FIZZA PUBLICITY, MUMBAI V. ITO 12(3)(4), MUMBAI

ITA 5125/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3876 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HEMANT J VORA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI ASHWANI TANEJA , ACCOUNTANT MEMBER ITA NO. : 5 125 /MUM/20 1 4 (ASSESSMENT YEAR: 200 9 - 1 0 ) FIZA PUBLICITY , PAREKHG VORA CHAMBERS, 66, NAGINDAS MASTER ROAD, FORT, MUMBAI - 400 001 PAN: AAA FF 8621 Q VS INCOME TAX OFFICER TAX - 1 2 (3)( 4 ), MUMBAI (APPELLAN T) (RESPONDENT) APPELLANT BY : SHRI HEMANT J VORA RESPONDENT BY : SHRI RAVINDER SINDHU /DATE OF HEARING : 12 - 07 - 201 6 / DATE OF PRONOUNCEMENT : 05 - 0 8 - 2016 ORDER , : PER AMIT SHUKLA , J M: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 3 .0 3 .201 4 , PASSED BY LD. CIT(A PPEALS ) - 2 3 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 200 9 - 1 0 . IN THE GROUNDS O F APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS : - 1. HOARDING REPAIR & MAINTENANCE EXPENSES : 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRM ING REPAIR & MAINTENANCE EXPENSES INCURRED IN RESPECT OF HOARDING 2 FIZA PUBLICITY ITA 5125 /MUM/ 2014 AMOUNTING TO RS.9,72,075/ - AND ADDING RS.8,26,264/ - TO THE APPELLANTS INCOME AFTER ALLOWING DEPRECIATION AT 15%. 1.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SAID EXPENSES WERE REVEN UE IN NATURE AND AS SUCH ALLOWABLE U/S 31 AND/OR U/S 37 OF THE INCOME TAX ACT AND NEITHER ANY NEW ASSETS WAS CREATED NOR DID IT ANY ENDURING BENEFIT AS ALLEGED. 2. EXPENSES CLAIMED AS LICENCE FEES 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRM ING PARTLY ADDITION IN RESPECT OF EXPENSES CLAIMED AS LICENSE FEES. 2.2 THE LEARNED ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT ALL THE EXPENSES IN RELATION TO LICENCE FEES CLAIMED AS PERTAINING TO THE PR EVIOUS YEAR I.E. 2007 - 08 3. DEPRECIATION ON AMOUNT CAPITALIZED IN THE AY 2007 - 08 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DEPRECIATION @ 15% ON REPAIR & MAINTENANCE EXPENSES WHICH WAS D ISALLOWED & CAPITALIZED BY ITO IN AY 2007 - 08. 4. DEPRECIATION ON AMOUNT CAPITALIZED IN THE AY 2008 - 09 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT ALLOWING DEPRECIATION @ 15% ON REPAIR & MAINTENANCE EXPENSE S WHICH WAS DISALLOWED & CAPITALIZED BY ITO IN AY 2008 - 09. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , GROUND NO S .2, 3 & 4 ARE NOT PRESSED, ACCORDINGLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 3. SO FAR AS THE ISSUE RELATING TO DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENSES IN RESPECT OF H OARDING, THE LD. COUNSEL SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE CASES OF SISTER CONCERNS OF THE ASSESSEE. IN SUPPORT, H E FILED THE ORDER OF THE ITAT IN THE CASE S OF M/S ASIAN ADVERTISING IN ITA NO.2349/MUM/2013 3 FIZA PUBLICITY ITA 5125 /MUM/ 2014 FOR THE ASSESSMENT YEAR 2007 - 08 AND M/S EMPRESS ADVERTISING IN ITA NO.428 4 /MUM/201 2. 4. THE LD. DR ALSO ADMITTED THAT THESE ISSUES ARE COVERED BY THE ORDER IN THE AFORESAID CASES. 5. AFTE R CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS AS WELL AS ORDER REFERRED TO BY THE LD. COUNSEL, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OUTDOOR ADVERTISING. IT HAS INCURRED REPAIR AND MAINTENANCE EXPENDITURE OF RS.9,72,075/ - DURING THE YEAR ON HOARDING. THE AO HAS CONSIDERED THE SE EXPENDITURE AS CAPITAL EXPENDITURE AND ACCORDINGLY, HE ALLOWED DEPRECIATION @ 15% AT RS.1,45,811/ - AND ADDED BACK BALANCE AMOUNT OF RS.8,26,264/ - TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) TOO HAS CONFIRMED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER: - I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE. I HAVE ALSO PERUSED THE BILLS RELATING TO THE REPAIRS AND MAINTENANCE AND FIND THAT THE EXP ENDITURE HAS BEEN INCURRED FOR REINFORCING THE PERMANENT STEEL STRUCTURE OF THE ASSESSEE WITH CEMENT CONCRETE FOUNDATIONS. THE PERMANENT STEEL STRUCTURE IS A CAPITAL ASSET OF THE ASSESSEE. THE NATURE OF THE WORK SHOWS THAT THE EXPENSES HAVE BEEN INCURRED F OR THE PURPOSE OF OBTAINING A NEW AND FRESH ADVANTAGE. UNDER THE CIRCUMSTANCES, THE EXPENDITURE IS HELD TO BE CAPITAL IN NATURE. THE ACTION OF THE ASSESSING OFFICER IS, THEREFORE, UPHELD. THE GROUND OF THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 4 FIZA PUBLICITY ITA 5125 /MUM/ 2014 6 . WE FIND THAT IN THE CASE OF ASIAN ADVERTISING GROUP ( SUPRA ), IN THE TRIBUNAL HAS FOLLOWED THE DECISION IN THE CASE OF E MPRESS ADVERTISING VS. ITO ( SUPRA ) AND HAS DECIDED THE ISSUE AFTER OBSERVING AND HOLDING AS UNDER: - 23. WE HAVE CONSIDERED THE RIVAL SUBM ISSION AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE ORDERS OF THE TRIBUNAL. THE ASSESSEE FIRM HAS UNDERTAKEN REPAIRS OF THE HOARDING STRUCTURES WITH RESPECT TO THE EXISTING STRUCTURE. WE FIND THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FA VOUR OF THE TAX - PAYER BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EMPRESS ADVERTISING (SUPRA) BEING SISTER CONCERN OF THE ASSESSEE FIRM ON IDENTICAL FACTS AND ISSUES IN THE APPEAL, M/S EMPRESS ADVERTISING V. ITO IN ITA NO. 4184/MUM/2012 FOR T HE ASSESSMENT YEAR 2007 - 08 WHEREBY MUMBAI TRIBUNAL VIDE ITS ORDER DATED 31 - 07 - 2014(COPY OF THE ORDER PLACED IN PAPER BOOK AT PAGE 108 - 111) HELD AS UNDER: - 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE WAS HAVING 15 HOARDINGS INSTALLED 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 ORDER TO AVOID CORROSION OF THE STRUCTURE AND OTHER ADVERSE WEATHERING EFFECTS, APPLICATION OF RED OXIDE A ND PAINTING WAS REGULARLY REQUIRED TO BE DONE. SIMILARLY, CEMENTING AND PLASTERING OF FOUNDATION WAS ALSO REQUIRED TO BE DONE REGULARLY IN ORDER TO MAINTAIN THE HOARDING STRUCTURES. KEEPING IN VIEW THE 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 EXPENDITURE 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 THAT SUCH EXPENDITURE IS A RECURRING EXPENDITURE WHICH IS REQUIRED TO BE INCURRED 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 THE NATURE OF REPLACEMENT OF PARTS OF THE 5 FIZA PUBLICITY ITA 5125 /MUM/ 2014 HOARDING STRUCTURE WHICH CANNOT BE TREATED AS CAPITAL EXPENDITURE. AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSE E IS ENTITLED TO DEDUCTION ON ACCOUNT OF HOARDING EXPENDITURE BEING IN THE NATURE OF REVENUE EXPENDITURE. IN THAT VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFORE - STATED DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF EMPRESS ADVERTISING(SUPRA) AS THE FACTS AND ISSUES INVOLVED ARE IDENTICAL , WE ALLOW THIS GROUND OF APPEAL RAISED BY THE ASSESSEE FIRM IN FAVOUR OF THE ASSESSEE FIRM. WE ORDER ACCORDINGLY. THUS, FOLLOWING AFORESAID JUDICIAL PRECEDENCE WHICH IS APPLICABLE ON THE PRESENT FACTS ALSO, WE HOLD THAT REPAIRS UN DERTAKEN F OR THE HOARDING, STRUCTURES WILL FALL IN THE NATURE OF REVENUE EXPENDITURE AND ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS ALLOWED. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016 . SD/ - SD/ - ( ) ( ) ( ASHWANI TANEJA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBE R JUDICIAL MEMBER MUMBAI, DATE: 5 TH AUGUST , 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE C IT 23 , MUMBAI . 4 ) THE C IT 12 , MUMBAI 5 ) , , / 6 FIZA PUBLICITY ITA 5125 /MUM/ 2014 THE D.R. F BEN CH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS