M/s. Unimax Laboratories, Distt. Amritsar. V. The Addl. Commissioner of Income-tax, Amritsar.

ITA 641/ASR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8806 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 142(1); 37(1); 143(1); 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 641(ASR)/2014 ASSESSMENT YEAR: 2010-11 M/S. UNIMAX LABORATORIES H.O. JANDIALA GURU, DIST. AMRITSAR. PAN:AAAFU2189C VS. ACIT, RANGE-IV, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. K.R.JAIN (ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (DR) DATE OF HEARING: 15.09.2016 DATE OF PRONO UNCEMENT:16.01.2017 ORDER PER N. K. CHOUDHRY (JM): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AMRITSAR, DATED 12.08.2014 FOR ASST. YEAR:2010 -11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LEARNED ADDL. COMMISSIONER OF INCOME TAX HAS ERRED IN LAW & ON FACTS WHILE MAKING AN ADDITION OF RS.43,21 ,700/- AND LIKEWISE LD. CIT IS NOT JUSTIFIED WHILE CONFIRMING THE SAME. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE DISALLOWAN CE OF RS.23,58,778/- CLAIMED AS REPAIR OF AIR HANDLING UNI T AND TREATING IT AS EXPENDITURE OF CAPITAL NATURE. 3. THAT THE LEARNED CIT (A) HAS FURTHER ERRED IN L AW AND ON FACTS WHILE CONFIRMING THE ORDER OF LD. ADDL. COMMISSIONE R OF INCOME TAX CAPITALIZING RS.25,74,155/- ON ACCOUNT OF BUILDING REPAIR. 4. THAT THE LEARNED CIT (A) HAS NOT APPRECIATED TH E FACTS OF THE CASE, EXPLANATION OFFERED & PROCEEDED TO CONFIRM THE ORDE R TO LD. ACIT CAPITALIZING THE REPAIR OF AIR HANDLING UNITS & BUIL DING REPAIR ARBITRARILY. ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 2 5. THAT WITHOUT PREJUDICE TO THE ABOVE CIT(A) HAS NOT PROVIDED THE DEPRECIATION WHILE TREATING THE ABOVE AMOUNT OF CAP ITAL NATURE. ACCORDINGLY IT IS PRAYED THAT ADDITION/DISALLOWANCE MADE BY THE LEARNED ADDL. COMMISSIONER OF INCOME TAX AND CONFIR MED BY THE CIT(A) BE DELETED AND ALLOWED AS REVENUE EXPENDITUR E OR SUCH OTHER RELIEF AS MAY BE PERMISSIBLE BE GRANTED. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSESSMENT ORD ER ARE THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF MANUFACTU RING OF MEDICINES AND SUBSTANTIAL QUANTITY IS EXPORTED. THE RET URN WAS FILED ON 25.09.2010 DECLARING THE INCOME OF RS.1,28,57,510/- AN D THE SAME WAS PROCESSED U/S 143(1) ON 24.05.2011. THE CASE WAS SELECTED FOR SCRUTINY AS PER CASS SOFTWARE. NOTICE U/S 142(1) AND 14 3(2) ALONG WITH DETAILED QUESTIONARE WAS ISSUED ON 16.08.2012 FIX ING THE PROCEEDINGS FOR 27.08.2012. THE ASSESSMENT PROCEEDINGS WER E ATTENDED BY THE ASSESSEES REPRESENTATIVE FROM TIME TO TIME WHO FURNISHED THE REQUIRED INFORMATION WHICH WAS EXAMINED AND PLACED ON RECORD. NOTICES U/S 133 (6) OF THE INCOME TAX ACT,1961 W ERE ISSUED FOR MAKING VERIFICATION OF VARIOUS SUNDRY CREDITORS AND VERIFEID/CROSS CHECKED WITH BOOKS OF ACCOUNTS OF THE ASSESSEE. THE NECESSARY VERIFICATION HAS ALSO BEEN PLACED ON RECORD. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER CAPITALIZED THE AIR HANDLING UNIT CHA RGES AND THE SAME IS DISALLOWED AS BEING REVENUE EXPENDITURE AND ACCOR DINGLY THE SUM OF RS.23,58,778/- IS BEING CAPITALIZED AND ADDED BA CK TO THE INCOME OF THE ASSESSEE AND DEPRECIATION @ 15% IS BEING ALL OWED ON THE ADDITION TO THE BUILDING. ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 3 3.2 SECONDLY CAPITALIZATION OF THE BUILDING REPAIR CH ARGES, THE ASSESSING OFFICER HAS ALSO HELD THAT EXPENDITURE TO THE TU NE OF RS.25,74,153/-BEING INCURRED BY THE ASSESSEE IS CAPITAL IN NATURE AS THE EXPENDITURE INCURRED HAS RESULTED IN AN ADVANTAGE OF ENDURING NATURE TO THE ASSESSEE. THEREFORE, THE LD. ASSESSING OFFICE R DISALLOWED THE SAID EXPENSES BEING CAPITAL IN NATURE AND ADDED BACK TO THE INCOME OF THE ASSESSEE WHILE GIVING BENEFIT OF DEPRECIATI ON @10% AND CAPITALIZED THE SAME. 4. BEING AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFF ICER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. C IT(A) WHO ALSO CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER BY HOLD ING AS UNDER: 6. DURING APPELLATE PROCEEDING ASSESSEE WAS ASKED TO PRODUCE DETAIL OUTLAY OF MANUFACTURING AREA BEFORE REPAIRIN G AND AFTER REPAIRING/ MODIFICATION AND SIMILARLY OF AIR HANDLI NG UNITS. THE DIAGRAMS SHOWING ABOVE CHANGES ARE ANNEXED TO THIS ORDER HAS ANNEXURE 1, 2, 3 & 4. DURING DISCUSSION IT WAS INFO RMED BY THE ASSESSEE THAT 10 NEW AIR HANDLING UNITS (AHU) WERE INSTALLED AT THE PLACES FROM AIR THE OLD AIR HANDLING UNITS (AHU ) WERE REMOVED AND - NEW AHUS WERE INSTALLED AS PER REQUIREMENT AN D RE-MODIFIED MANUFACTURING AIR LAYOUT. THUS TOTAL NO. OF AHUS WE RE INCREASED FROM 28 TO 41 TH E MODIFICATION OF ROOMS 'WERE CARRIED OUT TO PROVID E ENVIRONMENTAL CONTROL TO TEMPERATURE, HUMIDITY AND PRESSURE DIFFERENTIAL (I.E. FLOW OF AIR) AIR LOCKS WERE CREA TED BEFORE THE ENTRANCE OF THE PROCESS AIR AND THE TOTAL ACTIVITIE S CARRIED OUT AS FAR AS CIVIL WORK AND MECHANICAL WORK IN CONCERN AS UNDER AS PER THE ASSESSEE: THE TOTAL ACTIVITIES CARRIED ON DURING BOTH YEARS I .E. A.Y. 2010-11 8S 201 1-12 ORE AS UNDER: - ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 4 18. MODIFICATION OF ROOMS UNDER ENVIRONMENTAL CONTROL I E. CONTROL OF TEMPERATURE, HUMIDITY & PRESSURE DIFFERENTIAL (I E. OF AIR). THE TOTAL NO. OF AHU'S WAS INCREASED FROM 28 TO 41. FOR THIS, WE HAD TO ADD NEW AIR HANDLING UNITS (AHUS) & INSUL ATED DUCTS AS THE AHUS ARE PLACED ON THE ROOF TOP. 19. UP KEEP OF TO THE EXISTING AHUS WHICH WERE OLD 8S W ERE NOT PROVIDING SUFFICIENT AIR VOLUME. 20. REPLACEMENT OF THE DUCTS WHICH HAD CORRODED OVER T IME. 21. REPLACEMENT OF OLD GRILLS WITH NEW' GRILLS. 22. CREATION OF AIRLOCKS BEFORE THE ENTRANCE TO THE PR OCESS AREA. 23. AMENDMENT IN THE ALUMINUM DOORS TO MAKE THEM SMOOT H WITH NO DUST ACCUMULATION AREAS. 24. AMENDMENT IN THE ALUMINUM WINDOWS TO MAKE THEM SMOO TH WITH NO DUST, ACCUMULATION AREAS. 25. FABRICATION OF IRON PLATFORMS FOR PLACING THE AHUS. 26. THE EXISTING FALSE CEILING WAS DONE WITH 'GYPSUM' BOARD. IT HAD DEVELOPED CRACKS & HAD SWOLLEN AT MANY PLACES. REPLACEMENT OF FALSE, CEILING WAS DONE WITH 'HYLUX' CEMENT COMPOSITE BOARD. 27. MAKING WALL/FLOOR CORNERS ROUNDED SO THAT IT IS EA SILY CLEANABLE. 28. REPLACING KOTA FLOORING, WHEREVER DAMAGED AND ADDIN G EPOXY IN THE KOTA (FLOOR) JOINTS SO THAT THERE ARE NOT CRACKS WHERE DUST CAN ACCUMULATE. 29. COMPLETE EPOXY FLOORING IN MORE CRITICAL AREAS. 30. REPLACING IRON FURNITURE WITH SS FURNITURE. ADDITI ON OF NEW SS FURNITURE. 31. CHANGE (RESTRUCTURE) THE PROCESS AREA ROOMS WHEREVE R THE ROOM SIZE WAS NOT SUITABLE AS PER THE REQUIREMENTS. THIS INVOLVED DEMOLISHING A NUMBER OF INTERNAL WALLS & R EPLACING THEM WITH NEW ONES. 32. REPAINTING OF THE ENTIRE WALLS & ROOFS OF THE FACTO RY. 33. REPLACEMENT OF THE ENTIRE WALLS & ROOFS OF THE FACT OR. WATER STORAGE TANKS WITH SS TANKS & ATOMIZATION OF THE EN TIRE WATER SYSTEM. 34. SOME OF THE ELECTRICAL EQUIPMENT WITH LIGHTS, CABLE S, SWITCHBOARDS, MCB ETC. WERE REPLACED WITH MORE SUIT ABLE ONES AS PER THE REQUIREMENTS. DURING THE A.Y. 2010-11, FOLLOWING ACTIVITIES WERE DONE: - REPLACED 10 OLD AHUS WITH BRAND NEW ONES. SINCE THIS WAS REPLACEMENT, NO NEW DUCTING WAS DONE. THE OLD AHUS THAT WERE REMOVED & PLACED IN OTHER LOCATIONS AFTER REPA IRING THEM IN THE NEXT YEAR. THE VALUE OF THE NEW AHU'S W AS CAPITALIZED. - OTHER AHU WERE REMOVED FROM THEIR LOCATIONS & WERE REPAIRED. DAMAGED DUCTING WAS REMOVED & REPLACED. - OLD FILTERS INSTALLED IN THE AHUS, DUCTS & PROCESS AREAS WERE REPLACED WITH NEW ONES. ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 5 - INTERNAL DUCTING (DUCTING INSIDE THE BUILDING, ABOV E THE FALSE CEILING) TOO HAD TO BE REMOVED DUE TO AIR LEAKAGES & DUE TO CHANGES MADE IN THE ROOM SIZES) - A NUMBER OF INTERNAL WAILS WERE BROKEN DOWN & NEW O NES ERECTED FOR REORIENTATION OF THE ROOMS. - EXISTING ALUMINIUM DOORS & WINDOWS WERE AMENDED. - DAMAGED KOTA FLOORING REPLACED. ADDING EPOXY IN THE KOTA FLOOR JOINTS. - FALSE CEILING PULLED DOWN. DURING THE A.Y. 2011-12, FOLLOWING ACTIVITIES WERE DONE: - 3 NEW AHUS PURCHASED & INSTALLED (CAPITALIZED) - MODIFICATION OF THE OLD AHUS & THEIR INSTALLATION C OMPLETE WITH DUCTING, INSULATION, CHILLED WATER PIPELINE, F ILTERS & GRILLS WHEREVER REQUIRED. - NEW DUCTING, INSULATION, CHILLED WATER PIPELINE, FI LTERS & WHEREVER REQUIRED (CAPITALIZED) - A NUMBER OF INTERNAL WALLS WERE BROKEN DOWN & NEW O NE ERECTED FOR REORIENTATION OF THE ROOMS. - REINFORCEMENT OF THE ROOFS, WHEREVER REQUIRED. - EXISTING ALUMINUM DOORS & WINDOWS WERE AMENDED. - NEW ALUMINUM DOORS & WINDOWS (CAPITALIZED) - DAMAGED KOTA FLOORING REPLACED. ADDING EPOXY IN TH E KOTA FLOOR JOINTS. - OLD FALSE CEILING WAS PULLED DOWN & NEW FALSE CEILI NG DONE IN THE ENTIRE FACTORY. - MAKING WALL/ FLOOR CORNERS ROUNDED SO THAT IT IS EA SILY CLEANABLE. - EPOXY PAINT ON FLOORS OF MORE SENSITIVE AREAS. - REPLACING IRON FURNITURE WITH SS FURNITURE. - ADDITION OF NEW SS FURNITURE (CAPITALIZED) - REPAINTING OF THE ENTIRE WALLS & ROOFS OF THE FACTO RY, - REPLACEMENT OF THE OLD RUSTED WATER PIPELINE WITH N EW PIPES. - NEW SS WATER STORAGE TANKS WITH AULOMIZATION OF T HE ENTIRE WATER SYSTEM (CAPITALIZED). - REPLACEMENT OF THE OLD ELECTRICAL EQUIPMENT LIKE, SWITCHBOARDS, CABLES, MCB ETC. - INSTALLATION OF NEW LIGHTS IN THE FALSE CEILING (CAPITALIZED). THE ASSESSEE HAS RAISED 5 GROUNDS OF APPEAL INTER-A LIA CHALLENGING DISALLOWANCE OF RS.23,58,778/- CLAIMED AS REPAIR OF AIR HANDLING UNIT AND DISALLOWANCE OF RS.25,74,115/- CL AIMED AS BUILDING REPAIR, TREATING BOTH OF ABOVE AS CAPITAL IN NATURE. I HAVE GONE THROUGH ASSESSEE S SUBMISSIONS, ASSESSMENT ORD ER AND DIAGRAMS SHOWING CHANGES IN POSITION OI AIR HANDLIN G UNITS INCLUDING INSTALLATION OF NEW AIR HANDLING UNITS AN D RE-MODIFIED MANUFACTURING AREA LAY-OUT. I CAN BE SEEN FROM ANNE XURES 1, 2, 3 & 4 THAT THE COMPLETE NEW LAY-OUT OF AND MANUFACTURIN G AREA HAS ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 6 BEEN CREATED, ALONGWITH COMPLETE MODIFICATION OF WI NDOWS, DOORS AND ENVIRONMENTAL CONTROL INCLUDING AIR LOCKS. THES E MODIFICATIONS CAN NOT BE CO CURRENT REPAIRS AS PROVIDED IN SECTIO N-31 OF THE INCOME TAX ACT THEY HAVE. NOT BEEN INCURRED TO PRESERVE AND; MAINT AIN AND ALREADY EXISTING ASSET BUT HAVE BEEN CARRIED OUT TO GET NEW ADVANTAGE OF ENDURABLE NATURE BY MAKING ITS FACTORY WHO-GMP COMPLIANT RESULTING INTO SUBSTANTIAL GAIN IN TANGIB LE AS WELL AS INTANGIBLE ASSETS OF FIRM. THE SUPREME COURT HAS AL SO DISCUSSED SIMILAR ISSUE IN THE CASE OF M/S. SARAVANA SPINNING MILLS AND OBSERVED THAT: AN ALLOWANCE IS GRANTED BY CL. (I) OF S. 31 IN RE SPECT OF AMOUNT EXPENDED ON CURRENT REPAIRS TO MACHINERY, PL ANT OR FURNITURE USED FOR THE PURPOSES OF BUSINESS, IRRESPECTIVE OF WHETHER THE ASSESSEE IS THE OWNER OF THE ASSETS OR HAS ONLY USE D THEM. THE EXPRESSION CURRENT REPAIRS DENOTES REPAIRS WHICH ARE ATTENDED TO WHEN THE NEED FOR THEM ARISES FOR THE VIEWPOINT OF A BUSINESSMAN. THE WORD REPAIR INVOLVES RENEWAL. HOWEVER, THE WO RDS USED IN S. 31 (I) ARE CURRENT REPAIRS. THE OBJECT BEHIND S. 3.1 (I) IS TO PRESERVE AND MAINTAIN THE ASSET AND NOT TO BRING IN A NEW AS SET. IN OUR VIEW, S. 31(1) LIMITS THE SCOPE OF ALLOWABILITY OF EXPEND ITURE AS DEDUCTION IN RESPECT OF REPAIRS MADE TO MACHINERY, PLANT OR F URNITURE BY RESTRICTING IT TO THE CONCEPT OF CURRENT REPAIRS. ALL REPAIRS ARE NOT CURRENT REPAIRS. SEC. 37(1) ALLOWS CLAIMS FOR EXPEN DITURE WHICH ARE NOT OF CAPITAL NATURE. HOWEVER, EVEN S. 37(1) EXCLU DES THOSE ITEMS OF EXPENDITURE WHICH EXPRESSLY FALLS IN SECTION. 30 TO 36. THE EFFECT IS TO DELIMIT THE SCOPE OF ALLOWABILITY OF DEDUCTIONS FOR REPAIRS TO THE EXTENT PROVIDED FOR IN SS. 30 TO 36. TO DECIDE THE APPLICABILITY OF S. 31 (I) THE TEST IS NOT WHETHER THE EXPENDITURE IS R EVENUE OR CAPITAL IN NATURE, WHICH TEST HAS BEEN WRONGLY APPLIED BY THE HIGH COURT, BUT WHETHER THE EXPENDITURE IS CURRENT REPAIRS. THE B ASIC TEST TO FIND OUT. AS TO WHAT WOULD CONSTITUTE CURRENT REPAIRS IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO PRESERVE AN D MAINTAIN AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EXPEN DITURE MUST NOT TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE, IN FACT, IN THE PRESENT CASE, IN THE IN THE BALANCE SH EET THE ASSESSEE, VIS, M/S SARAVANA SPINNING MILLS HAS INDICATED THE ABOVE EXPENSE AS AN ITEM INCURRED FOR PURCHASE OF A NEW ASSET. IN OUR VIEW, THE HIGH COURT HAD ERRED IN PLACING RELIANCE ON THE REP ORT OF SITRA IN COMING TO THE CONCLUSION THAT: THE TEXTILE MILL IS A PLANT UNDER S. 31 (I). AS STATED ABOVE, EACH MACHINE IN A SEGMENT HAS AN INDEPENDENT ROLE TO PLAY IN THE MILL AND THE OUTPUT OF EACH DIV ISION IS DIFFERENT FROM THE OTHER. REPAIR IMPLIES THE EXISTENCE OF A PART OL THE MACHINE WHICH HAS MALFUNCTION. IF THE ARGUMENT OF T HE ASSESSEE HEREIN BEFORE US IS TO BE ACCEPTED IT WOULD RESULT IN ABSURDITY AND IT WOULD MAKE THE PROVISIONS OF S. 31 (I) COMPLETELY R EDUNDANT. ACCORDING TO SHRI R; VENKATARAMAN, LEARNED SENIOR C OUNSEL FOR THE ASSESSEE, THE TEXTILE PLANT CONSISTS OF ABOUT 25 MA CHINES. ONE OF SUCH MACHINES IS THE RING FRAME. IF THE ARGUMENT OF . THE ASSESSEE IS TO BE ACCEPTED, IT WOULD MEAN THAT PERIODICALLY ONE MACHINE OUT OF 25 WOULD BE REPLACED, AND ON THAT BASIS, FROM TIME TO TIME, EACH OF THESE 25 MACHINE IN THE TEXTILE PLANT WOULD BE ENTI TLED TO CLAIM ALLOWANCE UNDER S. 31 (I). IN OUR VIEW, THE AO WAS RIGHT IN HOLDING ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 7 THAT EACH MACHINE INCLUDING THE RING FRAME WAS AN I NDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPENDENT AND SPE CIFIC FUNCTION AND. THEREFORE, THE EXPENDITURE INCURRED FOR REPLAC EMENT OF THE NEW MACHINE WOULD NOT COME WITHIN THE MEANING OF THE WO RDS CURRENT REPAIRS. IN THE PRESENT CASE, IT IS NOT THE CASE O F THE ASSESSEE THAT A PART OF THE MACHINE (OUT OF 25 MACHINES) NEEDED R EPAIRS. THE ENTIRE MACHINE HAD BEEN REPLACED. THEREFORE, THE EX PENDITURE INCURRED BY THE ASSESSEE DID NOT FALL WITHIN THE ME ANING OF CURRENT REPAIRS IN S. 31 (I). HONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT (1097) 138 CTR (SC) 284: (1997) 2 SCC 449 A PPROVED THE TEST FORMULATED BY CHAGLA C.J. IN THE CASE OF NEW S HORROCK SPINNING & MANUFACTURING CO. LTD. VS. CIT (1956) 30 ITR 338 (BOM) AS TO WHEN THE EXPENDITURE CAN BE SAID TO HAVE BEEN INCURRED ON CURRENT REPAIRS IN THAT CASE IT WAS OBSERVED AS FOL LOWS: THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN M IND IS THAT AS RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EXPENDITURE FOR REP WHAT IS REALLY BEING DONE IS TO PRESERVE AN D MAINTAIN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITU RE IS NOT TO BRING A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJECT THE O BTAINING OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION OF REPAIRS BECAUSE IT IS ONLY BY REASON OF THIS DEFINITION OF REPAIRS THAT THE EXPENDITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, THEN OBVIOUSLY SUCH AN EXPENDITURE WOULD NOT BE AN EXPEN DITURE OF A REVENUE NATURE BUT IT WOULD BE A CAPITAL EXPENDITUR E, AND IT IS CLEAR THAT THE DEDUCTION WHICH THE LEGISLATURE HAS PERMIT TED UNDER S. 10(2){V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE. IN THE SAID JUDGMENT, IT HAS BEEN FURTHER OBSERVED BY CHAGLA C.J. THAT THE DEFINITION OF THE OWRD REPAIR' DOES NOT C REATE MUCH DIFFICULTY, BUT THE DIFFICULTY IS CREATED BY THE WO RD CURRENT WHICH QUALIFIES THE EXPRESSION REPAIR. THIS ADJECTIVE, NAMELY, CURRENT IS PUT IN BY THE LEGISLATURE. IT INDICATES THAT THE LE GISLATURE DID NOT INTEND THAT THE ASSESSEE SHOULD BE PERMITTED TO CLA IM ALLOWANCE FOR ALL KINDS OF REPAIRS, EVEN THOUGH CONCEPTUALLY THE EXPENDITURE MAY BE REVENUE EXPENDITURE. THE LEGISLATURE INTENDED TO STRESS THAT UNDER S. 31(1) THE PERMISSIBLE DEDUCTION EXPENDITUR E. THE LEGISLATURE INTENDED TO STRESS THAT UNDER S. 31 (I) THE PERMISSIBLE DEDUCTION ADMISSIBLE IS ONLY FOR CURRENT REPAIRS, T HEREFORE, THE QUESTION AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUALLY IS REVENUE OR CAPITAL IN NATURE IS NOT RELEVANT FOR DECIDING THE QUESTION AS TO WHETHER SUCH AN EXPENDI TURE COMES WITHIN THE ETYMOLOGICAL MEANING OF THE EXPRESSION CURRENT REPAIRS. IN OTHER WORDS, EVEN IF THE EXPENDITURE IS REVENUE, IT. MAY NOT FALL IN THE CONNOTATION OF CURRENT REPAIRS IN S. 31 (I). THE TEST FORMULATED ABOVE APPLIES TO CASES WHERE THE ASSESSEE CLAIMS AL LOWANCE UNDER S. 31 (I). IN THE PRESENT CASE, THE HIGH COURT HAS LOST SIGHT OF THE TEST TO BE APPLIED FOR AN EXPENDITURE TO FALL UNDER S. 3 1 (I) AS CURRENT ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 8 REPAIRS. IT H EMBARKED ON THE TEST WHICH WAS NOT A PPLICABLE, VIZ., WHETHER EXPENDITURE IS REVENUE OR CAPITAL IN THE AB OVE TEST WAS NOT R ELEVANT DURING THE ASSESSMENT YEARS IN QUESTION AS THE EXPLANATION TO S. 31 (I) WAS INSERTED LATER ON. IN OUR VIEW, APPLYING THE TEST LAID DOWN BY CHAGLA C.J. IN CASE OF NEW SH ORROCK SPINNING & MANUFACTURING CO. LTD. (SUPRA) THE ASSESSEE WERE NOT ENTITLED TO CLAIM ALLOWANCE UNDER S. 31(I) FOR CURRENT REPAIRS. IN OUR VIEW, THE RING FRAME BY ITSELF CONSTITUTED AN INDEPENDENT MAC HINE WITH AN INDEPENDENT FUNCTION, WHICH WAS REPLACED BY A NEW R ING FRAME GIVING ENDURING ADVANTAGE TO THE ASSESSEE AND, THER EFORE, THE EXPENDITURE INCURRED IN THAT REGARD CANNOT COME WIT HIN THE EXPRESSION CURRENT REPAIRS. 2. THE PROPOSITIONS THAT EMERGE FROM THE DECIDED CA SES ARE: (I) THE AMOUNT SHOULD BE PAID ON ACCOUNT OF CURRENT REPAIRS. (II) CURRENT REPAIRS MEANS REPAIRS UNDERTAKEN IN THE NORMAL COURSE OF USER FOR, THE PURPOSE OF PRESERVAT ION, MAINTENANCE OR PROPER UTILIZATION OR FOR RESTORING IT TO ITS ORIGINAL CONDITION. (III) CURRENT REPAIRS DO NOT MEAN ONLY PETTY REPAIRS OR REPAIRS NECESSITATED BY WEAR AND TEAR PARTICULAR YE AR (IV) SUCH REPAIRS SHOULD NOL BRING INTO EXISTENCE NOR OB TAIN A NEW OR DIFFERENT ADVANTAGE. (V) NEITHER THE QUANTUM OF EXPENDITURE NOR THE FACT TH AT IN THE PROCESS OF REPAIRS THERE WAS SUBSTANTIAL REP LACEMENT OF THE PARTS OF THE MACHINE OR SHIP, IS DECISIVE OF THE TRUE NATURE OF THE EXPENDITURE. (VI) THE ORIGINAL COST OF THE ASSET IS NOT AT ALL RELEVA NT FOR ASCERTAINMENT OF THE TRUE NATURE OF THE EXPENDITURE ON REPAIRS. (VII) THE REPLACEMENT COST OF THE ASSET MAY, HOWEVER, AT TIMES BE USED AS AN INDICATOR OF THE TRUE CHARACTER OF THE EXPENDITURE. IF TL EXPENDITURE ON REPAIRS ADDED TO THE WRITTEN DOWN VALUE OR DISPOSAL VALUE EXCEEDS THE REPLACEMEN T COST OF THE ASSET, A PRESUMPTION POSSIBLE THAT IT IS NOT A REVENUE EXPENDITURE BUT EXPENDITURE OF CAPITAL NATURE. SUCH A PRESUMPTION, OF COURSE, WOULD BE REBUTTABLE. IN VARIOUS OTHER DECISIONS BY MADRAS HIGH COURT, MU MBAI HIGH COURT & KERALA HIGH COURT HAS ALSO HELD THAT A NY EXPENDITURE INCURRED FOR IMPROVEMENT OR AN ADDITION TO THE ASSE T WILL NOT FALL IN CURRENT REPAIRS AND HAS TO BE TREATED AS CAPITAL EX PENDITURE:- (A) THE EXPRESSION CURRENT' PRECEDING REPAIRS APPEAR S TO HAVE BEEN USED BY THE LEGISLATURE WITH A VIEW TO RESTRICTING THE ALLOWANCE TO EXPENDITURE INCURRED F OR PRESERVATION AND MAINTENANCE THEREOF IN ITS CURRENT STATE IN CONTRADISTINCTION TO THAT INCURRED ON ANY IMPROVEMENT OR AN ADDITION THERETO - CIT V. CHOWGULE & CO. (P) LTD. [1995J 214 ITR 523/81 TAXMAN 384 (BOM.) ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 9 (B) REPAIR IMPLIES THE EXISTENCE OF A TILING WHICH H AS MALFUNCTIONED AND CAN BE GET RIGHT BY EFFECTING REPAIRS WHICH MAY INVOLVE REPLACEMENT OF SOME PARTS, THEREBY MAKING THE THING AS EFFICIENT AS IT WAS BEFORE OR AS CLOSE TO IT AS POSSIBLE. AFTER REP AIR THE THING TO WHICH REPAIR WAS CARRIED OUT CONTINUES TO BE AVAILABLE FOR USE. REPLACEMENT IS DIFFERENT FROM REPAIR. REPLACEMENT IMPLIES THE REMOVAL OR DISCARDING OF THE THING THAT WAS IN USE, BY A DIFFERENT OR NEW' THING CAPABLE OF PERFORMING THE SAME FUNCTION WITH THE SAME, LESSER OR GREATER EFFICIENCY. THE REPLACEMENT OF A SECTION IN A SERIE S OF MACHINES WHICH ARE INTERCONNECTED IN A SEGMENT OF THE PRODUCTION PROCESS WHICH TOGETHER FORM AN INTEGRATED WHOLE MAY, IN SOME CIRCUMSTANCES, BE REGARDED AS AMOUNTING TO REPAIR WHEN WITHOUT SUCH REPLACEMENT THAT UNIT, IN THAT SEGMENT WDLL NOT FUNCTION. THE IOGIC CANNOT BE EXTENDED TO THE ENTIRE MANUFACTURING FACILITY IROM THE STAGE OF RAW ' MATERIAL TO THE DELIVERY OF THE FINAL FINISHED PROD UCT - CIT V. MADRAS CEMENTS LTD. [2002) 255 ITR 243/ 123 TAXMAN 412 (MAD.)., (C) WHERE THE ASSESSEE REPLACED THE ELECTRIC CONTROL PANEL WHICH DAMAGED AND WAS BEYOND REPAIR, BY A NEW CONTROL PANEL, THE EXPENDITURE ON SUCH REPLACEMENT CANNOT BE TREATED AS REPAIR UNDER SECTION 31. IT. WOULD BE A CASE OF CAPITAL INVESTME NT AND WOULD NOT BE A CASE OF REPAIR - DEPUTY CIT V. S.T.N. TEXTILES LTD. (2002) 257 ITR 161 (KER.). THUS IT IS CLEAR THAT ASSESSEE HAS CARRIED OUT IMP ROVEMENT INTO THE EXISTING ASSETS BY INCURRING EXPENDITURE W HICH HAS RESULTED INTO NEW/DIFFERENT ADVANTAGE TO THE ASSESSEE AND CA N NOT BE CONSIDERED AS CURRENT REPAIRS. IN VIEW OF ABOVE, AC TION OF THE AO IS UPHELD AND APPEAL OF THE ASSESSEE IS DISMISSED. 5. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE PREFERRED THE INSTANT APPEAL WHICH IS UNDER CONSIDE RATION ON THE GROUNDS MENTIONED IN PARA NO.2. 6. AT THE OUTSET, IT WAS ARGUED BY THE LD. COUNSEL FO R THE ASSESSEE THAT A.O HAS MISCONSTRUED BY HOLDING THAT THE EXPENDITU RE ON REPAIR OF THE AIR HANDLING UNIT WAS CAPITAL IN NATURE. THE LD. AR ARGUED THAT AIR ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 10 HANDLING UNITS CHARGES ARE OF REVENUE NATURE I.E. BECAU SE REPAIR, REPLACEMENT OF MOTORS, FILTERS, FANS, DUCTING, CHILLED W ATER PIPELINE SYSTEMS ETC., BECAUSE ALL THE AIR HANDLING UNITS ARE INSTA LLED ON THE ROOF OF THE BUILDING AND ARE OPEN TO ATMOSPHERIC CONDI TIONS WHICH IS IN INDUSTRIAL AREA EXTREMELY POLLUTED AND ACIDIC IN NATU RE, RESULTING CORROSION/DAMAGE OF THE AIR HANDLING UNITS AND MACHINER Y/EQUIPMENT, IT OFTEN REQUIRES REPAIR & REPLACEMENT OF PARTS. THIS I S ALSO REQUIRED TO KEEP THE AHU SYSTEMS IN ORDER FOR EXPORTS. FURTHER AIR HANDLING UNITS RUNS ALL THE TIME TO ENSURE DESIRED SPECIFICATIONS OF HUM IDITY, DUST FREE AIR ETC. IN THE PRODUCTION AREA AS PER THE WHO. THIS RESU LTS IN CONTINUOUS WEAR & TEAR. FURTHER IT WAS SUBMITTED THAT ON BEING ASKED BY THE AO, THE ASSESSEE AGAIN CLARIFIED TO THE ASSESSING OF FICER QUA AIR HANDLING UNITS THAT IN ADDITION TO THE SUBMISSION ALREA DY MADE IT IS SUBMITTED THAT THIS IS AN EXISTING UNIT AND NO MAJOR REPAIR HAS BEEN DONE IN THE PAST 8 YEARS. THE OBJECTIVE OF THE REPAIR IS TO MAINTAIN THE EXISTING ASSET & ENSURE PROPER PERFORMANCE. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF MEDICINES AND SUBSTANTIAL QUANT ITY IS EXPORTED. ACCORDINGLY, THE PARAMETERS OF WHO-GMP NEEDS T O BE COMPLIED WITH. NO NEW ASSET HAS BEEN CREATED BY THESE REP AIRS. THE LIST OF PARTS USED ALONG WITH PHOTOSTAT COPY OF PURCHASE INVOICES IS ENCLOSED HEREWITH. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT ALL THE A IR HANDLING UNITS ARE INSTALLED ON THE ROOF & REPAIR & REPLACEME NT OF PARTS AND ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 11 REQUIRED TO KEEP THE AHU SYSTEMS IN ORDER, INSTALLED IN 2005 TO TILL 2009-10, NO MAJOR REPAIR HAS BEEN DONE. THE COMPLETE DETAILS REGARDING REPAIR EXPENSES SUPPORTED BY VOUCHERS WERE PRO DUCED BEFORE THE AO. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , A COPY OF VOUCHERS OF REPAIR CHARGES AND SALE WERE ALSO FILED BEFOR E HIM AND THE LD. AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT TH AT NEW HANDLING UNITS AND OTHER MATERIALS AMOUNTING TO RS.8,30,710/- H AVE BEEN CAPITALIZED, WHILE REPAIR EXPENSES HAVE BEEN CLAIMED IN P&L ACCOUNT. FURTHER, IT WAS ARGUED THAT IN VIEW OF THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RANJ IT SINGH (SB) (1955) REPORTED AT 28 ITR 14 (PUN) THAT A SUM CAN BE ALLOWED AS THE COST OF REPAIRS AND CA N BE HELD NOT BE A CAPITAL EXPENDITURE, IF IN A PARTICULAR YE AR IS HEAVY ON ACCOUNT OF THE FACT THAT IT IS UNDERTAKEN TO REM EDY THE EFFECT OF SEVERAL YEARS OF WEAR AND TEAR OR NEGLECT OR ALSO IN SPITE OF THE FACT THAT SUCH EXPENDITURE MAY NOT BE NECESSARY FOR SEVERAL YEARS TO COME, AFTER THE REPAIRS HAVE B EEN CARRIED OUT. THE LD. AR FURTHER RELIED UPON THE JUDGMENTS PASSED BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS. SHRI RAM LAKSHMI GINNING SPINNING & WEAVING MILLS LTD.(2002) REPORTED AT 256 ITR 592 (MAD) THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN REPLAC ING THE OLD WORN OUT PARTS, IS OF THE NATURE OF EXPENDITURE AN D THE FACT THAT THE VALUE OF PARTS REPLACED IS HIGH DOES NOT C ONVERT IT INTO CAPITAL EXPENDITURE. THE LD. AR FURTHER ARGUED THAT ON THE BASIS OF THE AF ORESAID JUDGMENTS, IT IS CLEAR THAT EXPENDITURE IN A PARTICULA R MAY BE HEAVY ON ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 12 ACCOUNT OF THE FACT THAT IT IS UNDERTAKEN TO REMEDY THE EFFECT OF SEVERAL YEARS OF WEAR AND TEAR AS IN THE INSTANT CASE, THE DISALL OWANCE BY THE AO AND UPHELD BY THE LD. CIT(A) IS NOT CORRECT. THE LD . AR ALSO RELIED UPON THE MANY OTHER JUDGMENTS WHICH ARE PART OF THE SUBMISSION , HOWEVER, FOR THE SAKE OF CONVENIENCE AND BREVITY THE S AME ARE NOT REPEATED HEREIN BELOW. 7. ON THE OTHER HAND, LD. DR HEAVILY PLACED HIS RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITTED THAT BOTH THE AUTHORITIES BELOW HAVE TAKEN UNDER CONSIDERATION, THE FACTS AND CIR CUMSTANCES OF THE CASE AND THE EXPENDITURE AS CLAIMED BY THE ASSESSEE HAV E CULMINATED INTO NEW ESTABLISHMENT AS WELL AS NEW UNIT, THEREFORE, THE SAME CANNOT BE ALLOWED TO BE AS REVENUE EXPENDITURE. 8. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS INCURRED THE FOLLOWING EXPENSES/ADDIT IONS TO BUILDING ACCOUNT SINCE 1999-2010 WHICH ARE AS UNDER: FINANCIAL YEAR BUILDING REPAIR (RS. LAKH) BUILDING A/C (CAPITALIZED) RS. LAKH 1999-2000 2.08 3.68 2000-01 .74 - 2001-02 4.38 - 2002-03 3.13 - 2003-04 6.50 73.06 2004-05 9.16 87.97 2005-05 17.20 38.56 2006-07 7.14 - 2007-08 2.80 - 2008-09 3.33 - 2009-10 25.74 - FURTHER, TOTAL ACTIVITIES CARRIED OUT DURING BOTH ASST. YEARS: 2010-11 & 2011-12 ARE AS UNDER: ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 13 35. MODIFICATION OF ROOMS UNDER ENVIRONMENTAL CONTROL I E. CONTROL OF TEMPERATURE, HUMIDITY & PRESSURE DIFFERENTIAL (IE. OF AIR). THE TOTAL NO. OF AHU'S WAS INCREASED FROM 28 TO 41. FOR THIS, WE HAD TO ADD NEW AIR HANDLING UNITS (AHUS) & INSULATED DUCTS AS THE AHU S ARE PLACED ON THE ROOF TOP. 36. UP KEEP OF TO THE EXISTING AHUS WHICH WERE OLD 8S W ERE NOT PROVIDING SUFFICIENT AIR VOLUME. 37. REPLACEMENT OF THE DUCTS WHICH HAD CORRODED OVER T IME. 38. REPLACEMENT OF OLD GRILLS WITH NEW' GRILLS. 39. CREATION OF AIRLOCKS BEFORE THE ENTRANCE TO THE PR OCESS AREA. 40. AMENDMENT IN THE ALUMINUM DOORS TO MAKE THEM SMOOT H WITH NO DUST ACCUMULATION AREAS. 41. AMENDMENT IN THE ALUMINUM WINDOWS TO MAKE THEM SMOO TH WITH NO DUST, ACCUMULATION AREAS. 42. FABRICATION OF IRON PLATFORMS FOR PLACING THE AHUS. 43. THE EXISTING FALSE CEILING WAS DONE WITH 'GYPSUM' BOARD. IT HAD DEVELOPED CRACKS & HAD SWOLLEN AT MANY PLACES. REPL ACEMENT OF FALSE, CEILING WAS DONE WITH 'HYLUX' CEMENT COMPOSITE BOAR D. 44. MAKING WALL/FLOOR CORNERS ROUNDED SO THAT IT IS EA SILY CLEANABLE. 45. REPLACING KOTA FLOORING, WHEREVER DAMAGED AND ADDIN G EPOXY IN THE KOTA (FLOOR) JOINTS SO THAT THERE ARE NOT CRACKS WH ERE DUST CAN ACCUMULATE. 46. COMPLETE EPOXY FLOORING IN MORE CRITICAL AREAS. 47. REPLACING IRON FURNITURE WITH SS FURNITURE. ADDITI ON OF NEW SS FURNITURE. 48. CHANGE (RESTRUCTURE) THE PROCESS AREA ROOMS WHEREVE R THE ROOM SIZE WAS NOT SUITABLE AS PER THE REQUIREMENTS. THIS INVO LVED DEMOLISHING A NUMBER OF INTERNAL WALLS & REPLACING THEM WITH NEW ONES. 49. REPAINTING OF THE ENTIRE WALLS & ROOFS OF THE FACTO RY. 50. REPLACEMENT OF THE ENTIRE WALLS & ROOFS OF THE FACT OR. WATER STORAGE TANKS WITH SS TANKS & ATOMIZATION OF THE ENTIRE WAT ER SYSTEM. 51. SOME OF THE ELECTRICAL EQUIPMENT WITH LIGHTS, CABLE S, SWITCHBOARDS, MCB ETC. WERE REPLACED WITH MORE SUITABLE ONES AS P ER THE REQUIREMENTS. DURING THE A.Y. 2010-11, FOLLOWING ACTIVITIES WERE DONE: - REPLACED 10 OLD AHUS WITH BRAND NEW ONES. SINCE THIS WAS REPLACEMENT, NO NEW DUCTING WAS DONE. THE OLD AHUS THAT WERE REMOVED & PLACED IN OTHER LOCATIONS AFTER REPAIRING THEM IN THE NEXT YEAR. THE VALUE OF THE NEW AHU'S WAS CAPITALIZED. - OTHER AHU WERE REMOVED FROM THEIR LOCATIONS & WERE REPAIRED. DAMAGED DUCTING WAS REMOVED & REPLACED. - OLD FILTERS INSTALLED IN THE AHUS, DUCTS & PROCESS AREAS WERE REPLACED WITH NEW ONES. - INTERNAL DUCTING (DUCTING INSIDE THE BUILDING, ABOV E THE FALSE CEILING) TOO HAD TO BE REMOVED DUE TO AIR LEAKAGES & DUE TO CHAN GES MADE IN THE ROOM SIZES) - A NUMBER OF INTERNAL WAILS WERE BROKEN DOWN & NEW O NES ERECTED FOR REORIENTATION OF THE ROOMS. - EXISTING ALUMINIUM DOORS & WINDOWS WERE AMENDED. - DAMAGED KOTA FLOORING REPLACED. ADDING EPOXY IN THE KOTA FLOOR JOINTS. - FALSE CEILING PULLED DOWN. ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 14 DURING THE A.Y. 2011-12, FOLLOWING ACTIVITIES WERE DONE: - 3 NEW AHUS PURCHASED & INSTALLED ( CAPITALIZED) - MODIFICATION OF THE OLD AHUS & THEIR INSTALLATION C OMPLETE WITH DUCTING, INSULATION, CHILLED WATER PIPELINE, FILTERS & GRILL S WHEREVER REQUIRED. - NEW DUCTING, INSULATION, CHILLED WATER PIPELINE, FI LTERS & WHEREVER REQUIRED (CAPITALIZED) - A NUMBER OF INTERNAL WALLS WERE BROKEN DOWN & NEW O NE ERECTED FOR REORIENTATION OF THE ROOMS. - REINFORCEMENT OF THE ROOFS, WHEREVER REQUIRED. - EXISTING ALUMINUM DOORS & WINDOWS WERE AMENDED. - NEW ALUMINUM DOORS & WINDOWS (CAPITALIZED) - DAMAGED KOTA FLOORING REPLACED. ADDING EPOXY IN TH E KOTA FLOOR JOINTS. - OLD FALSE CEILING WAS PULLED DOWN & NEW FALSE CEILI NG DONE IN THE ENTIRE FACTORY. - MAKING WALL/ FLOOR CORNERS ROUNDED SO THAT IT IS EA SILY CLEANABLE. - EPOXY PAINT ON FLOORS OF MORE SENSITIVE AREAS. - REPLACING IRON FURNITURE WITH SS FURNITURE. - ADDITION OF NEW SS FURNITURE (CAPITALIZED) - REPAINTING OF THE ENTIRE WALLS & ROOFS OF THE FACTO RY, - REPLACEMENT OF THE OLD RUSTED WATER PIPELINE WITH N EW PIPES. - NEW SS WATER STORAGE TANKS WITH AULOMIZATION OF T HE ENTIRE WATER SYSTEM (CAPITALIZED). - REPLACEMENT OF THE OLD ELECTRICAL EQUIPMENT LIKE, SWITCHBOARDS, CABLES, MCB ETC. - INSTALLATION OF NEW LIGHTS IN THE FALSE CEILING (CAPITALIZED) IT IS ALSO AN UNDISPUTED FACT THAT NEW AIR HANDLING UNI TS AND OTHER ITEMS AMOUNTING TO RS.8,30,710/- HAVE BEEN CAPI TALIZED WHILE THE REPAIR EXPENSES HAVE BEEN CLAIMED IN P&L ACCOUNT, BY ASSESSEE ITSELF VOLUNTARILY AND FROM THE CHART IT CLEARLY REFLE CTS THAT SINCE 1999 TILL 2009-10, NO MAJOR REPAIR HAS BEEN DONE AND IT I S ALSO NOT IN DISPUTE THAT ACCORDING TO PARA METERS SET UP BY WHO, A U NIT MANUFACTURING OF MEDICINES, REQUIRES TO BE NEAT AND CLE AN DUST FREE AND TEMPERATURE CONTROL ENVIRONMENTS AS WE REALIZED, B OTH THE AUTHORITIES BELOW HAVE NOT DISPUTED THE FACT QUA WHO PARAMETERS. NOW COMING TO THE ASSESSMENT ORDER, THE ASSESSING OFFICER MAINLY RELIED ON THE JUDGMENT PASSED BY THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. SRI MANGAYARKARASI MILLS PVT. LTD. ( 2009) 315 ITR ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 15 114(SC). IN OUR CONSIDERED VIEW, THE FACTS OF THE INSTANT CASE AR E DISSIMILAR TO THE SAID CASE, DECIDED BY THE HONBLE APEX C OURT BECAUSE IN THAT CASE THE HONBLE APEX COURT HAS HELD THAT THE EACH TEXTILE MACHINES IS AN INDEPENDENT AND SEPARATE MACHINE FORMING PART OF AN INTEGRATED MANUFACTURING PROCESS AND THE ENTIRE TEXTIL E MILL MACHINERY CANNOT BE CONSIDERED AS A SINGLE ASSET. BUT IN THE INSTANT CASE, EACH AIR HANDLING UNITS IS NOT AN INDEPENDENT AND SEPARATE MACHINERY BUT ARE HAVING INTEGRATED AND COLLECTIVE EFFECT , THEREFORE, IT CANNOT BE EQUATE WITH THE AFORESAID CASE. FURTHER, THE LD. AO RE LIED UPON THE JUDGMENT PASSED BY THE APEX COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT 224 ITR 414 (SC) IN WHICH IT WAS HELD THAT ANY CAPITAL EXPENDITURE CLAIMED BY THE ASSESSEE FOR ACQUIRING PLANT A ND MACHINERY, BUILDINGS, FIXED ASSETS ETC. CANNOT BE TREATE D AS REPAIRS OR RENEWALS, THEREFORE, IT CANNOT BE HELD AS REVENUE EXPE NDITURE IN THE YEAR AND ACQUISITION OF FIXES ASSETS. NOW COMING TO THE INSTANT CASE, THE ASSESSEE HAS NOT ACQUIR ED ANY NEW PLANT AND MACHINERY, BUILDING OR FIXED ASSETS B UT IN FACT THE EXPENDITURE HAS BEEN INCURRED ONLY FOR PRESERVING THE AIR HANDLING UNITS AND TO UP KEEP THE BUILDINGS ACCORDING TO THE PAR AMETERS OF WHO. IT IS VERY IMPORTANT TO MENTION HEREIN THAT AS IT REFLECTS FROM THE CHART THAT THE ASSESSEE ITSELF HAVE CAPITALIZED THE NEW AI R HANDLING UNIT, INSTALLATION OF CHILLED WATER PIPE LINES SYSTEM, F ILTERS, GRILLS IN ALL OVER TO THE TUNE OF RS.8,30,710/- WHICH IS NOT DISPUTED BY THE ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 16 DEPARTMENT AND REST THE EXPENDITURE HAVE BEEN INCURRE D TO REPLACEMENT OF THE DUCTS WHICH HAD CORRODED OVER TIME TO UP KEEP THE EXISTING AHUS WHICH WERE OLD & WERE NOT PROVIDING SUF FICIENT AIR VOLUME, MECHANIZATION OF ALUMINUM DOORS TO MAKE THE M SMOOTH WITH NO DUST ACCUMULATION AREAS, REPLACED THE EXISTING F ALSE CEILING WITH GYPSUM BOARD BECAUSE THE SAME HAS DEVELOPED CRACKS & HAD SWOLLEN AT MANY PLACES. REPLACEMENT OF OLD AHUS WITH BRA ND NEW ONES WITHOUT MAKING PROVISIONS OF NEW DUCTING AND REPAIR OF THE NUMBER OF INTERNAL WALLS AS THE SAME WERE BROKEN DOWN & NEW ONES ERECTED FOR REORIENTATION OF THE ROOMS WHERE REQUIRED AND DAMAGE KOTA FLOORING REPLACED. ON THE AFORESAID CONSIDERATION OF THE REPAIRS CARRIED OU T BY THE ASSESSEE, IN ORDER TO PRESERVE THE SMOOTH FUNCTIONING OF T HE UNITS, WE ARE OF THE CONSIDERED OPINION THAT BECAUSE THE ORIGINAL BUILDING WAS CONSTRUCTED MORE THAN 40 YEARS BACK AND SUBSTANTIAL REPAI R OR ADDITION TO THE BUILDING WAS NOT CARRIED OUT SINCE 1999-2000 TIL L 2009-10. FURTHER NO SUBSTANTIAL EXPENDITURE HAVE BEEN INCURRED, THEREFORE, THE ASSESSEE WAS CONSTRAINED TO REPAIR THE EXISTING UNITS AND B UILDINGS AS PER REQUIREMENT OF WHO-GMP DUE TO CONTINUOUS CORROSION /DAMAGES OF THE AIR HANDLING UNITS OF MACHINERY/EQUIPMENTS, IT WAS ESSENTIAL TO REPAIR, REPLACE OF MOTORS, FILTERS, FANS, DUCTING, CHILL ED WATER PIPELINE SYSTEMS ETC. TO MAKE BUILDING CONGENIAL AND HABITABLE A CCORDINGLY . THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS CARRIED OUT ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 17 IMPROVEMENT INTO THE EXISTING ASSETS BY INCURRING EXPEND ITURE WHICH HAS RESULTED NEW/DIFFERENT ADVANTAGE TO THE ASSESSEE. EVE N OTHERWISE, BOTH THE AUTHORITIES BELOW FAILED TO POINT OUT ANY SPECIFIC IMPROVEMENT IN THE EXISTING ASSETS WHICH CULMINATED INTO NEW/DIFFEREN T ESTABLISHMENT AND ALSO FAILED TO APPRECIATE THAT ASSESSEE ITSELF HAVE CAPITALIZED THE NEW ALUMINUM DOORS AND WINDOWS, NEW SS FURNITURE, INSTALLATION OF NEW LIGHTS IN THE FALSE CEILING, NEW AHU S PURCHASED AND INSTALLED AND NEW DUCTING INSULATION, CHILLED WATER PIP ELINE, FILTERS & GRILLS WHEREVER REQUIRED. IN OVERALL EFFECTS, WE DO NO T FIND ANY REASONS TO UPHOLD THE DECISION PASSED BY THE AUTHORITIES BELOW AND THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTI TLED TO GET THE RELIEF AS PRAYED FOR, AND HENCE, THE EXPENDITURE INCURRED TO THE TUNE OF RS.23,58,778/- CLAIMED AS REPAIR OF AIR HANDLIN G UNITS AND FURTHER RS.25,74,155/- ON ACCOUNT OF BUILDING REPAIR A RE HELD TO BE EXPENDITURE OF REVENUE NATURE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.0 1. 2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:16.01.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), ITA NO.641 (ASR)/2 014 ASST. YEARS: 2010 -11 18 (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER