DCIT, New Delhi V. M/s Pearey Lal & Sons Pvt. Ltd.., New Delhi

ITA 6863/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7055 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 09-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MEHTA
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-3 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 6784/DEL/2015 ASSESSMENT YEAR: 2012-13 M/S PEAREY LAL & SONS (P) LTD., VS. DCIT, CIR CLE 14(1) PEAREY LAL BUILDING, NEW DELHI 42, JANPATH, NEW DELHI 110 001 (PAN: AAACP0003B) (APPELLANT) (RESPONDENT) AND ITA NO. 6863/DEL/2015 ASSESSMENT YEAR: 2012-13 DCIT, CIRCLE 19(2), VS. M/S PEARLEY LAL & SONS P VT. LTD. NEW DELHI PEAREY LAL BUILDING, 42, JANPATH ROOM NO. 221, 2 ND FLOOR, NEW DELHI 110 001 CR BUILDING, IP ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. R..M. MEHTA, CA RESPONDENT BY : SH. ANIL KUMAR SHARMA, SR. DR ORDER THE ASSESSEE AND DEPARTMENT HAS FILED THE CROSS AP PEALS WHICH IS EMANATE FROM THE ORDER DATED 27.10.2015 OF THE LD. CIT(A)-7, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2 012-13. THE GROUNDS RAISED IN THE ASSESSEES APPEAL READS A S UNDER:- 2 1. THAT THE LD. CIT(A) ERRED BOTH ON FACTS AND IN LAW IN TREATING AS CAPITAL EXPENDITURE A SUM OF RS.11,18,840/- BEING THE ROUTINE REPAIR EXPENSE INCURRED ON LEASED PREMISES USED FOR BUSINESS PURPOSES AND WHICH DID NOT BRING INTO EXISTENCE ANY ASSET OF ANY ENDURING NATURE. 2. THAT THE APPELLANT RESERVES TO ITSELF, THE RIGH T TO ADD, ALTER, AMEND, SUBSTITUTE, WITHDRAW AND / OR AN Y GROUND(S) OF APPEAL ON OR BEFORE THE DATE OF HEARIN G. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ERRED IN DELETING DISALLOWANCE OF RS. 4,31,517/ - MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD REPAIR A ND MAINTENANCE BY IGNORING THE FACT THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINES S PURPOSES OF THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS. 10,65,560/- MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD REPAIR AND MAINTENANCE FOR MUSSORIE GUEST HOUSE TREATING IT AS CAPITAL IN NATURE BY NO T APPRECIATING THE FACT THAT THE EXPENDITURE RESULTED IN AN IN ENDURING NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE PART 3 DISALLOWANCE OF RS. 24,66,305/- OUT OF RS. 32,26,630/- MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HE AD REPAIR AND MAINTENANCE TREATING IT AS CAPITAL IN CAPITAL IN NATURE BY NOT APPRECIATING THE FACT THAT THE EXPENDITURE RESULTED IN AN ENDURING NATURE. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND(S) OF APPEAL AND / OR DELETE OR AMEND ANY OF THE GORUND(S) OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY FILED E-RETURN OF INCOME ON 26.9.2012 FOR AY 2012-13 AT A LOSS OF RS. 13,99,754/- AFTER SETTING OF INCOME FROM HOUSE PROP ERTY OF RS. 1,23,25,742/- AND INCOME FROM OTHER SOURCES OF RS. 78,09,874/- FROM THE CURRENT YEAR BUSINESS LOSS OF RS. 2,15,35, 372/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND STATUTORY NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 WAS ISSUED ON 6.8.2013. IN COMPLIANCE OF THE NOTICE, COPY OF IT R ALLONGWITH ALL FINANCIAL DETAILS WERE FILED. SUBSEQUENTLY, NOTICE U/S. 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WAS ISSUED AND INFORMAT ION IN SUPPORT OF ITS CLAIM WAS CALLED FOR. IN RESPONSE THERETO, THE ASSESSEES AR ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILE D THE DETAILS/INFORMATION. DURING THE PERIOD, THE ASSESS EE COMPANY IS STATED TO BE ENGAGED IN THE BUSINESS OF RETAIL DIST RIBUTION OF PETROL, LPG AND RELATED PRODUCTS, FAST FOOD BUSINESS AND LE TTING OF PROPERTIES. AO OBSERVED THAT IN THE ABSENCE OF EVID ENCES OR PROPER 4 VOUCHING BY THE ASSESSEE, HE MADE THE VARIOUS ADDIT IONS AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 33,23,95 1/- U/S. 143(3) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 14.11.20 14. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE AO, TH E ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDE R DATED 16.5.2014 DELETED SOME OF THE ADDITIONS AND SUSTAIN ED THE ADDITION OF RS. 11,18,840/- VIDE HIS ORDER DATED 27.10.2015 AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF THE LEARNED CIT(A) THE ASSE SSEE & REVENUE ARE IN CROSS APPEALS BEFORE THE TRIBUNAL. 6. LD. COUNSEL OF THE ASSESSEE HAS STATED THAT AC TION OF THE LD. CIT(A) IN TREATING A SUM OF RS. 11,18,840/- AS CAP ITAL EXPENDITURE BEING THE ROUTINE REPAIR EXPENSES INCURRED ON LEAS ED PREMISES USED FOR BUSINESS PURPOSES AND WHICH DID NOT BRING INTO EXISTENCE ANY ASSET OF AN ENDURING NATURE. THEREFORE, THE SAME MA Y BE DELETED. 7. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED IN THE GROUNDS O F APPEAL. 8. FIRST I TAKE UP THE REVENUES APPEAL AS UNDER:- 8.1 I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US ESPECIALLY THE ORDER OF THE LD. CIT(A). WITH REGARD TO GROUND NO. 1 RELATING TO DELETION OF ADDI TION OF RS. 4,31,517/- IS CONCERNED, WE FIND THAT THIS DISALLOW ANCE IS MADE FROM EXPENSES PERTAINING TO GUEST HOUSE MAINTENANCE AND REPAIR MAINTENANCE ON THE GROUND THAT IT RELATES TO CASH P AYMENT WHICH THE ASSESSEE DID NOT PROVIDE VOUCHERS/BILLS. THE AO HAS HOWEVER STATED 5 THAT LEDGER ACCOUNT AND BILLS/VOUCHERS FOR THE IMPU GNED EXPENDITURE WERE FURNISHED BY THE ASSESSEE VIDE LETTER 10.11.20 14. THE ASSESSEE HAD ALSO STATED BEFORE THE AO THAT THE EXPENSES INC URRED WERE NORMAL ROUTINE BUSINESS EXPENSES. THE AO HOWEVER, W AS OF THE VIEW THAT IN THE ABSENCE OF PROPER VOUCHING, THE CLAIM O F EXPENSES IS NOT ENTIRELY CORRECT. HE THEREFORE, DISALLOWED 50% OF T HE CLAIM OF CASH EXPENSES I.E. RS.93,397/- & RS.3,38,120/-UNDER THE RESPECTIVE HEADS. IT IS EVIDENT THAT THE DISALLOWANCE MADE IS COMPLETELY AD-HOC WITHOUT SPECIFIC FINDING AS TO HOW THE EXPENDITURE INCURRED IS NOT FOR BUSINESS PURPOSE. IT IS NOT THE CASE OF THE AO THAT THE EXPENDITURE CLAIMED IS NOT GENUINE. SINCE ALL BILLS/VOUCHERS AN D LEDGER ACCOUNTS WERE BEFORE THE AO, IT WOULD HAVE BEEN APPROPRIATE THAT SPECIFIC VOUCHERS ETC. WERE IDENTIFIED BEFORE THE DISALLOWAN CE WAS MADE. THE ASSESSEE HAD INCURRED THE EXPENDITURE ON A LEASE PR OPERTY USED AS HOLIDAY HOME FOR THE EMPLOYEES OF THE COMPANY. THE EXPENSES INCURRED IN CASH OR THROUGH DD ARE TOWARDS ELECTRIC ITY, WATER, HOUSE TAX CHARGES ETC. AND ARE FOR BUSINESS PURPOSES. SIM ILAR IS THE NATURE OF EXPENSES CLAIMED UNDER REPAIRS AND MAINTENANCE. THEREFORE, I AM OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY HELD THAT T HERE IS NO JUSTIFICATION FOR MAKING AN AD-HOC DISALLOWANCE WHE N ALL BILLS/VOUCHERS ETC. WERE PRODUCED BEFORE THE AO, HE NCE, THE DISALLOWANCE OF RS. 4,31,517/- WAS THEREFORE RIGHT LY DELETED WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, I UPHOLD THE 6 SAME AND ACCORDINGLY DISMISS THE GROUND NO. 1 RAIS ED BY THE REVENUE. 8.2 WITH REGARD TO GROUND NO. 2 RELATING TO DELETIO N OF ADDITION OF RS. 10,65,560/- ON ACCOUNT OF REPAIR AND MAINTENANC E IS CONCERNED, I FIND THAT THE AO, FROM THE PERUSAL OF LEDGER ACCO UNT AND DETAILS OF BILLS/VOUCHERS OF REPAIR AND MAINTENANCE FOR MUSSOO RIE GUEST HOUSE DISALLOWED RS.11,83,955/- BY HOLDING THE SAME TO BE EXPENDITURE OF CAPITAL NATURE. I FIND THAT LD. CIT(A) HAS PERUSED THE BILLS/VOUCHERS PRODUCED BEFORE THE AO AND NOTED THAT EXPENDITURE I NCURRED IS PURELY ON REPAIR AND MAINTENANCE OF THE ROOF AND OU TER AREAS AND CANNOT BE TREATED AS CAPITAL EXPENDITURE PROVIDING BENEFIT OF ENDURING NATURE OR LEADING TO CREATION OF CAPITAL A SSET. THEREFORE, LD. CIT(A) HAS RIGHTLY HELD THAT THE DISALLOWANCE O F THE IMPUGNED EXPENDITURE BY TREATING THE SAME AS CAPITAL IN NATU RE WAS NOT IN ORDER AND WAS THEREFORE RIGHTLY DELETED WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, I UPHOLD THE SAME AND ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED . 8.3 WITH REGARD TO GROUND NO. 3 RELATING TO DELETION OF ADDITION OF RS. 24,66,305/- ON ACCOUNT OF REPAIR AND MAINTENAN CE RAISED IN REVENUE IS CONCERNED, THE AO HAS DISALLOWED EXPENSE S OF RS.35,85,145/- INCURRED ON REPAIR AND MAINTENANCE F OR MAINTENANCE OF LEASED PROPERTY AT 42, JANPATH USED BY THE ASSES SEE AS ITS OFFICE BY TREATING IT AS CAPITAL EXPENDITURE. I FIND THAT LD. CIT(A) HAS OBSERVED THAT THE EXPENDITURE HAS BEEN INCURRED ON PAINTING, POLISHING, REPAIR OF FALSE CEILING, WATER PROOFING TREATMENT, TILE WORK, 7 DISMANTLING OF ROOF AND OTHER MISCELLANEOUS REPAIRS . ON CAREFUL EXAMINATION OF THE BILLS/VOUCHERS, IT WAS NOTED THA T SUM OF RS.11,18,840/- IS INCURRED FOR DISMANTLING AND GRAD ING OF ROOF. IT APPEARS THAT ENTIRE ROOF HAS BEEN RECAST. I FURTHER NOTE THAT LD. CIT(A) HAS TREATED A SUM OF RS.24,66,305/- AS REVE NUE IN NATURE AND THEREFORE THE DISALLOWANCE MADE BY THE AO WAS R IGHTLY DIRECTED TO BE DELETED WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THI S ISSUE AND DISMISS THE GROUND NO. 3 RAISED BY THE REVENUE. ASSESSEES CROSS APPEAL (ITA NO. 6784/DEL/2015) AY- 2012-13 9. WITH REGARD TO GROUND NO. 1 RAISED BY THE ASSES SEE RELATING TO TREATING THE SUM OF RS. 11,18,840/- A S CAPITAL EXPENDITURE BEING THE ROUTINE REPAIR EXPENSES INCUR RED ON LEASED PREMISES USED OR BUSINESS PURPOSE IS CONCERN ED, I FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION OF RS. 24,66,305/- ON THE SAME ACCOUNT HAS OBSERVED THAT ON CAREFUL E XAMINATION OF THE BILLS / VOUCHERS, A SUM OF RS. 11,18,840/- AS INCURRED FOR DISMANTLING AND GRADING OF ROOF APPEARS THAT THE EN TIRE ROOF HAS BEEN RECAST. LD. CIT(A) HAS FURTHER OBSERVED THAT N ATURE OF THIS EXPENDITURE CANNOT BE CATEGORIZED AS REVENUE AS IT CANNOT BE SAID THAT IT HAS BEEN INCURRED FOR REPAIR AND MAINT ENANCE BUT IS FOR DISMANTLING AND CASTING A NEW ROOF. HOWEVER, I NOTE THAT LD. CIT(A) OBSERVED THAT ON PERUSAL OF THE DETAILS OF THE IMPUGNED EXPENDITURE THE EXPENDITURE HAS BEEN INCUR RED ON PAINTING, POLISHING, REPAIR OF FALSE CEILING, WATER PROOFING TREATMENT, TILE WORK, DISMANTLING OF ROOF AND OTHER MISCELLANEOUS REPAIRS AND NOWHERE IT IS MENTIONED T HAT CASTING A NEW ROOF. THESE ITEMS LIKE PAINTING, POLISHING, REPAIR OF FALSE CEILING, WATER PROOFING TREATMENT, TILE WORK, DISM ANTLING OF ROOF 8 AND OTHER MISCELLANEOUS REPAIRS WORKS COMES UNDER T HE CATEGORY OF REPAIR AND MAINTENANCE. HENCE, THE LD. CIT(A) HAS WRONGLY HELD THAT THE EXPENDITURE OF RS. 11,18,840/ - AS CAPITAL IN NATURE AND THEREFORE, NOT ALLOWABLE. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 11,18,840/- IS HEREBY DELETED, BECAUSE THE WORK OF DISMANTLING OF ROOF IS COME UNDER THE CATE GORY OF REPAIR AND MAINTENANCE AND IS A REVENUE EXPENDITURE . ACCORDINGLY, THE GROUND RAISED NO. 1 RAISED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED AND ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 09-01-2017. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED : 09-01-2017 DRAGON NS SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI