The Dy. Commr. Of Income Tax, Cir.-1(2), RAJKOT-GUJARAT V. M/s Ramboo Prolen Pvt. Ltd., RAJKOT-GUJARAT

ITA 503/RJT/2015

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6387 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 143(3); 40(a)(ia); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e DCIT, Circle-1 (2 ), Rajkot (App ellant) Vs M/s. Ramboo Pro len (I) Pvt. Ltd. 90 7-917 Star Plaza, Pho olchhab Chowk, Rajkot (Resp ondent) Asses see by : Shri Sa mir Bhuptani, A.R. Revenue by : Shri B. D. Gupta, Sr. D. R. Date of hearing : 05-07 -2 022 Date of pronouncement : 16-09 -2 022 आदेश /ORDER PER BENCH:- This is an appeal filed by the Revenue against the order of the CIT(A)-1, Rajkot-1 dated 17-07-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”. 2. The Department has taken the following grounds of appeal:- ITA No. 503/Rjt/2015 Assessment Year 2005-06 I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 2 “1. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs. 12,52,661/- on account of disallowance of forfeited security deposit on lease premises. 2. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.30,38,593/- made u/s.40(a)(ia) of the Act. 3. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.55,51,780/- made on account of difference in stock statement viz-a-viz appearing in the balance sheet. 4. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.1,33,008/- on account of difference in balance with Supplier viz Kerala State Bamboo Corporation Ltd. 5. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.59,94,293/ - out of purchases. 6. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.40,500/- on account of discount given to supplier. 7. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.83,892/- made for non reflection of transaction in the books of supplier. 8. The learned CIT(Appeal) has erred in law and on facts in deleting the addition of Rs.1,42,580/- treating repairing expenditure as capital expenditure. 9. It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and that of the Assessing Officer be restored.” Ground number 1: deletion of disallowance of forfeited security deposit on leased premises 12,52,661/- of the Act I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 3 3. The brief facts in relation to this ground of appeal are that the assessee is engaged in the business of manufacturing and trading of furniture and ancillary items. The assessee had taken show-rooms on rent/lease, but since assessee was incurring heavy losses, it closed down the showrooms before the end of lease period. As a result, the security deposit/advance rent paid for taking the properties on lease have been forfeited by the respective property owners. The sum of forfeited deposits/rent has been debited to the profit and loss account by the assessee. The AO disallowed assessee’s claim on the ground that forfeiture of the security deposit cannot be considered as revenue expenditure and he disallowed the same as being capital expenditure. In appeal, Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations: “Decision: 6.4 I have duly considered the submission made by the appellant as well as gone through the assessment order. The issue is fully covered by the decision of Hon'ble ITAT, Delhi Bench in the case of Fab India Overseas Pvt. Ltd (supra), in that case it was held as under: "18. On this factual matrix the issue before us is "whether the loss of security deposit, in question is a business loss in the revenue field". In our considered opinion the above loss is a business loss; for the Reason that the assessee has taken on lease many premises spread over many parts of the country, ad this act of taking this show room on lease is in the normal course of business. In fact 84 show rooms are taken on lease at various places. Six months rent was given as security deposit. This was given in the course of business. The transaction is intimately connected with the business of assessee. The Assessing Officer has not disputed the genuineness of claim. The CIT(A) has disallowed the amount on the ground that the loss was in the capital field. We do not agree with this finding, I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 4 There is enduring benefit to the assessee. In our view the loss in question is in the revenue field and has been rightly claimed u/s. 28. The facts of the appellant are fully covered by the above decision and respectfully following the said decision this ground of the appeal is allowed.” 4. On a perusal of the facts before us, we find no infirmity in the order of the Ld. CIT(Appeals) who has correctly held that forfeiture of security deposit is normal business loss in the assessee’s line of business and the same is allowable as revenue expenditure in light of the decision of the Delhi ITAT in the case of Fab India Overseas Private Limited in ITA number 199/Del/2012 dated 28-06-2013. 