WHERE THE OFFICE WAS SITUATED, THE EXPENDITURE HAS TO BE CONSIDERED ONLY AS REVENUE EXPENDITURE FOR THE PURP OSE OF BUSINESS. THE AUTHORITIES HAVING NOT DOUBTED THE GENUINENESS OF T HE EXPENDITURE AND IT HAS ALSO NOT BEEN ALLEGED THAT ASSESSEE HAS CREATED SOM E CAPITAL ASSET OR OBTAINED ANY ENDURING BENEFIT AND, THEREFORE, SAME COULD NOT HAVE BEEN DISALLOWED. THEREFORE, I SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 18/3/2011. S D/- (T.R.SOOD) ACCOUNTANT MEMBER MUMBAI: 18/3/2011. P/-* 4