M/S. ATMARAM HARCHANDRAI BUSINESS SEERVICE CENTRE, MUMBAI V. ASST.C.I.T.,RANGE14(1), MUMBAI

ITA 6185/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6388 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-01-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 16-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAUR
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 6185/MUM/2008 (ASSESSMENT YEAR: 2004-05) M/S. ATMARAM HARCHANDRAI ACIT, RANGE 14(1) BUSINESS SERVICE CENTRE EARNEST HOUSE, 2ND FLOOR HARCHANDRAI HOUSE, 81 QUEENS RD. VS. NARIMAN POINT, MUMBAI 400021 MUMBAI 400002 PAN - AAAAO 0118 L APPELLANT RESPONDENT APPELLANT BY: SHRI P.J. PARDIWALLA RESPONDENT BY: SMT. PARMINDER KAUR O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)- XIV, MUMBAI DATED 08.08.2008. 2. THE BRIEF FACTS ARE THAT THE ASSESSEE, AN AOP AND D OING BUSINESS OF RUNNING A BUSINESS SERVICE CENTRE, FILED RETURN OF INCOME ON 25.09.2004 DECLARING TOTAL INCOME OF ` 50,15,453/-. THE A.O. PASSED ORDER UNDER SECTION 143(3) ON 26.12.2006 ASSESSING THE INCOME AT ` 71,17,910/-. WHILE DOING SO THE A.O. DISALLOWED THE CLAIM OF EXPENDITURE OF ` 12,43,186/- ON THE GROUND THAT THE EXPENDITURE DOES NOT PERTAIN TO THE YEAR O F ACCOUNT AND FURTHER DISALLOWED AN AMOUNT OF ` 8,59,269/- ON THE GROUND THAT THIS HAS BEEN INCURRED IN THE CAPITAL FIELD. AGGRIEVED ASSESSEE C ARRIED THE MATTER IN APPEAL WITHOUT SUCCESS. 3. NOW THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROU NDS: - 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN UPHOLDING THE ORDER OF THE LEARNED ASSESSING OFFICE R DISALLOWING A SUM OF RS.12,43,186/- OUT OF REPAIR EXPENSES ON THE GROUND THAT THE BILLS FOR THE EXPENSES ARE DATED PRIOR TO THE Y EAR UNDER CONSIDERATION. ITA NO. 6185/MUM/2008 ATMARAM HARCHANDRAI BUSINESS SERVICE CENTRE 2 IT IS SUBMITTED THAT THE LIABILITY TO PAY THE EXPE NSES WAS CRYSTALLISED DURING THE PREVIOUS YEAR RELEVANT TO A BOVE ASSESSMENT YEAR ON COMPLETION OF THE JOB. THE CONCLUSION ARRIVED AT BY THE LEARNED ASSESSING OFFICER AND THE APPELLATE AUTHORITY IS ERRONEOUS AND CONTRARY TO TH E FACTS. IN AN ALTERNATE AND WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER BE DIRECTED TO ALLOW THE EXPENSES IN EARLIER YEAR. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF THE LEARNED ASSESSING OFFICE R DISALLOWING A SUM OF RS.8,59,269/- OUT OF REPAIRS ON THE GROUND T HAT THE EXPENDITURE INCURRED IS CAPITAL IN NATURE. IT IS SUBMITTED THAT THE APPELLANT INCURRED THE EX PENDITURE ON CURRENT REPAIRS IN A RENTED PREMISES. THE EXPENDITU RE HAS NOT RESULTED IN CREATION OF ANY ASSET OR BENEFIT OF END URING IN NATURE AND THEREFORE THE SAME IS OUGHT TO BE ALLOWED AS DE DUCTION. THE CONCLUSION ARRIVED AT BY THE LEARNED ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS) IS ERRONEOUS A ND CONTRARY TO THE FACTS AND THE LAW. 4. WE HAVE HEARD SHRI P.J. PARDIWALLA, THE LEARNED COU NSEL FOR THE ASSESSEE AND SMT. PARMINDER KAUR, THE LEARNED D.R. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND PERUSAL OF THE PAPERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 6. THE FIRST ISSUE IS WHETHER THE AMOUNT OF ` 12,43,186/- OUT OF REPAIR EXPENDITURE ARE RIGHTLY DISALLOWED, FOR THE REASONS THAT THEY DO NOT PERTAIN TO THE YEAR OF ACCOUNT. THE ASSESSEE FILED A PAPER BOOK, WHICH RUNS INTO 53 PAGES AND THE DETAILS OF THE SAID EXPENDITURE ARE O N PAGE 17 OF THE ORDER. ASSESSEE IN THIS CASE IS NOT THE OWNER OF THE PREMI SES AND IS ONLY A MONTHLY TENANT. IT INCURRED CERTAIN EXPENDITURE FOR REPAIRS AND RENOVATION AND THE BILLS ARE ENCLOSED IN THE PAPER BOOK, PAGES 19 TO 3 7. PERUSAL OF THE COPIES OF THE BILLS CLEARLY DEMONSTRATES THAT EACH OF THIS EX PENDITURE IS ROUTINE REPAIR EXPENDITURE. THE ISSUE NOW IS WHETHER IT CAN BE SAI D, THAT THIS EXPENDITURE CRYSTALLISED IN THIS YEAR OR IN THE NEXT YEAR. 7. THE LEARNED SENIOR COUNSEL POINTED OUT THAT THE CON TRACTOR WHO UNDERTOOK THE REPAIRS IS NO ENTITLED FOR CLAIMING P AYMENT OF THE BILL UNTIL THE ARCHITECT CERTIFIES THEM. HE SUBMITTED THAT THOUGH THE BILLS PERTAIN TO JANUARY 2003 AND NOVEMBER 2002, THE ARCHITECT HAS A PPROVED THESE BILLS ITA NO. 6185/MUM/2008 ATMARAM HARCHANDRAI BUSINESS SERVICE CENTRE 3 ONLY ON 4 TH OF APRIL 2003, I.E. IN THE CURRENT YEAR AND HENCE, THE LIABILITY CRYSTALLISED IN THIS YEAR. HE DREW THE ATTENTION OF THE BENCH TO THE PAPER BOOK PAGE 18 WHICH CONTAINS THE LETTER OF MR. MANEC K R. DOONGAJI, CHARTERED ARCHITECT ISSUED ON 4 TH APRIL 2003 WHEREBY HE HAD CHECKED AND CERTIFIED THE BILLS. THUS, IN OUR OPINION, THOUGH T HE WORKS WERE DONE IN THE PREVIOUS YEAR AND THE BILLS WERE RAISED AT THE END OF THE YEAR, AS THE ARCHITECT HAS CHECKED AND APPROVED THE SAME DURING THIS YEAR ONLY, THE LIABILITY TO PAY THE CONTRACTOR IS FASTENED ON THE ASSESSEE ONLY ON SUCH APPROVAL AS THE LIABILITY HAS CRYSTALLISED IN THE Y EAR ONLY. WE HAVE ALSO TO SEE THAT THE ASSESSEE IS A GOING CONCERN AND YEAR OF TA XABILITY HAS TO BE CONSIDERED IN THE CONTEXT OF CRYSTALLIZATION OF LIA BILITY, WHICH IN OUR OPINION HAS TAKEN PLACE ONLY IN APRIL 2003 AND NOT IN THE E ARLIER ASSESSMENT YEAR. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED. 8. COMING TO GROUND NO. 2, THE DETAILS OF THE EXPENDIT URE IN QUESTION ARE ON PAGES 38 TO 53 OF THE ASSESSEES PAPER BOOK. WE HAVE GONE THROUGH THESE PAPERS. THE SUMMARY IS BROUGHT OUT AT PAGE NO. 38, WHICH IS EXTRACTED AS UNDER: - DETAILS OF REPAIRS AND MAINTENANCE EXPENSES DISALLO WED AS CAPITAL IN NATURE S.NO. NAME AND ADDRESS NATURE OF WORK RS. 1 B.B. CORPORATION 446/448, KALBADEVI ROAD, BHANG WADI, 3 RD FLOOR, MUMBAI 400 002 CIVIL WORK 69,900 2 MONIKA AGENCY SALES OFFICE MISTRI BUILDING OLD HANUMAN LANE KALBADEVI ROAD, MUMBAI 400 002 CIVIL WORK 64,900 3 MONIKA AGENCY SALES OFFICE MISTRI BUILDING OLD HANUMAN LANE, KALBADEVI ROAD, MUMBAI 400 002 CIVIL WORK 58,265 4 K.P. INTERIOR NEW 52 CHAWL, SHOP NO. 18, V.T. MARG, NEAR COTTON GREEN STATION MUMBAI 400 033 NEW SOFA MAKING WOOD FRAME & FORM MATERIALS 25,300 ITA NO. 6185/MUM/2008 ATMARAM HARCHANDRAI BUSINESS SERVICE CENTRE 4 5 IMPEX SALES CORPORATION SALES OFFICE 41, S.V.P. ROAD MUMBAI 400 004 CIVIL WORK 34,715 6 IMPEX SALES CORPORATION SALES OFFICE 41, S.V.P. ROAD MUMBAI 400 004 CIVIL WORK 47,468 7 IMPEX SALES CORPORATION SALES OFFICE 41, S.V.P. ROAD MUMBAI 400 004 CIVIL WORK 49,601 8 IMPEX SALES CORPORATION SALES OFFICE 41, S.V.P. ROAD MUMBAI 400 004 CIVIL WORK 47,930 9 ELBEE INTERIORS 20 MANIBEN, SHANTIALAL COMPOUND, JAWAHAR NAGAR, KHAR (EAST), MUMBAI 400 055 PARTITION DOOR 15,800 10 SEW ELECTRICAL PVT. LTD. 206, PENINSULA CENTRE, DR. S.S. MOSE ROAD, PAREL, MUMBAI 400012 ELECTRICAL WORK 237,844 11 MANEK R. DONGAJEE SULEMAN CHAMBER, BATTERY STREET, MUMBAI 400 038 ARCHITECTS FEES 252,768 904,494 ======= 9. A PERUSAL OF EACH OF THIS ITEM CLEARLY SHOWS THAT T HE EXPENDITURE WAS IN THE REVENUE FIELD AND THE ASSESSEE HAS NOT DERIV ED ANY BENEFIT OF ENDURING NATURE, MUCH LESS, CREATED A CAPITAL ASSET FOR ITSE LF. IT HAS TO BE REMEMBERED THAT THE ASSESSEE IS ONLY TENANT AND NOT OWNER OF T HE PREMISES. HENCE, WE AGREE WITH THE ARGUMENTS OF SHRI PADRIWALLA AND ALL OW THE GROUND. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2010. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH NOVEMBER 2010 ITA NO. 6185/MUM/2008 ATMARAM HARCHANDRAI BUSINESS SERVICE CENTRE 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIV, MUMBAI 4. THE CIT XIV, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.