5. In the result, ground number 1 of the Department’s appeal is dismissed. Ground number 2: deleting the addition of 3,38,593/- made under section 40(a)(ia) of the Act 6. The brief facts in relation to this ground of appeal are that the assessee made payments to various Clearing and Forwarding agents for commission as well as towards reimbursement of expenditure. The assessee had deducted TDS on commission part and no TDS was deducted on the reimbursement element. The AO disallowed the quantum of reimbursement element by invoking the provisions of section 40(a)(ia) of the Act and disallowed expenditure amounting to 31,02,921/-. In appeal, Ld. CIT(Appeals) gave partial relief to the assessee with the following observations: I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 5 “Decision: 7.4 I have duly considered the submission made by the appellant as well as gone through the assessment order. The issue in this case is classified in three categories viz. no default, part default (short deduction) and no deduction. In respect of Velji Dosabhai &. Sons Pvt. Ltd the agent has issued separate bills for reimbursement of expenditure and hence in view of the decision of Hon'ble Delhi-ITAT in the case of Grandprix Fab. (P) Ltd (128 TTJ 60) no IDS is deductible on such element. Same way in the cases of Bhanu Clearing Agency and Unispec Logistic Pvt. Ltd it is observed that the amount net of ocean freight comes to less than Rs. 20,000/- and hence no IDS is deductible thereon. In the case of Hindustan Cargo Ltd the appellant has duly deducted the due tax hence no default exists. Thus the disallowance of Rs. 2,55,757/- in these four cases is directed to be deleted. In respect of payments to Del Freight Forwarders the appellant has submitted return of income and profit and loss account of the said agent which shown on credit side the amount by very of freight charges collected of Rs. 3,25,85,008/-. Thus the agent has shown the receipt in his books of account and return of income. In view of the insertion of second proviso to section 40(a)(ia) of the act the disallowance would not be made if the appellant fails to deduct whole or part of the tax but is not deemed to be an assessee in default under first proviso to sub-section (1) of section 201. Although, this section has came into effect prospectively but as held by the Hon'ble ITAT Kolkata in the case of Santosh Kumar Kedia (supra) the provision is curative in nature and has retrospective effect w.e.f. 1 st April, 2005 being a date from which sec. 40(a)(ia) of the act was inserted by the Finance (No. 2) Act, 2004. Respectfully following the ratio laid down by the said decision I hold that no disallowance on account of payments made to Del Freight Forwarders is warranted and hence the disallowance of Rs. 27,62,136/- is directed be deleted. In the cases of Indev Shipping Service Pvt. Ltd the appellant has deducted tax on portion of Rs. 10,200/- and no tax was deducted on amount of Rs. 17,528/- and in the same way no tax was deducted on the sum of Rs. 57,300/- paid to Reliable Freight Forwarders. The appellant has not submitted any return of income and profit and loss I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 6 account to establish the fact that the corresponding payee has shown the receipt of income in their accounts and have paid due tax thereon. In these circumstances the disallowance to the extent of Rs. 74,828/- is confirmed.” 7. We observe that Ld. CIT(Appeals) has given relief in respect of non deduction of TDS for cases where (i) the agent had issued separate invoice for reimbursement expenditure (ii) relief was also granted in respect of cases where there was no requirement for TDS since falling within the limit of 20,000 (iii) when the payee was filing his return of income and had reflected the said receipts and his return of income. However, in such cases where the assessee could not file the relevant proof of the payee filing its return of income and reflecting such income in the return of income, the Ld. CIT(Appeals) disallowed the same. In our considered view, we find no infirmity in the order of Ld. CIT(Appeals), either in facts or application of law. 8. In the result, ground number 2 of the Department’s appeal is dismissed. Ground number 3: deleting addition of 55,51,780/- on account of difference in stock statement 9. The brief facts in relation to this ground of appeal are that the assessee had submitted stock statement with Bank containing details of goods hypothecated with the bank for the purpose of availing credit facility. The AO disallowed an amount of 55,51,780/ - on account of difference in stock I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 7 statement with the bank. Before the Ld. CIT(Appeals), the assessee submitted that the AO has arbitrarily selected only 2 items out of 7 items and ignored the 5 items in which the stock in books was shown at the higher side than with the bank. Further, AO ignored the fact that the overall amount of stock in the assessee/register is on the higher side as compared to statement with the bank by a sum of 36.50 lakhs. Further, the AO has not been able to point out any mistake in the assessee’s books of accounts. The Ld. CIT(Appeals) allowed the assessee’s appeal on this ground, with the following observations: “8.4 I have considered the facts of the case and submission made by the appellant. It is undisputed fact that the AO has considered only those items which are shown higher in bank statement and ignored those items which are shown higher in books of account. In my considered opinion this is arbitrary decision and against the principles of natural justice. The AO cannot be selective for the purpose of making the addition and ignored those aspects of the case which are in favour of the assessee. This is not the case where the aggregate amount of stock in bank statement exceeds the amount of stock reflected in the banks of account. The internal differences are result of merger and reshuffle of one or more heads. If the sum of upholstery is added in the sum of raw-material and in the same way sum of export trading goods is clubbed with the finished goods the result amount is still lower than what the appellant has declared in the final balance sheet. Thus the difference in one head, if merged/clubbed with another possible head the difference stand explained. Particularly when the overall sum of the stock in books of account is exceeding the sum of stock declared before bank then there is no case of unexplained/ unaccounted investment in stock. The appellant has declared higher stock in the books of account by 36.50 Lac and, therefore, no addition thereto is warranted. I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 8 Moreover, the books result declared by the appellant also shows improvement in terms of GP as compared to immediate preceding three years. The appellant is also maintaining quantitative details and the books of account have been subject to audit. Above all, the appellant has declared loss of Rs. 42.16 Lac in the year under consideration and the appellant was also having unabsorbed loss of Rs. 19.11 crore thus there is absence of any kind of motive which may lead to suppression of stock and thereby the profit to reduce tax effect. It is noted that even after making additions the tax effect comes NIL. Considering all the aspects and Submissions of the case the addition on account of difference in stock statement submitted with bank vis-a-vis books of account is not justified and the same is hereby directed to be deleted. This ground of appeal is allowed.” 10. Before us, the Ld. DR relied on the observations made in assessment order. In response, the counsel for the assessee drew attention to page 7 of the synopsis submitted before us and submitted that when the books of accounts are clubbed together, then the stock in the books of accounts is higher than that in the statement given before the bank. On a perusal of the records and on going through the order passed by the Ld. CIT(Appeals), we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made by the AO. 11. In the result, ground 3 of the Department’s appeal is dismissed. Ground number 4: deleting the addition of 1,33,008/- on account of difference in balance sheet with supplier: I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 9 12. The brief facts in relation to this ground of appeal are that the assessee had purchased goods from M/s Kerala State Bamboo Corporation Ltd. worth 14, 63,088/-, which includes 1,33,008/- toward sales tax. The entire payment, including sales tax amount, has been paid by the assessee in advance subject to the condition that sum of tax of 1,33,008/ - was to be refunded on production of form-H by the assessee. Subsequently, the seller intimated the assessee that instead of form-H, the assessee was required to furnish form number 18A in order to claim refund of 1,33,008/-. However, the assessee was not able to furnish form number 18-A, for the reason that the assessee was not registered in the state of Kerala. Accordingly, the assessee debited this amount “to purchase” by crediting the account of the seller M/s Kerala State Bamboo Corporation Ltd. However, since in the books of the seller, the said amount was shown as payable to the assessee for want of form number 18-A, whereas the assessee’s books show “Nil” balance, the AO added this sum to the total income of the assessee. Before the Ld. CIT(Appeals), the assessee submitted that the difference was on account of sales tax refund, which was earlier to be repaid by M/s Kerala State Bamboo Corporation Ltd. , but due to change in form “H” to form “18- A”, the assessee was not able to furnish the new form and hence it has written off the said amount under the head of purchase. There is no difference in the balance, the said amount was never returned back by the supplier as the assessee has not furnished form 18-A. Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations: “Decision: 9.4 I have gone through the assessment order and submission made by the appellant and also gone through the series of document the I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 10 appellant relied upon. This is the case where the appellant has recognized expenditure as soon as it came to know that it was not possible for it to issue Form no. 18A and consequently not entitled to get refund of the sum of duty. Ld. AR has placed sufficient documents to establish the genuineness of the transaction. Given facts that the appellant was not in a position to issue Form no. 18A, it was automatically disentitled to receive refund of the duty of Rs. 1,33,008/- and consequently it has to be added to the purchase price as the same has direct nexus with the cost of purchase. I do not see any accounting error in entering the transaction and thereby debiting the said amount to the cost of purchase. Merely because the supplier has not written back the amount in his books of account mainly because it was awaiting Form no. 18A would not vitiate the fact that the duty was not refundable to the appellant and ultimately it had to go to the profit and loss account. As per accounting principles the expenditure has to be recognized the moment liability crystalised. In this case on receipt of the letter from the supplier demanding Form no. 18A and appellant inability to issue the same made it clear that the liability was sure and, therefore, it was appropriate to recognized in the respective year. In view of above discussion I hereby direct the AO to delete the addition of Rs. 1,33,008/-. This ground of appeal is allowed.” 13. Before us, the Department relied upon the observations made in the assessment order. In response, counsel for the assessee drew our attention to page 261 of the paper-book and submitted that the amount of 1,33,008/- was still shown as credited in the assessee’s books against export purchase against Form H. We have heard the rival contentions and perused the material on record. We are of the considered view that in the instant facts Ld. CIT(Appeals) has not erred in facts and in law in granting relief the assessee. Merely because the supplier has not written back the amount in his books of account mainly because it was awaiting Form no. 18A would I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 11 not vitiate the fact that the duty was not refundable to the 'appellant and ultimately it had to go to the profit and loss account. 14. In the result, ground number 4 of the Department’s appeal is dismissed. Ground number 5: deleting the addition of 59,94,293/ - out of purchases: 15. The brief facts in relation to this ground of appeal are that the assessee had purchased goods from 2 concerns viz. Ej Designer and Interior Architect For 50,84,537/ - and Fyuga furniture for 9,09,756/ -. During the course of assessment proceedings, the AO sent notices under section 133(6) of the Act to both the suppliers, which were returned unserved with the remarks “left”. Accordingly, the AO made disallowance of purchases from both the suppliers. 16. In appeal, Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations: “Decision: 11.4 I have gone through the submission made by the AR and also considered the assessment order. The addition as made on the only basis of return of notice u/s. 133(6) and non-filing of confirmation during the course of the assessment proceedings. In my opinion ld. AO would have to take into consideration all the documents available on records to verify the genuineness of the purchases. Merely because notice u/s. 133(6) was returned un-served or confirmation was not filed would not be sufficient ground to disallow genuine purchases, particularly when the appellant is in position to demonstrate the same I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 12 by producing and submitting relevant documentary evidences. Here, ld. AO completely failed to consider and comment on the critical documents submitted by the appellant viz. purchase invoices containing name, address, contact details, sales tax registration numbers of the supplier, transport receipts, goods inward details, delivery challans, correspondence with the supplier, corresponding sale, mode of payments, outstanding at the end of the year etc.. All the purchase under consideration are duly supported by documentary evidences which clearly establishes the actual movement of goods and in the light of the same the genuineness and actual receipt of goods cannot be denied. Merely, non-furnishing confirmation return of supplier, return of notice would not negate the evidentiary value of the material produced by the appellant. Moreover, the appellant has furnished confirmations of both the suppliers during the course of the remand proceedings and copy of the same is also submitted before me, with this the basic grievance of the ld. AO also does not survive. This view is also forfeited by the decision of Hon'ble ITAT-Mumbai in the case of National Tiles & Industries Pvt. Ltd (supra). In the light of the documentary evidences, mode of payments, corresponding sales, respectfully following decision of Hon'ble ITAT, Mumbai and other aspects as discussed above I am of the considered opinion that the appellant has duly discharged its onus and ld. A.O. has wrongly disallowed the purchases . I, therefore, direct ld. A.O. to delete the disallowance.” 17. On perusal of the facts before us, it is observed that the assessee has been able to prove the genuineness of the transaction and has given substantial evidentiary proof to show that the assessee had made purchases from these two parties. Accordingly, we find no infirmity in the order of the Ld. CIT(Appeals), wherein on appreciation of facts, he allowed the assessee’s ground. 18. In the result, ground number 5 of the Department’s appeal is dismissed. I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 13 Ground number 6: deleting the addition of 40,500/- on account of discount given to supplier: 19. The brief facts in relation to this ground are that Assessing Officer noted that Lotus Power Gear Private Limited, a supplier of the assessee had given discount to the assessee of 40,500/ - which was not reflected in the books of the assessee. The assessee submitted that it was not aware of the credit entry passed by the supplier and the said discount has been recognised by it in the subsequent year i.e. assessment year 2006-07. However, the AO added a sum of 40,500/- to total income of the assessee on the ground that the discount given by the supplier was not recorded in the books of the assessee. 20. In appeal, Ld. CIT(Appeals) allowed the assessee’s appeal on the ground that the assessee could not recognise the discount in this year since the same was not intimated to it by the supplier. However, in the subsequent year, the assessee recognised this discount. Ld. CIT(Appeals) made the following observations while passing the order: “Decision: 12.4 In this case the income has been recognized by the appellant but in the different assessment year. The reason advanced by the appellant for recognizing the said income in the AY 06-07 and not in the AY 05-06 was that the supplier did not intimate about the grant of discount. This is not an abnormal situation. The appellant did not come to know about the credit given by the appellant in the year and hence no question of taking the credit of the same arises. The matter was settled in the AY 06-07, hence the appellant came to know about the credit effects and the same have been recognized in the subsequent year. It is not possible for the appellant to assume the I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 14 discount without any intimation from the supplier and hence the said income was rightly not recognized in the year under consideration. I, therefore, direct ld. A.O. to delete the addition. This ground of appeal is allowed.” 21. We have perused the material on record, and in our considered view, we find no infirmity in the order of Ld. CIT(Appeals). In our view, income can be recognised by the assessee only when the same comes to the knowledge of the assessee. It is quite common in any line of business that the assessee cannot be expected to know about the discount unless the same is intimated to him. It is also observed that in the subsequent year i.e. assessment year 2006-07, the assessee recognised the discount in its books of accounts, when it came to know about the same. Accordingly, a find no infirmity in the order of Ld. CIT(Appeals). 22. In the result, ground number 6 of the Department’s appeal is dismissed. Ground number 7 deleting the addition of 83,892/- made for non- reflection of transaction the books of supplier: 23. The brief facts in relation to this ground of appeal are the assessee got job of work done through M/s Gajjar fabrication for 83,892/-. On verification of the contra account of M/s Gajjar fabrication called under section 133(6) of the Act , the AO noted that the said transaction is not appearing on this account. Accordingly, the AO disallowed the job work of 83,892/-. I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 15 24. In appeal, the assessee submitted that the job expenditure cannot be disallowed only on the ground that the same is not reflected in the payee’s accounts. Ld. CIT(Appeals) allowed the assessee’s appeal on the ground that the assessee had made payment to M/s Gajjar fabrication through banking channels after deduction of TDS, and this fact was completely ignored by the AO while making the above aforesaid addition. Further, the assessee has also produced invoices of the concerned party to whom job work payment was made. Accordingly, Ld. CIT(Appeals) allowed this ground of the assessee, with the following observations: “Decision: 13.4 I have gone through the assessment orders and submission of the appellant. Ld. AO failed to carry any inquiry with M/s. Gajjar Fabrication even after the submission of bills, TDS and payment details by the appellant during the course of the assessment. The documents submitted by the appellant are carrying evidentiary value and the same cannot be negated without conducting any cross verification thereof. Ld. AO completely failed to contradict the material submitted by the appellant to substantiate its claim. Ld. AO also erred in not allowing the appellant cross verification of Gajjar Fabrication. Considering the fact that the appellant has submitted bills, payment details, TDS effected on the bills the onus on the appellant stands discharged and hence the expenditure is allowable. The AO is, therefore, directed to allow the said expenditure. This ground of the appeal is allowed.” 25. On perusal of the material on record, we find no infirmity in the order of Ld. CIT(Appeals), who upon appreciation of the facts of the case, allowed the assessee’s appeal. I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 16 26. In the result, ground number 7 of the Department’s appeal is dismissed. Ground number 8 deleting the addition of 1,42,580/- treating repairing expenditure as capital expenditure: 27. The brief facts in relation to this ground of appeal are that assessee had carried waterproof coating over the terrace of the factory and claimed the said expenditure as revenue expenditure. The AO disallowed the same as capital expenditure. In appeal, the Ld. CIT(Appeals) allowed the assessee’s appeal on the basis that as per the balance sheet, the gross value of the building was 5,00,67,882/-,whereas the repairing expenditure for waterproofing was 1,42,580/-only. Accordingly, since the expenditure was too small as compared to the value of asset, the assessee was justified in claiming the same as revenue expenditure. While passing the order, Ld. CIT(Appeals) made the following observations: “Decision: 14.4 I have considered the submission of the appellant and assessment order as well. During the course of the hearing ld. AR drawn attention towards the gross value of the factory building as per the balance sheet which was Rs. 5,00,67,882/-, whereas the repairing expenditure viz. water proofing costing comes to Rs. 1,42,580/- only. The expenditure is too small in compare to the value of the asset and hardly it could be said to be an accumulated repairs at all. Further, water proofing coating can be considered for the purpose of maintenance and preservation of the existing asset and not for acquiring or replacing new asset. There is no replace of any part of the asset even. Hon'ble Supreme Court in the case of Sarvana Spinning Mills Pvt. Ltd (supra) has dealt with the issue of current repairs. It was held as under: I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 17 "The basis test to find out as to what would constitute current repairs is that the expenditure must have been incurred to "preserve and maintain" an already existing asset, and the object of the expenditure must not be to bring a new asset into existence or to obtain a new advantage." In the same way in the case of Allied Metal Products and Asian Hotels Ltd (supra) the expenditure incurred on repairs of leaky roofs and overhauling of business premises was held to be an allowable expenditure. In view of the nature of the repairing work carried by, the appellant, ratio laid down in the decisions of Hon'ble Supreme Court and High Courts the expenditure is held to be of "Current Repairs" and hence allowable as revenue expenditure. The ld. AO is directed to delete the disallowance. This ground of appeal is allowed.” 28. On perusal of the material on record, we find no infirmity in the order of Ld. CIT(Appeals), who upon proper appreciation of the facts of the case, allowed the assessee’s appeal on this issue. The assessee had carried out minor repairs which are allowed by the CIT(A) on appreciation of proper evidence as revenue expenditure. No doubt has been casted on the genuineness of the expenditure. 29. In the result, ground number 8 of the Department’s appeal is dismissed. 30. Ground number 9 of the Department’s appeal is general in nature and does not require any specific adjudication. I.T.A No. 503/Rjt/2015 A.Y. 2005-06 Page No Dy. CIT vs. M/s. Ramboo Prolen (I) Pvt. Ltd. 18 31. In the combined result, the Department’s appeal is dismissed. Order pronounced in the open court on 16-09-2022 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/09/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot