Dr. Govind Shivram Kulkarni, Miraj V. Joint CIT, Range-2, Sangli

ITA 642/PUN/2013

• Counselvise Citation: 64224514 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.642/PN/2013 (ASSESSMENT YEAR: 2009-10) GOVIND SHIVRAM KULKARNI EXTENSION AREA, MIRAJ 416410 PAN: ACCPK5416E . APPELLANT VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE-2, SANGLI . RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI P.S. NAIK DATE OF HEARING : 28-10-2014 DATE OF PRONOUNCEMENT : 30-10-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 13-12-2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST ORDER PASSED U/S.143(3) OF THE INCOME-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DISALLOWED AN AMOUNT OF RS.2,50,638/- OUT OF ELECTRICAL REPLACEMENT EXPENSES TREATING THE SAME AS CAPITAL IN NATU RE. THE APPELLANT PRAYS THAT DISALLOWANCE OF RS.2,50,638/- OU T OF ELECTRICAL REPLACEMENT BE DELETED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DISALLOWED AN AMOUNT OF RS.9,04,085/- OUT OF REPAIRS AND RENEWAL EXPENSES TREATING THE SAME AS CAPITAL IN NATURE. THE APPELLANT PRAYS THAT DISALLOWANCE OF RS.9,04,085/- OUT OF REPAIRS AND RENEWAL EXPENSES BE DELETED. 3. THE APPELLANT PREYS LEAVE TO SUBMIT DETAILED SUBMISSION ON THE GROUNDS OF APPEAL AT THE TIME OF HEARING. ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 2 4. THE APPELLANT PRAYS TO ADD, AMEND, ALTER AND TO MODIFY ANY OR ALL THE GROUNDS OF APPEAL TO MEET JUSTICE AND EQUITY. 3. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSE SSEE ARE IN RELATION TO THE TREATMENT OF REPAIRS AND RENEWAL EXPENSES. 4. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE WAS ENGAGED IN MEDICAL PROFESSION FOR THE PAST SEVERAL YEARS AND WAS RUN NING HOSPITAL IN DISTRICT SANGLI. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CARRIED OUT CERTAIN REPAIRS AND RENEWAL EXPENSES OF HIS HOSPITAL WHICH WERE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSIN G OFFICER NOTED THAT A SUM OF RS.5,23,051/- WAS DEBITED ON ACCOU NT OF ELECTRICAL REPLACEMENT. THE PLEA OF THE ASSESSEE BEFORE ASSESSING O FFICER WAS THAT THE EXPENSES INCLUDED REPLACEMENT OF CABLE WIRES AND BULBS, FLUORESCENT TUBES, ELECTRICAL PANELS, ETC. AND WERE IN THE NA TURE OF CURRENT REPAIRS AND REPLACEMENTS. THE ASSESSEE PRODUC ED THE RELEVANT BILLS OF VARIOUS ITEMS OF ELECTRICAL REPLACEMENTS. THE ASSESSIN G OFFICER ON THE PERUSAL OF THE SAID DETAILS, NOTED THAT THE ASSES SEE HAD INCURRED EXPENSES FOR THE PURCHASE OF NEW ITEMS / MATE RIAL WHICH WERE MATERIAL IN NATURE. THE ASSESSING OFFICER TABULATED TH E MAJOR ITEMS EXCEEDING RS.10,000/- AS DETAILED UNDER PARA 3.1 AT PAGE 4 OF THE ASSESSMENT ORDER AND HELD THAT EXPENSES OF RS.2,50,6 38/- WERE TO BE TREATED AS CAPITAL GAIN. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER OBSERVIN G THAT THE NATURE, PURPOSE AND INTEND OF THE EXPENSES HAD TO BE EXAMINED AND VARIOUS EXPENDITURE WERE MERELY REPLACED WITHOUT PA RTS, THEN THE SAME WOULD BE OF REVENUE EXPENSES, BUT IF IT REPLACES THE OLD SYSTEM ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 3 SUBSTANTIALLY TO PROVIDE ENDURING BENEFIT TO THE ASSESSE E, THEN THE SAME WAS TO BE CONSIDERED AS CAPITAL EXPENSES. 6. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE SAID DISALLOWANCE OF RS.2,50,638/-. THE LEARNED AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE DREW OUR ATTENTION TO THE LIST OF EXPENDITURE B OOKED UNDER THE HEAD ELECTRICAL REPLACEMENT PLACED AT PAGE 8 OF THE PAPER BOOK AND POINTED OUT THAT THE MAJOR EXPENDITURE DURING THE YEAR UNDER CONSIDERATION WAS ON REPLACEMENT OF THE ELECTRICAL CABLE A S THE HOSPITAL RUN BY THE ASSESSEE WAS VERY OLD AND MAJOR RE PAIRS WERE CARRIED OUT BY THE ASSESSEE. THE LEARNED AUTHORIZED RE PRESENTATIVE FURTHER POINTED OUT THAT OUT OF THE TOTAL EXPENDITURE, EX PENSES TOTALING RS.22,400/- WERE CAPITAL IN NATURE AND THE BALANCE EXPEND ITURE WAS ALLOWABLE EXPENDITURE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLAC ED RELIANCE ON THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND NO.1 IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF PART OF ELECTRICAL REPLACEMENT EXPENSES, HOLD ING THE SAME TO BE CAPITAL IN NATURE. THE ASSESSEE WAS AN ORT HOPEDIC SURGEON AND WAS RUNNING HOSPITAL IN DISTRICT SANGLI. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMS THAT IT HAD CAR RIED OUT CERTAIN REPAIRS AND REPLACEMENTS AND HAD INCURRED MAJOR EXPENDITURE ON REPLACING THE ELECTRICAL CABLES, WHICH WERE ALREADY EXISTIN G IN THE HOSPITAL BUILDING. THE ASSESSEE DURING THE ASSESSMENT PRO CEEDINGS, HAD FURNISHED THE COMPLETE BILLS IN RESPECT OF THE EXPENDITU RE BOOKED ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 4 UNDER THE HEAD ELECTRICAL REPLACEMENTS. HOWEVER, THE ASSESSING OFFICER LISTED OUT THE ITEMS WHICH WERE ABOVE RS.10,000/- A ND DISALLOWED A SUM OF RS.2,50,638/-. THE ASSESSEE BEFORE US HAS FURNISHED THE COMPLETE BREAKUP OF THE SAID EXPENDITURE AT PAGE 8 OF THE PAPER BOOK AND HAS ALSO ENLISTED THE NATURE OF THE ITEMS WHICH WERE PURCHASED BY THE ASSESSEE. THE PHOTO COPIES OF THE BILLS WHICH ARE ABOVE RS.10,000/- HAVE BEEN FILED BY THE ASSESSEE. THE PERUSAL OF THE SAID BILLS REFLECTS VARIOUS ITEMS BEING PURCHASED BY ASS ESSEE. ONE OF THE MAJOR BILLS IS IN RESPECT OF THE ITEMS PURCHASED FRO M MANGAL ELECTRICALS & REFRIGERATION DATED 16.05.2008 WHEREIN, THE ASS ESSEE HAD PURCHASED GI SHEET METAL DUET OF MEASURING 463 SQ.FT . FOR RS.50,000/-. ANOTHER BILL TOTALING RS.18,260/- IS IN RESPECT OF SOMMER CABLE QUANTAM 8 CORE AND AMPHENOL CONNECTOR AC 3 MM AND AC 3 FD 2 VIDE INVOICE NO.138, DATED 16.06.2008 FROM S.U .N. MEDIA VENTURES PVT. LTD. THE PERUSAL OF THE DETAILS IN THE BILLS FILED BY THE ASSESSEE DOES NOT JUSTIFY THE DISALLOWANCE MADE IN T HE HANDS OF THE ASSESSEE MERELY BECAUSE THE BILLS TOTAL MORE THAN R S.10,000/-. IT IS THE NATURE OF THE EXPENDITURE WHICH HAS TO BE CONSIDE RED WHILE ALLOWING THE EXPENDITURE IN THE HANDS OF THE ASSESSEE. W E FIND MERIT IN THE PLEA OF THE ASSESSEE THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE IS ON ACCOUNT OF REPAIRS AND RENEWALS CARRIED O UT AT HIS BUSINESS PREMISES AND ARE IN THE NATURE OF CURRENT REPA IRS WHICH IS ALLOWABLE AS EXPENDITURE UNDER SECTION 31(1) OF THE ACT. IN VIEW OF THE ADMISSION OF THE ASSESSEE, WE DIRECT THE ASSESSING OFFICER T O ALLOW THE EXPENDITURE OF RS.2,28,238/- AS REVENUE EXPENDITURE AND T HE BALANCE EXPENDITURE OF RS.22,400/- IS TO BE TREATED AS CAPITAL IN NATURE. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 5 9. THE ASSESSEE VIDE GROUND NO.2 HAS RAISED THE ISSUE AG AINST DISALLOWANCE OF RS.9,04,085/- OUT OF REPAIRS AND RENEWAL EXP ENSES I.E. BUILDING. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N HAD CLAIMED EXPENDITURE OF RS.11,71,359/- ON ACCOUNT OF REPAIRS AND RENEWALS. THE PLEA OF THE ASSESSEE BEFORE THE AUTHORITIE S BELOW WAS THAT THE EXPENSES WERE FOR CARRYING OUT THE REPAIRS OF THE BUILDING AND TOILETS AND PAINTING OF THE BUILDING WERE CARRIED OUT. THE A SSESSING OFFICER AS IN THE CASE OF ELECTRICAL INSTALLATION TABULATED THE EXPENSES EXCEEDING RS.10,000/- UNDER PARA 4.1 AT PAGES 6 AND 7 OF THE ASSESSMENT ORDER AND DISALLOWED EXPENSES OF RS.9,04,085/- AS CAPITAL IN NATURE. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICE R REJECTING THE BIFURCATION FILED BY THE ASSESSEE THAT OUT OF THE TOTA L EXPENSES, CERTAIN EXPENSES WERE CAPITAL EXPENSES AND THE BALANCE WERE REVENUE EXPENDITURE. THE CIT(A) NOTED THAT IN THE CHART, THE A SSESSEE HAD CLASSIFIED BORE WELL DRILLING EXPENSES OF RS.14,100/- AS REVENU E EXPENSES, BUT THE SAME WERE HELD TO BE CAPITAL EXPENDITU RE BY THE CIT(A). 10. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE MADE A REFER ENCE TO THE TABULATED DETAILS FILED AT PAGES 22 AND 23 OF THE PAPE R BOOK, UNDER WHICH, THE NATURE OF EXPENDITURE HAD BEEN EXPLAINED AND A LSO BIFURCATED BETWEEN CAPITAL AND REVENUE EXPENSES. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLA CED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 6 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE EXPENDITURE BOOKED UNDER THE HEAD REPAIRS AND RE NEWALS WAS CLAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE TOTALING RS.11,71,359/-. THE ASSESSING OFFICER HOWEVER, PICKED UP TH E BILLS EXCEEDING RS.10,000/- AND HELD THE SAME TO BE CAPITAL IN N ATURE. THE ASSESSEE HAS ENCLOSED THE BILLS AT PAGES 24 TO 73 OF THE PAPER BOOK ALONG WITH THE TABULATED DETAILS FURNISHED AT PAGES 22 AN D 23 OF THE PAPER BOOK. THE ASSESSEE OUT OF THE SAID EXPENDITURE O F RS.9,04,085/- TREATED AS CAPITAL EXPENDITURE BY THE CIT(A ), FAIRLY CONTENDS THAT THE EXPENDITURE TOTALING RS.3,40,196/- WAS CAPITAL IN NATURE. HOWEVER, THE BALANCE OF EXPENDITURE OF RS.5,64,517 /- WAS CLAIMED TO BE REVENUE IN NATURE. THE FIRST BILL REFERRED TO BY THE ASSESSEE IS DATED 02.05.2008 OF MANGAL ELECTRICALS & REFRIGER ATION FOR RS.2,00,000/-. THE NATURE OF THE EXPENDITURE IS THE REPAI RS OF TOILET ROOMS WHICH CHANGES OF TILES, PAINTING, WATER PROOFING AND P LUMBING. THOUGH THE ASSESSEE HAS BOOKED THE EXPENSES AT RS.2,0 0,000/- BUT THE SAME COMPRISES OF VARIOUS ITEMS UNDER WHICH, THE REPA IRS OF THE TOILETS BY WAY OF CHANGING THE TILES AND ALSO PLUMBING IN DIFFE RENT ROOMS OF THE HOSPITAL HAVE BEEN CARRIED OUT. ANOTHER EX PENDITURE OF RS.75,628/- HAS BEEN CLAIMED BY THE ASSESSEE BY WAY OF PAYMENT TO M/S. BHARATKUMAR DAYAL & CO VIDE INVOICE DATED 05.06.2008. THE ASSESSEE HAD PURCHASED VARIOUS CARPENTRY ITEMS FROM THE SAID CO NCERN FOR REPLACING THE OLD ITEMS. WHERE THE ASSESSEE HAS CARR IED ON REPAIRS OF EXISTING ITEMS, THEN THE SAID EXPENDITURE IS TO BE ALLOWE D AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. IN THE ENTIRE TY OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PAR T OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IS REVENUE IN NATURE I.E. EXPENDITURE INCURRED ON REPLACING OF TILES AND BATH ROOMS ALONG WITH ITA NO. 642/PN/2013 GOVIND SHIVRAM KULKARNI 7 WATER PROOFING, PLUMBING WORK CARRIED OUT, THE CARPENTRY MATERIAL PURCHASED BY THE ASSESSEE AND OTHER HARDWARE ITEMS P URCHASED FOR REPLACING OF THE EXISTING ITEMS INCLUDING PAINTING AND SUPERV ISION CHARGES FOR REPAIR WORKS. THE EXPENDITURE INCURRED ON B ORE WELL DRILLING OF RS.14,100/- IS OF ENDURING BENEFIT AND IS TO BE TREA TED AS CAPITAL EXPENDITURE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TREAT THE EXPENDITURE OF RS.5,64,517/- -RS.14,100/- = 5,5 0,417/-, TABULATED BY THE ASSESSEE, AS REVENUE EXPENDITURE AND THE BALANCE EXPENDITURE OF RS.3,40,196+14,100/- = 3,54,296/- AS CAPITA L EXPENDITURE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASS ESSEE IS THUS, PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCTOBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH OCTOBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE