M/s Snowview Automobiles Pvt. Ltd., Chandigarh V. ACIT, Chandigarh

ITA 770/CHANDI/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8681 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 68

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NOS. 768 TO 770/CHD/2017 / ASSESSMENT YEARS : 2011-12 TO 2013-14 M/S SNOWVIEW AUTOMOBILES PVT LTD, PLOT NO. 26, INDUSTRIAL AREA, PHASE 1, CHANDIGARH THE ACIT, CIRCLE 2(1), CHANDIGARH ./PAN NO: AAHCS6610D / APPELLANT /RESPONDENT ! /ASSESSEE BY : SH. PARIKSHIT AGGARWAL, ADVOCATE ' ! / REVENUE BY : SH. MANJIT SINGH, SR. DR # $ % /DATE OF HEARING : 19.12 .2018 &'() % /DATE OF PRONOUNCEMENT : 19.12 . 2018 (*/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE AS SESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME T AX (APPEALS)-1, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)] DA TED 28.2.2017 RELATING TO ASSESSMENT YEARS 2011-12, 2012-13 AND 2013-14 R ESPECTIVELY. 2. SINCE THE ISSUED INVOLVED IN ALL THE APPEALS AR E IDENTICAL, HENCE, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSE D OF BY THIS COMMON ORDER. FIRST, WE SHALL DEAL WITH THE APPEAL OF TH E ASSESSEE FOR ASSESSMENT YEAR 2013-14 IN ITA NO. 770CHD/2017, WHICH IS TAKEN AS LEAD CASE. ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 2 ITA NO. 770/CHD/2017 (A.Y. 2013-14). 3. THE ASSESSEE IN THIS APPEAL HAS TAKEN THE FOLLOW ING GROUNDS OF APPEAL:- 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY IN APPEAL NO. 417/1516 DATED 28.02.2017 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) O F THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION TO AN EXTENT OF RS. 15,52,376/- U/S 36(L)(III) EVEN WHEN THE WHOLE OF THE ADDITION ON T HIS ACCOUNT DESERVED TO BE DELETED. 3. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION TO AN EXTENT OF RS. 40,73,739/-, ON ACCOUNT OF REPAIR AND MAINTENANCE CLAIMED BY THE APPELLANT AS REVENUE EXPENSES AND HE LD BY THE LD. AO AS CAPITAL IN NATURE, EVEN WHEN WHOLE OF THE ADDITION ON THIS ACCOUNT DESERVED TO BE DELETED . 4. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) WAS HIGHLY UNJUSTIFIED IN UPHOLDING THE ACTION OF LD. AO IN RESPECT OF ADDITI ON OF RS. 6,00,000- MADE U/S 68 ON PROTECTIVE BASIS IN TH E HANDS OF THE APPELLANT ON ACCOUNT OF LOAN RAISED FR OM SH. PAWAN MITTAL (MD). 5. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION, DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON O R BEFORE THE DISPOSAL OF THE SAME. 4. GROUND NOS.1 & 5 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 5. GROUND NO. 2 : VIDE THIS GROUND, THE ASSESSEE HAS AGITATED THE CONFIRMATION OF ADDITION OF RS. 15,52,376/- MADE OU T OF THE INTEREST ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 3 EXPENDITURE U/S 36(I) (III) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD USED INTEREST BEARING FUNDS FOR MAKING INTEREST FREE LOANS AND ADVANCES TO OTHE R PARTIES. HE, THEREFORE, MADE AN ADDITION OF RS. 35,60,646/- U/S 36(1)(III) OF THE ACT. IN APPEAL, THE LD. CIT(A) OBSERVED THAT THE ADVANCE S FROM THE TWO SOURCES VIZ. FROM THE CURRENT ACCOUNT OF THE ASSE SSEE COMPANY AND FROM THE CASH BOOK OF THE COMPANY CANNOT BE SAID TO BE M ADE FROM INTEREST BEARING FUNDS, RATHER, FROM THE OWN FUNDS OF THE C OMPANY. HOWEVER, IN RESPECT OF THE ADVANCES FROM CASH CREDIT LIMIT ACCO UNT, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD PAID INTEREST ON THE AMOUNT WITHDRAWN FROM THE CASH CREDIT LIMIT, HENCE, THE INTEREST BEARING FUNDS WERE USED FOR MAKING THE ADVANCES. HE, THEREFORE, UPHELD THE DISA LLOWANCE OF RS. 15,52,376/- OUT OF THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT AFTER MAKING ADVANCES FROM THE CASH CREDIT LIMIT ACCOUNT, THE AS SESSEE GOT CERTAIN INTEREST FREE FUNDS, OWN FUNDS, TRADING RECEIPTS WH ICH WERE GOT DEPOSITED IN THE CASH CREDIT LIMIT, HENCE, IT CANNOT BE SAID TH AT THE ASSESSEE HAD USED INTEREST BEARING FUNDS. 7. THE LD. DR HOWEVER, HAS RELIED UPON THE FINDI NGS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE THE ASSESSEE HAD WITHDRAWN THE FUNDS FROM THE CASH CREDIT LIMIT WHIC H WERE ADMITTEDLY INTEREST BEARING FUNDS, HENCE, DISALLOWANCE U/S 36( 1)(III) OF THE ACT IS ATTRACTED IN THIS CASE. HOWEVER, THE CONTENTION OF THE ASSESSEE THAT THE ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 4 ASSESSEE SUBSEQUENTLY DEPOSITED THE TRADING RECEIPT S / OWN FUNDS INTO THE CASH CREDIT LIMIT HAS ALSO FORCE. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER TO CALCULATE THE INTEREST U/S 36(1)(III) OF THE ACT FROM THE DATE OF WITHDRAWAL OF THE FUNDS FROM THE CASH CREDIT LIMIT TILL THE DATE OF DEPOSIT OF THE INTEREST FREE FUNDS INTO THE CASH CREDIT LIMIT. THIS GROUND IS ACCORDINGLY PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 9 . GROUND NO.3 : VIDE GROUND NO.3, THE ASSESSEE HAS AGITATED THE A CTION OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF E XPENDITURE OF RS. 40,73,739/- INCURRED BY THE ASSESSEE ON REPAIR AND MAINTENANCE. 10. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT ASSESSEE IS ENGAGED IN THE RUNNING OF DEALERSHIP OF MAHINDRA & MAHINDRA L TD AND DEALS IN SALES AND SERVICING OF THE VEHICLES. THE BUSINESS IS BEIN G RUN IN LEASED PREMISES. THE ASSESSEE DURING THE YEAR CLAIMED AN EXPENDITURE OF RS. 57,78,253/- AS REPAIR AND MAINTENANCE EXPENDITURE. HOWEVER, THE AS SESSING OFFICER DISALLOWED THE SAME OBSERVING THAT THE SAME WAS NO T A REVENUE EXPENDITURE RATHER A CAPITAL EXPENDITURE OF ENDUR ING BENEFIT. IN APPEAL, THE LD. CIT(A) ALLOWED A RELIEF OF RS. 3 1,48,369/- OBSERVING THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE ON GLASS WORK, PAINTING, ELECTRIC FITTINGS, SANITARY FITTINGS, GIV ES THE ASSESSEE BENEFIT OF ENDURING NATURE. HOWEVER, HE CONFIRMED THE ADDITION OF RS. 40,73,739/- IN RESPECT OF EXPENDITURE INCURRED ON FLOOR AND WALL T ILES, FALSE CEILING, ALUMINUM PARTITIONING ETC. HOLDING THAT THE SAME WOULD NOT COME WITHIN THE MEANING OF CURRENT REPAIRS. ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 5 11. WE HAVE HEARD THE RIVAL CONTENTIONS ON THE ISSU E. AS PER THE PROVISIONS OF SECTION 30 OF THE INCOME TAX ACT, WHE RE THE PREMISES IS OCCUPIED BY THE ASSESSEE AS A TENANT, THE RENT PAI D FOR SUCH PREMISES AND IF THE TENANT HAS UNDERTAKEN TO BEAR THE COST OF REPAI R AND MAINTENANCE OF THE PREMISES, THE AMOUNT INCURRED ON ACCOUNT OF SUCH R EPAIRS IS ALLOWABLE AS BUSINESS EXPENDITURE. HOWEVER, IF THE PREMISES IS TAKEN BY THE ASSESSEE OTHERWISE THAN AS A TENANT, AMOUNT PAID BY HIM ON A CCOUNT OF CURRENT REPAIRS OF THE PREMISES IS ALLOWABLE EXPENDITURE. A DMITTEDLY, IN THIS CASE THE ASSESSEE IS RUNNING A SHOW ROOM CUM SALES AND SERVICE OF MAHINDRA & MAHINDRA VEHICLES IN LEASED PREMISES. THE ASSESSEE FOR BUSINESS PURPOSES GOT RENOVATION OF THE PREMISES, WHICH APART FROM TH E REPLACEMENT OF GLASSWARE PLANT, ELECTRIC FITTINGS ETC. ALSO INCLUD ED CHANGE OF FLOOR AND WALL TIMES, FALSE CEILING, ALUMINUM PARTITIONS ETC. IT IS NOT A CASE OF THE REVENUE AUTHORITIES THAT THE SAID EXPENDITURE WAS NOT INCURRED BY THE ASSESSEE OR THAT THE SAME WAS TO BE BORNE BY THE LA ND LORD. IN OUR VIEW, THE SAID REPAIR AND RENOVATION CARRIE D OUT BY THE ASSESSEE DID NOT GIVE RISE TO A NEW CAPITAL ASSET, RATHER THE SAME WAS CARRIED OUT FOR THE PROPER AND SMOOTHNESS OF THE BU SINESS. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN DISALLOWING THE SAID EXPENDITURE. WE, THEREFORE, DI RECT THE ASSESSING OFFICER TO ALLOW THE AFORESAID EXPENDITURE ON REPAI R AND MAINTENANCE AS REVENUE EXPENDITURE. THIS GROUND OF THE APPEAL IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 6 12. GROUND NO.4 : THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS GROUND IS NOT PRESSED AT THIS STAGE AND THE SA ME IS DISMISSED AS NOT PRESSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED. ITA NO. 769/CHD/2017 (A.Y. 2012-13). 13. IN THE APPEAL, THE ASSESSEE HAS TAKEN ONLY ONE EFFECTIVE GROUND I.E. IN RELATION TO THE DISALLOWANCE OF RS. 4,24,54 0/- OUT OF INTEREST EXPENDITURE U/S 36(I)(III) OF THE ACT. 14. THE FACTS AND THE ISSUE INVOLVED ARE IDENTICAL AS TAKEN BY ASSESSEE IN GROUND NO.2 OF THE APPEAL BEARING IT A NO. 770/CHD/2017 AND OUR FINDINGS ARRIVED AT, WHILE ADJ UDICATING THE SAID ISSUE, WILL APPLY MUTATIS-MUTANDIS TO THIS GROUND A LSO. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO CALCULATE THE DI SALLOWANCE U/S 36(1) (III) OF THE ACT AS PAR THE DIRECTIONS GIVEN ABOVE. THIS APPEAL OF THE ASSESSEE IS TREATED AS PARTLY AL LOWED. ITA NO. 768/CHD/2017 (A.Y. 2011-12): IN THIS APPEAL THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL. 16 . GROUND NOS.1 & 4 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 17 . GROUND NO.2 : THIS GROUND IS IN RELATION TO DISALLOWANCE OF R S. 3,29,552/- MADE U/S 36(1)(III) OF THE ACT. IN VIEW OF OUR FINDINGS GIVEN ABOVE WHILE ADJUDICATING GROUND NO.2 OF THE A PPEAL IN ITA ITA NOS. 768 TO 770/CHD/2017- M/S SNOWVIEW AUTOMOBILES PVT LTD, CHANDIGARH 7 NO.770/CHD/2017, THIS ISSUE IS ALSO DECIDED ACCORDI NGLY AND THE ASSESSING OFFICER IS DIRECTED TO CALCULATE THE DISA LLOWANCE U/S 36(1) (III) OF THE ACT AS PER THE DIRECTIONS GIVEN ABOVE WHILE DECIDING THE IDENTICAL ISSUE VIDE GROUND NO. 2 IN ITA NO. 770/C HD/2017. 18 . GROUND NO.3 : GROUND NO.3 IS RELATING TO THE DISALLOWANCE OF RS. 8,35,743/- ON ACCOUNT OF REPAIR AND MAINTENANCE CLAIMED BY THE ASSESSEE. THIS ISSUE IS IDENTICAL TO THAT TAKEN B Y THE ASSESSEE VIDE GROUND NO.3 IN ITA NO. 770/CHD/2017. IN VIEW OF OU R FINDINGS GIVEN ABOVE IN RELATION TO GROUND NO.3, THE DECISION REND ERED THEREIN WILL APPLY MUTATIS-MUTANDIS TO THIS GROUND OF APPEAL ALS O. IN VIEW OF THIS, ALL THE APPEALS OF THE ASSESSEE AR E TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2018 SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 19.12. 2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR