DCIT 2(3), MUMBAI V. SATGURU INFOCORP SERVICES P. LTD, MUMBAI

ITA 6060/MUM/2010

• Counselvise Citation: 606019914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI. B.R. MITTAL (J.M.) AND SHRI. J. SUDHAK AR REDDY (A.M.) ITA NO.6060/M/2010 (AY 2007-08) DEPUTY COMMISSIONER OF INCOME TAX 2(3), R.NO. 555, AAYAKAR BHAVAN, MUMBAI. VS. M/S. SATGURU INFOCORP SERVICES PVT. LTD., 505 ACME PLAZA, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI 400 059. PAN: AAECS6683A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.S. SUNDER SINGH (DR) RESPONDENT BY: NONE DATE OF HEARING:22/12/2011 DATE OF PRONOU NCEMENT:29.12.2011. O R D E R PER B.R. MITTAL, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2007-08 AGAINST ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), DATED 13/5/2010. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER LD. CIT (A) HAS ERRED TO CONSIDER THAT THE AMOUNT OF RS. 73.23 LAKHS INCURRED BY THE ASSESSEE ON PURCHASES OF TIMBERS AND LAMINATIONS ON ACCOUNT OF REPAIRS AND MAINTENANCE OF FURNITURE AND FIXTURES IS REVENU E IN NATURE OR CAPITAL EXPENDITURE. 2 ITA NO.6060/M/2010 3. THE RELEVANT FACTS GIVING RAISE TO THIS APPEAL A RE THAT THE ASSESSEE DEBITED EXPENSES AMOUNTING TO RS.3,34,405/- UNDER T HE HEAD REPAIRS AND MAINTENANCE BUILDING, RS. 68,50,747/- UNDER THE H EAD REPAIRS AND MAINTENANCE FURNITURE AND FIXTURES AND RS.1,38,18 8/- UNDER THE HEAD REPAIRS AND MAINTENANCE OTHERS. THUS, ASSESSEE C LAIMED AGGREGATE EXPENDITURE WHICH COMES TO RS. 73,23,340/-. THE AS SESSING OFFICER STATED THAT THE ABOVE EXPENDITURE WERE INCURRED IN RELATIO N TO THE PREMISES TAKEN BY ASSESSEE ON HIRE FROM MMTC LTD., MUMBAI. THE AS SESSING OFFICER STATED THAT AN AMOUNT OF RS. 57,29,609/- WAS INCURR ED TOWARDS PURCHASE OF BURMA GURJAN WOODEN LOGS. A SUM OF RS. 1,60,514 /- WAS INCURRED TOWARDS PLYWOOD AND LAMINATION. THE ASSESSING OFFI CER STATED THAT THE SAID EXPENDITURE WAS NOT INCURRED FOR ANY REPAIR BU T TOWARDS MAKING NEW FURNITURE AND FIXTURES. THEREFORE, THE SAME CANNOT BE TREATED AS REVENUE EXPENDITURE. ASSESSEE WAS ASKED TO EXPLAIN AS WHY THE SAID EXPENDITURE SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE AND TH E ASSESSEE FURNISHED THE FOLLOWING REPLY, WHICH IS STATED BY ASSESSING O FFICER AT PAGE 4 OF THE ASSESSMENT ORDER AS UNDER: THE FACT OF THE CASE IS THAT YOUR ASSESSEE IS ENGA GED IN THE BUSINESS OF RUNNING THE BUSINESS CENTRE. IT HAD TA KEN BUILDING PREMISES ON LEASE FROM THE MMTC LTD. (A GOVERNMENT OF INDIA UNDERTAKING). DURING THE YEAR YOUR ASSESSEE INCURR ED EXPENDITURE ON THE REPAIRS & MAINTENANCE OF FURNITURE AND FIXTU RES RELATED TO THIS BUILDING PREMISES. THIS EXPENSE WAS INCURRED DUE T O THE NATURE OF BUSINESS OF THE APPELLANT SINCE THE APPELLANT HAS R EQUIRED TO MAKE SOME CHANGES IN THE EXISTING FURNITURE & FIXTURES A S PER THE REQUIREMENT OF THEIR CLIENT. HENCE THIS EXPENSE OF REPAIRS & MAINTENANCE WAS INCURRED ONLY FOR MAKING THE EXISTI NG FURNITURE & FIXTURES OF THE BUILDING PREMISES SUITABLE TO THE C LIENTS BUSINESS. IT 3 ITA NO.6060/M/2010 IS IN THE NATURE OF THE REVENUE EXPENDITURE SINCE I T DOES NOT MAKE ANY ADDITION TO THE FURNITURE & FIXTURES OF THE BUI LDINGS. IF YOUR ASSESSEE DOES NOT INCUR THESE EXPENSES THEN IT WOUL D BE DIFFICULT FOR IT TO GET THE CLIENT OR RUN THE BUSINESS CENTRE. T HIS EXPENSE WAS INCURRED ONLY TO RUN THE BUSINESS OF THE APPELLANT, HENCE IT IS THE REVENUE EXPENDITURE. FURTHER THESE EXPENSES WAS INCURRED NOT ON ACCOUNT OF CONSTRUCTING THE NEW FURNITURE BUT FOR REPAIRING OR RENEWING THE EXISTING FURNITURE & FIXTURES AS PER THE REQUIREMENT OF THE CLIENT. T HESE EXPENSES INCLUDES THE EXPENSES OF PURCHASE OF ALUMINIUM / SE CTIONAL WINDOW / PAINTERS / FLOORING / ROOFING / HARDWARE GLASS / WOOD / LABOUR CHARGES ETC. WHICH WAS USED IN REPAIRING OR RENEWIN G THE EXISTING FURNITURE & FIXTURES. IF SUCH EXPENSES ARE NOT INCU RRED BY THE ASSESSEE THEN IT WOULD BE DIFFICULT FOR IT TO RUN T HE BUSINESS CENTRE. EVERY YEAR THE APPELLANT SPENT SUCH LARGE AMOUNT OF EXPENDITURE ON REPAIRS & MAINTENANCE. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE C ONTENTION OF THE ASSESSEE AND STATED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD REPAIRS AND MAINTENANCE BUILDINGS, FURNI TURE AND FIXTURES AND OTHERS AGGREGATING TO RS. 73,23,340/- IS CAPITAL EX PENDITURE. THUS, ASSESSING OFFICER ALLOWED DEPRECIATION @ 5% OF IT A ND WORKED OUT DISALLOWANCE OF RS. 69,57,173/-. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRST APPELLATE AUTHORITY. 5. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, VIDE PARA 4.3, DELETED THE AFORESAID ADDITION MADE BY ASSESSING OFFICER. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE APPEAL WAS FIXED FOR HEARING TODAY I.E., 22. 12.2011 AND NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE DECIDE D TO DISPOSE OF THE 4 ITA NO.6060/M/2010 APPEAL AFTER CONSIDERING THE MATERIAL ON RECORD AND THE SUBMISSIONS OF LEARNED DEPARTMENTAL REPRESENTATIVE. 7. DURING THE COURSE OF HEARING LEARNED DEPARTMENTA L REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER THAT THE E XPENDITURE INCURRED BY ASSESSEE UNDER THE HEAD REPAIRS IS CAPITAL IN NATUR E AS IT IS GIVING ENDURING BENEFIT TO THE ASSESSEE. 8. WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A ) HAS RIGHTLY STATED THAT CONSIDERING THE TOTAL BLOCK OF FURNITURE AND F IXTURES AMOUNTING TO RS. 5.25 CRORES, THE REPAIRS AND MAINTENANCE EXPENDITUR E OF RS. 60 LAKHS COULD NOT BE STATED TO BE UNREASONABLE, PARTICULARL Y WHEN THE FURNITURE AND FIXTURES WERE BEING USED FOR BUSINESS CENTRE. THE LD. CIT (A) HAS STATED THAT FURNITURE AND FIXTURES AT BUSINESS CENT RE REQUIRE INHERENTLY HIGHER MAINTENANCE EXPENDITURE AS BUSINESS CENTRES ARE USED BY A LARGE NUMBER OF PEOPLE FOR COMMERCIAL PURPOSES RESULTING IN HIGHER WEAR-AND- TEAR OF THE FURNITURE ETC. THE LD. CIT (A) HAS FUR THER STATED THAT THE ASSESSEE ITSELF HAD CAPITALIZED A SUM OF RS. 28 LAK HS APPROXIMATELY ON ACCOUNT OF NEW FURNITURE AND FIXTURE. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO NOT DISPUTED THE OBSERVATIO N OF LD. CIT (A) THAT IN PRECEDING YEARS I.E., ASSESSMENT YEARS 2005-06 AND 2006-07, SIMILAR DISALLOWANCES WERE MADE BY ASSESSING OFFICER AND WE RE DELETED BY THE FIRST APPELLATE AUTHORITY. AT THE TIME OF HEARING, LEARN ED DEPARTMENTAL 5 ITA NO.6060/M/2010 REPRESENTATIVE COULD NOT STATE AS TO WHETHER THE DE PARTMENT HAD ACCEPTED THE SAID ORDERS OF LD. CIT (A) OR NOT. 9. CONSIDERING THE ABOVE FACTS AND ALSO CONSIDERING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. A.M. SINGHVI, 302 ITR 26 WHEREIN IT WAS HELD THAT EVEN IF THE SUBSTANTIAL AMOUNT IS SPENT ON REPAIRS AND RENOVATION OF OFFICE PREMISES TAKEN ON RENT, IT IS TO BE ALLOWED AS REVENUE EXPENDITURE BECAUSE NO CAPITAL ASSET IS ACQUIRED BY THE ASSESSEE. HENCE, WE HOLD THAT THERE IS NO INFIRMIT Y IN THE ORDER OF LD. CIT (A). THEREFORE, WE UPHOLD HIS ORDER BY REJECTING T HE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT. 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2011 SD/- SD/- J. SUDHAKAR REDDY) (B.R. MITT AL) (ACCOUNTANT MEMBER) JUDICIAL MEMBER MUMBAI, DATED 29 TH DECEMBER, 2011 OKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- CONCERNED 4. COMMISSIONER OF INCOME TAX, CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 6 ITA NO.6060/M/2010 DATE INITIALS 1. DRAFT DICTATED ON 23.12.2011 PS 2. DRAFT PLACED BEFORE AUTHOR 26.12.2011 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER