ACIT, Chandigarh V. Punjab Inds. & Exports Corporation Ltd., Chandigarh

ITA 841/CHANDI/2011

• Counselvise Citation: 84121514 RSA 2011
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Capital asset; Depreciation; Question of law; Revised return; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 841/CHD/2011 ASSESSMENT YEAR: 2008-09 THE ACIT, VS M/S PUNJAB SMALL INDUSTRIES CIRCLE 2(1), & EXPORTS CORPORATION LTD, CHANDIGARH CHANDIGARH PAN NO. AABCP1602M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SHRI VINEET KRISHAN DATE OF HEARING : 24.10.2011 DATE OF PRONOUNCEMENT : 24.10.2011 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), CHANDIGARH DATED: 6.6.2011 RELATING TO ASSE SSMENT YEAR 2008-09. 2. GROUND NO. 1 OF THE APPEAL READS AS UNDER:- 1. THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,98,94,291/- MADE ON ACCOUNT OF EXPENDITURE UNDER THE HEAD MAINTENANCE OF FOCAL POINTS . 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 2 'THE ACT') AND MADE AN ADDITION OF RS. 2,98,94,291/ - ON ACCOUNT OF EXPENDITURE UNDER THE HEAD MAINTENANCE OF FOCAL PO INTS. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 2 OF THE ASSESSMENT ORDER WHICH READS AS UNDER:- 2. THE ASSESSEE CLAIMED RS. 3,32,15,879/- AS MAINT ENANCE OF FOCAL POINTS IN PROFIT AND LOSS ACCOUNT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO F URNISH DETAILS UNDER THIS HEAD. THE SAME WERE FURNISHED BY THE AS SESSEE VIDE LETTER DATED 1.2.2010. THE BREAK UP OF THE EXPENDI TURE SUBMITTED BY THE ASSESSEE VIDE LETTER REFERRED TO ABOVE, IS AS U NDER:- M/S PSIEC CLASSIFICATION DIV-I DIV (HORT) XEN (ELEC) XEV-IV TOTAL SALARY & WAGES 8594513 1311918.50 1676305.25 6786228.55 18369010.30 ELECT.BILL & WATER 1491298 2438747 2580895 6420940 REP MTC. 2280191.70 202703.50 842432 5100601.71 8425928.91 TOTAL EXPENDITURE 12366002.70 1514622 4867529.25 14467725.26 33215879.21 2.2 PERUSAL OF THE AUDIT REPORT REVEAL THAT AUDITOR S HAVE MENTIONED IN NOTES ON ACCOUNTS THAT: A) THE EXPENDITURE INCURRED ON ANY PROJECT IS DEBI TED TO WORK IN PROGRESS. ON COMPLETION OF 60% OF THE PROJ ECT, THE AMOUNT IS TRANSFERRED TO STOCK WITH FULL ESTIMA TED PROJECT COST (INCLUDING UNSPENT BALANCE OF 40%). F OR UNSPENT BALANCE, THE LIABILITY IS CREATED AND IS SH OWN UNDER THE HEAD OTHER LIABILITIES. AMOUNTS SPENT ON THESE PROJECTS IN SUBSEQUENT YEARS ARE DEBITED TO T HE HEAD OTHER LIABILITIES. THE EXCESS EXPENDITURE U NDER SPECIFIC SUB HEAD THAN THE PROJECT COST IS CHARGED TO PROFIT AND LOSS ACCOUNT UNDER SPECIFIC HEADS. FOR THE 3 PROJECTS UNDERTAKEN W.E.F. 1.4.2005, THE INCOME IS BEING TREATED ON PERCENTAGE OF COMPLETION METHOD. B) THE INDIRECT PROJECT EXPENDITURE INCURRED BY THE ENGG. WING INCLUDING ESTATE ETC. WAS FIRST DEBITED TO DEVELOPMENT EXPENDITURE ACCOUNT UPTO 31.3.2006, HOWEVER, ESTATE WING HAS BEEN SEPARATED DURING THE YEAR 1996-97. THE EXPENSES OF ESTATE WING AND ENGINEERI NG WING HAVE BEEN DIRECTLY CHARGED TO PROFIT AND LOSS ACCOUNT, INSTEAD OF DEVELOPMENT EXPENDITURE ACCOUNT FROM 1996-97 AND 2005-06 RESPECTIVELY. THE DEVELOPMENT CHARGES EARNED FROM THE DEPOSIT WOR K ARE TAKEN AS INCOME IN PROFIT & LOSS ACCOUNT. THE NET AMOUNT OF DEBIT BALANCE UNDER RESPECTIVE HEADS OF ACCOUNT TO THE EXTENT OF 12% OF THE WORK DONE IS APPROPRIATED TO WORK IN PROGRESS AND REMAINING ACCO UNT IS DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE SPECIFIC HEADS INSTEAD OF EARLIER TAKEN UNDER THE H EAD DEVELOPMENT EXPENSES OVER AND ABOVE ESTIMATES. 2.3 ABOVE DETAILS SHOW THAT ASSESSEE IS MAKING PRO VISION OF EXPENDITURE IN BALANCE SHEET OUT OF CAPITAL FUNDS A ND ALSO DEBITING THE EXCESS EXPENDITURE IN PROFIT AND LOSS ACCOUNT. THIS EXPENDITURE IS NOT A REVENUE EXPENSE AS IT FORMS A PART OF CUR RENT ASSETS IN THE BALANCE SHOWN AND THE WORK CARRIED OUT UNDER THESE HEADS RESULTS IN ADDITION OF ASSETS IN BALANCE SHEET. ALSO, THIS ISSUE HAS BEEN DEALT IN EARLIER YEARS ALSO. KEEPING IN VIEW THE FACTS AND THE STAND OF THE DEPA RTMENT, THE EXPENSE IS HELD TO BE CAPITAL IN NATURE WHERE IN 10 % DEPRECIATION IS ALLOWABLE (RS. 33,21,588/-). HENCE AN ADDITION OF RS. 2,98,94,291/- IS BEING MADE. PENALTY PROCEEDINGS U/S 271(1) (C) OF THE INCOME TA X ACT ARE BEING INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME ON THIS ISSUE. 4 3. ON APPEAL, THE CIT(A) DELETED THE ADDITION FOLL OWING THE ORDER OF THIS BENCH OF THE TRIBUNAL DATED 30.7.2009 PASSED IN ASSESSEES CASE IN ITA NO.627/CHD/2009 RELATING TO ASSESSMENT YEAR 200 6-07. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI VINEE T KRISHAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE FOLLOWING DECISIONS PASSED IN ASSESSEES CASE:- (1) ITA NOS. 611/CHD/2006 AND 566/CHD/2007 DATED 30.5.2008 RELATING TO ASSESSMENT YEARS 2003-04 AND 2004-05. (2) ITA NO. 330/CHD/2008 DATED 30.6.2008 RELATING TO ASSESSMENT YEAR 2005-06. (3) ITA NO. 627/CHD/2009 DATED 30.7.2009 RELATING TO ASSESSMENT YEAR 2006-07. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO PERUSED THE ABOVE ORDERS. WE FIND THAT THE ISSUE OF MAINTENAN CE OF FOCAL POINTS IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE ABOVE DECISIONS. WHILE DECIDING ITA NO. 330/CHD/2008 REL ATING TO ASSESSMENT YEAR 2005-06, THE TRIBUNAL HELD AS UNDER:- 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON THE FILE. THE FIRST AND T HE SECOND ADDITION IN THE GROUND RAISED BY THE REVENUE IS THA T THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,77,7 7,476/- MADE ON ACCOUNT OF MAINTENANCE OF FOCAL POINT AND DEVELO PMENT EXPENDITURE OF RS. 4,77,27,323/-. IT IS SEEN THAT THE TRIBUNAL VIDE ORDER DATED 30.5.2008 (SUPRA), HELD AS UNDER:- THE FIRST GROUND RAISED BY THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD F IRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITIONS OF RS. 2,10,09,705/- MADE ON ACCOUNT OF MAINTENANCE OF FOC AL 5 POINT AND RS. 2,62,36,425/- MADE ON ACCOUNT OF DEVELOPMENT EXPENDITURE. ON THE ISSUE OF MAINTENANC E OF FOCAL POINTS, THE CONTENTION ON BEHALF OF THE RE VENUE IS THAT THE ASSESSING OFFICER NOTED FROM THE AUDIT ORS REPORT THAT THE EXPENDITURE INCURRED ON ANY PROJEC T IS DEBITED TO THE WORK IN PROGRESS AND ON COMPLETION O F 60% OF THE PROJECT, THE AMOUNT IS TRANSFERRED TO ST OCKS WITH FULL ESTIMATED PROJECT COST (INCLUDING UNSPENT BALANCE OF 40%). THE LD CIT DR INVITED OUR ATTENTIO N TO PAGE 2 OF THE ASSESSMENT ORDER. PLEA WAS ALSO RAIS ED THAT NO EXPLANATION WAS FURNISHED BY THE ASSESSEE I N ITS SUBMISSION DT 25.11.2005. THE ASSESSEE ON ASKING FOR THE JUSTIFICATION OF THE EXPENDITURE FURNISHED REPL Y DATED 7.12.2005. THE LD ASSESSING OFFICER WAS OF T HE VIEW THAT EXPENDITURE UNDER THESE HEAD IS OF CAPITA L NATURE, CONSEQUENTLY, THE ADDITION TO THE TUNE OF R S. 2,10,09,705/- WAS MADE. OUR ATTENTION WAS INVITED TO THE CONCLUSION OF THE LD CIT(A) AND PAGE 6 OF THE P APER BOOK. THE LD DR ALSO RELIED UPON THE DECISION IN T HE CASE OF CIT VS BRITISH PAINTS INDIA LTD 188 ITR 44 (SC) AND CIT VS PUNJAB STATE INDUSTRIAL DEVELOPMENT CORP N LTD 255 ITR 351(P&H) TO THE EFFECT THAT RES JUDICAT A DOES NOT APPLY TO INCOME TAX MATTERS. ON THE ISSUE OF DEVELOPMENT EXPENDITURE, IT WAS PLEADED BY THE LD CIT DR THAT IN THE ASSESSMENT ORD ER, FACTS HAS BEEN CORRECTLY APPRECIATED WHEREAS THE LD CIT(A) IS UNJUSTIFIED WHILE COMING TO A PARTICULAR CONCLUSION. PLEA WAS RAISED THAT THE IMPUGNED ORD ER BE SET ASIDE. RELIANCE WAS PLACED IN THE CASES OF V.N .R. MEENAKSHI AMMAL V AGRICULTURAL ITO & OTHERS 82 ITR 676(MAD.), DIRECTOR OF INCOME TAX VS DHARM PRATISTHANAM 234 ITR 842(DEL.) AND BHARAT SANCHAR NIGAM LTD V UNION OF INDIA282 ITR 273 (SC) . 3. HOWEVER, THE LD COUNSEL FOR THE ASSESSEE, STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT ASSESSEE IS A GOVERNMENT UNDERTAKING, THE ACCO UNTS OF THE ASSESSEE ARE AUDITED BY THE AUDITORS APPOINT ED BY THE GOVERNMENT DEPARTMENT, THE NATURE OF EXPENSES H AS TO BE UNDERSTOOD, THE ACCOUNTS ARE AUDITED FOR THE PAST SEVERAL YEARS AND THAT IF IN A YEAR ANY PROJECT WAS GOING ON, OUT OF EXPENSES @ 12% EXPENSES WERE TRANSFERRED TO THE PROJECT WORK IN PROGRESS AS SUPERVISION CHARGES OF THE WORK DONE IN RESPECT OF ANY PROJECT, THIS METHO D IS THE RECOGNIZED METHOD BY THE PWD AND WAS ACCEPTED B Y THE DEPARTMENT YEAR TO YEAR. IT WAS PLEADED THAT THE ASSESSEE HAD BEEN FOLLOWING THE RECOGNIZED METHOD FOLLOWED BY THE PWD DEPARTMENT AND ALL THE DETAILS WERE DULY FURNISHED BY THE ASSESSEE. THE LD COUNS EL COUNTERED THAT THE FACTS IN THE CASES RELIED UPON B Y THE LD CIT DR ARE NOT APPLICABLE TO THE FACTS OF THE PR ESENT APPEAL. IT WAS ALSO POINTED OUT THAT IDENTICALLY IN EARLIER ASSESSMENT YEARS THE EXPENSES HAS BEEN ALLO WED BY THE DEPARTMENT ITSELF. 6 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKIN G, DECLARED TOTAL INCOME OF RS. 1,63,69,010/- IN ITS R ETURN FILED ON 1.12.2003 WHICH WAS PROCESSED U/S 143(1) O N 30.3.2004 AND REFUND OF RS.1,13,81,111/- WAS ISSUED ON 22.6.2004. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE, QUESTIONNAIRE ALONGWITH NOTICE S WERE ISSUED TO WHICH THE ASSESSEE FILED A REVISED R ETURN DECLARING TOTAL INCOME OF RS. 1,60,98,250/- ON 9.3. 2005. THE ASSESSEE FILED THE DETAILS DURING ASSESSMENT PROCEEDINGS AND THE SAME WERE PERUSED/EXAMINED BY T HE LD ASSESSING OFFICER. AN AMOUNT OF RS. 2,33,44,106 /- WAS DEBITED BY THE ASSESSEE UNDER THE HEAD MAINTENANCE OF FOCAL POINT IN THE REVISED RETURN. ON ASKING BY THE REVENUE, THE ASSESSEE FURNISHED THE DETAILS/BREAK-UP OF THE EXPENDITURE WHICH IS AS FOL LOWS. XEN I RS. 18,17,646/- XEN II RS. 38,89,901/- XEN IV RS. 1,50,87,304/- XEN ELECTRICAL RS. 25,49,255/- TOTAL RS. 2,33,44,106/- THE BASIS FOR THE IMPUGNED ADDITION IS THE NOTE OF THE AUDITOR WHICH IS REPRODUCED HEREWITH. THE EXPENDITURE INCURRED ON ANY PROJECT IS DEBITED TO WORK IN PROGRESS. ON COMPLETION OF 60% OF THE PROJECT, THE AMOUNT IS TRANSFERRED TO STOCKS WITH FULL ESTIMATED PROJECT COST (INCLUDING UNSPENT BALANCE OF 40%). FOUR UNSPENT BALANCE, THE LIABILITY IS CREATED AND IS SHOWN UNDER THE HEAD OTHER LIABILITIES. AMOUNTS SPENT ON THESE PROJECTS IN SUBSEQUENT YEARS IS DEBITED TO THE HEAD OTHER LIABILITIES. THE EXCESS EXPENDITURE UNDER SPECIFIC SUB HEAD THAN THE PROJECT COST IS CHARGED TO PROFIT AND LOSS ACCOUNT AS MAINTENANCE OF FOCAL POINTS. THE INDIRECT PROJECT EXPENDITURE INCURRED BY THE ENGG. WING INCLUDING ESTATE., ETC. WAS FIRST DEBITED TO DEVELOPMENT EXPENDITURE ACCOUNT UPON 31.3.96, HOWEVER, , ESTATE WING HAS BEEN SEPARATED DURING THE YEAR 1996-97, SO THE EXPENSES OF ESTATE WING HAS BEEN DIRECTLY CHARGED TO PROFIT AND LOSS ACCOUNT INSTEAD OF DEVELOPMENT ACCOUNT. THE DEVELOPMENT CHARGES EARNED FROM THE DEPOSIT WORK, ARE CREDITED TO THE DEVELOPMENT EXPENDITURE ACCOUNT. THE NET AMOUNT OF DEBIT BALANCE IN THE DEVELOPMENT EXPENDITURE ACCOUNT TO THE EXTENT OF 12% OF THE WORK DONE IS APPROPRIATED TO WORK IN PROGRESS AND THE 7 REMAINING AMOUNT IS DEBITED TO THE PROFIT AND LOSS ACCOUNT. WHERE DEVELOPMENT CHARGES RECEIVED/CREDITED FROM DEPOSIT WORKS ARE MORE THAN THE DEVELOPMENT EXPENDITURE, THE CREDIT BALANCE OF THE DEVELOPMENT CHARGES IS TAKEN AS INCOME IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE IN ITS REPLY DT 7.12.2005 CLAIMED THAT THE EXPENDITURE OF RS.233.44 LAKHS ON MAINTENANCE OF FO CAL POINT AND RS. 291.52 LAKHS AS DEVELOPMENT EXPENSES HAVE BEEN CHARGED AS PER SCHEDULE M AND THE EXPENDITURE IS ON YEARLY BASIS. THE HEAD WISE EXPENDITURE BY EACH UNIT WAS CLAIMED AS UNDER:- NAME OF DIVISION WAG ES ELECTRI C BILL REPAIR & MAINTENA NCE TOTA L DIVISION 1 16.1 3 0.96 1.08 18.1 7 DIVISION 2 25.0 5 11.05 2.8 38.9 DIVISION ELEC. 15.4 3 9.98 0.07 25.4 8 DIVISION 8 51.0 8 24.62 75.17 150. 87 THE ARGUMENT OF THE LD CIT DR IS THAT THE NATURE OF EXPENDITURE INVOLVED UNDER THESE HEADS IS NOT BASIC ALLY REVENUE EXPENDITURE AT ALL. RESULTANTLY, IT WAS T REATED AS CAPITAL EXPENDITURE. THE ASSESSEE WAS ESTABLISH ED FOR PROMOTING INDUSTRIES IN THE STATE OF PUNJAB AND TO ASSIST THE ENTREPRENEURS IN SETTING UP VARIOUS PROJ ECTS. IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAD BE EN CONSISTENTLY FOLLOWING THE SAME SYSTEM OF ACCOUNTIN G OVER THE YEARS AND THE RETURN WAS ACCOMPANIED BY ACCOUNTS AUDITED BY THE STATUTORY AUDITORS AND THE TAX AUDIT REPORT WAS APPROVED BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA. SINCE 1962, I.E. YEAR OF CREATION OF THE ASSESSEE COMPANY, THE ASSESSEE HAD BEEN HELPING THE ENTREPRENEURS IN THE STATE OF PUNJAB FO R WHICH THE INFRASTRUCTURE WAS CREATED AND FROM 1973 ONWARDS, THE ASSESSEE RAISED MANY INDUSTRIAL FOCAL POINTS UPTO THE FINANCIAL YEAR 1984-85 BY MAKING ROADS, LAYING SEWERAGE SYSTEM, ELECTRICITY, WATER S UPPLY ETC. MAINLY THE FOCAL POINTS WHICH WERE DEVELOPED SO FAR ARE LOCATED AT VARIOUS CITIES OF THE STATE OF P UNJAB. THE HEAD WISE EXPENDITURE INCURRED BY EACH UNIT IS TO THE TUNE OF RS. 233.42 LAKHS, THE DETAILS/BREAK-UP OF WHICH ARE AVAILABLE AT PAGE 3 OF THE IMPUGNED ORDER . LIKEWISE THE BREAK UP OF EXPENDITURE OF RS. 291.51 LAKHS IS AVAILABLE IN PARA 3.3 (PAGE 4) OF THE IMPU GNED ORDER. IF THE BREAK UP OF EXPENDITURE IS ANALYSED , IT IS CLEARLY ESTABLISHED THAT IT WAS INCURRED FOR PAYMENT/WAGES OF WORKERS, REPAIR JOBS, ELECTRICITY BILLS AND OTHER REPAIR AND MAINTENANCE EXPENSES FOR THE F OCAL 8 POINTS AND THEIR UPKEEPING ALONGWITH MAINTENANCE OF PARKS AND HORTICULTURE. IT IS ALSO AN ADMITTED P OSITRON THAT THE ENTIRE EXPENDITURE WAS INCURRED IN THE NOR MAL COURSE OF BUSINESS. THE EXPENDITURE CLAIMED UNDE R THE SUBJECT TWO HEADS IN THE PRECEDING YEARS ARE AS UND ER:- A.Y MAINTENANCE OF FOCAL POINTS DEVELOPMENT EXPENDITURE OVER AND ABOVE ESTIMATE (RUPEES IN LAKHS) 1997- 98 183.19 40.85 1998- 99 215.01 33.96 1999- 00 197.28 184.58 2000- 01 379.89 82.95 2001- 02 265.11 220.43 2002- 03 289.68 276.29 2003- 04 233.44 291.51 IF THE AFORESAID FIGURES ARE ANALYSED, IT CAN BE SA ID THAT THE LD ASSESSING OFFICER HAS DISALLOWED THESE EXPEN SES IN A SUMMARY MANNER WITHOUT CONSIDERING THE PAST HISTO RY OF THE ASSESSEE AND ALSO WITHOUT BRINGING ANY MATER IAL ON RECORD THAT ANY NEW ASSET WAS CREATED WHICH IS O F ENDURING BENEFIT TO THE ASSESSEE CORPORATION. THE QUESTION WHETHER A PARTICULAR EXPENDITURE IS A REVE NUE EXPENDITURE OR CAPITAL EXPENDITURE HAS TO BE VIEWED FOR THE PURPOSE OF BUSINESS AND IN THE LARGER CONTEXT O F BUSINESS NECESSITY AND EXPEDIENCY. IF THE OUTGOINGS/EXPENDITURE IS SO RELATED TO CARRYING ON OR CONDUCT OF THE BUSINESS, IT HAS TO BE REGARDED AS A N INTEGRAL PART OF PROFIT EARNING PROCESS AND NOT FOR ACQUISITION OF NEW ASSET OR A RIGHT OF A PERMANENT CHARACTER, THEN IT HAS TO BE TREATED AS REVENUE. W HERE THE EXPENDITURE IS LINKED WITH ACQUISITION OF A NEW ASSET OR AN INTEREST OR RIGHT OF A PERMANENT CHARACTER, I T HAS TO BE TREATED AS CAPITAL IN NATURE. THERE IS NO CLEA R CUT DEFINITION IN THE ACT REGARDING CURRENT REPAIRS, HO WEVER, THE SAME HAS TO BE CONSIDERED IN ITS POPULAR OR COMMERCIAL SENSE. IN COMMERCIAL PARLANCE, IT MEAN S THE REPAIR WHICH ARE UNDERTAKEN IN THE NORMAL COURS E OF USER FOR THE PURPOSES OF PRESERVATION, MAINTENANCE OR PROPER UTILIZATION OF ASSETS OR FOR RESTORING IT TO ITS ORIGINAL CONDITION. THE PAYMENTS ON ACCOUNT OF CUR RENT REPAIR MUST BE UNDERSTOOD IN CONTRADICTIONS TO PAYM ENT FOR ADDITIONS OR IMPROVEMENTS. THE OBJECT OF THE EXPENDITURE SHOULD NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW OR DIFFERENT ADVANTAGE . ADMITTEDLY, THE QUANTUM OF EXPENDITURE, INCURRED ON CURRENT REPAIRS IS NOT THE DETERMINING FACTOR BECAU SE THE EXTENT OF REPAIRS AND THE AMOUNTS SPENT THEREIN WOU LD 9 DEPENDS UPON VARIOUS FACTORS. SIMILARLY, BY MERE FACT THAT OLD PARTS WERE REPLACED WITH NEW PARTS, IT CAN NOT BE SAID THAT A NEW ASSET IS BROUGHT INTO EXISTENCE. ANOTHER FACTOR WHICH IS MORE IMPORTANT TO BE MENTIO NED HERE IS THAT THE METHOD OF ACCOUNTING BEING CONSIST ENTLY FOLLOWED BY THE ASSESSEE COMPANY HAS BEEN ACCEPTED IN EARLIER YEARS AND SUCH CLAIMS WAS ALLOWED BY THE REVENUE ITSELF AS REVENUE EXPENDITURE, THEREFORE, F ROM THE ANGLE OF CONSISTENCY ALSO IT FAVOURS THE ASSESS EE FOR WHICH THE UNDER MENTIONED DECISIONS CAN BE QUOTED:- DHANSIRAM AGGARWAL V CIT (217 ITR 4) (GUJ) TARABEN RAMANBHAI PATEL ETC. V ITO (215 ITR 323) (G UJ) CIT V NEO POLY PACK PVT LTD (245 ITR 492) (DEL.) ACIT VS GAINDA LAL HAZARI LAL & CO (263 ITR 679)(M. P.) CIT VS A.R.J. SECURITY PRINTERS (264 ITR 276)(DEL) THE RATIO LAID DOWN BY THE HON'BLE COURTS IN THE AFORESAID DECISIONS ARE THAT IF A SIMILAR RELIEF HA S BEEN ALLOWED IN EARLIER YEARS AND HAS ATTAINED FINALITY AND THERE IS A NO CHANGE IN THE BUSINESS OR FRESH MATER IAL BROUGHT ON RECORD, THE SAME CANNOT BE DENIED IN THE SUBSEQUENT YEARS. 5. DURING ARGUMENTS THE LD CIT DR RELIED UPON THE DECISION IN THE CASE OF BHARAT SANCHAR NIGAM LTD & OTHERS V UNION OF INDIA & OTHERS (2006) (282 ITR 27 3 (SC) TO THE EFFECT THAT IN TAX CASES RELATING TO SUBSEQUENT YEARS INVOLVING THE SAME ISSUE, THE COUR T CAN DIFFER. WE ARE IN FULLY AGREEMENT WITH THIS ARGUM ENT OF THE LD CIT DR. HOWEVER, AT THE SAME TIME IT IS ALS O NECESSARY THAT THE FACT HAS TO BE DISTINGUISHED FRO M THE EARLIER YEARS AND ALSO THAT THE EARLIER DECISION DO ES NOT REPRESENT THE TRUE LAW OR THE FACTS ARE DIFFERENT. THE HON'BLE APEX COURT IN THE AFORESAID CASE HAS CLEARL Y HELD THAT THE COURT OF SUPERIOR JURISDICTION CAN OV ERRULE THE DECISION OF THE LOWER STRENGTH AND MORE IMPORTA NT IS IF THE FACTS ARE DISTINGUISHABLE OR PER INCURIAM. THE ANOTHER CASE RELILED UPON BY MRS PURI, THE LD CIT D R IS DIRECTOR OF INCOME TAX VS DHARAM PRITASHANAM (234 ITR 842)(DEL) TO THE EFFECT THAT RULE OF RES-JUDICA TA IS NOT APPLICABLE TO THE TAX ASSESSMENT PROCEEDINGS. THE HON'BLE DELHI HIGH COURT HELD THAT EVERY YEARS ASSESSMENT IS INDEPENDENT AND RES-JUDICATA IS NOT APPLICABLE. THE PETITIONER HAS RIGHT TO SEEK REFER ENCE OF QUESTION OF LAW EVEN IF SUCH REFERENCE WAS NOT SOUG HT IN EARLIER YEARS. IDENTICAL RATIO WAS LAID DOWN IN TH E CASE OF LACHHIRAM PURAN MAL V CIT (171 CTR (M.P.) 640. THE FOLLOWING CASES TO THIS EFFECT CAN ALSO BE RELI ED UPON. NEW JAHANGIR VAKIL MIILS LTD V CIT (49 ITR 137) (SC) M.M. IPOH V CIT (67 ITR 106) (SC) 10 CIT V BRIJ LAL LOHIA & MAHIVIR PRASAD KHEMKA (84 ITR 273 (SC)] CIT V BRITHISH PAINTS INDIA LTD 91 CTR (SC) 108 BINOY RATTAN BANERJEE V CIT (15 ITR 98)(ALL) CIT V M.CHAWLA (177 ITR 289) (DEL) IF THE AFORESAID DECISIONS ARE KEPT IN JUXTAPOSITIO N WITH THE FACTS OF PRESENT APPEAL, SUGGESTS THAT THE ASSE SSEE MADE THE PROVISION OF EXPENDITURE UNDER THE HEADS MAINTENANCE OF FOCAL POINT AND HAS DEBITED THESE AMOUNTS IN THE PROFIT AND LOSS ACCOUNT. THE LD COU NSEL FOR THE ASSESSEE, DURING ARGUMENT, PLEADED THAT THE SE EXPENSES WERE INCURRED ONLY FOR CURRENT REPAIRS AND REPLACEMENT AND AS A RESULT THEREOF IDENTITY OF TH E EXISTING ASSET HAS NOT BEEN AFFECTED. THIS CLAIM OF THE ASSESSEE WAS NEITHER CONTROVERTED BY THE REVENUE NO R ANY EVIDENCE WAS BROUGHT ON RECORD EVIDENCING THAT THE ASSESSEE GOT THE BENEFIT OF ENDURING NATURE OR ANY NEW ASSET WAS CREATED. EVEN OTHERWISE FOR ASSESSMENT YEAR 1984-85, THE APPEAL OF THE DEPARTMENT, ON IDENTICAL FACT, THE TRIBUNAL DECIDED IN FAVOUR OF THE ASSESSEE. T HE FOLLOWING PARA FROM THE ORDER IS WORTH MENTIONING. WE HAVE LOOKED INTO THE FACTS OF THE CASE AND WE FIND THAT LOOKING TO THE PAST HISTORY, THE CIT(A) HAS TAKEN A CORRECT VIEW IN THE MATTER AND THERE WAS NO JUSTIFICATION TO MAKE THE ADDITION. THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE IS THE SAME AS IN THE PAST. NO OBJECTION CAN BE TAKEN TO THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE CONSISTENTLY. WE, THEREFORE, FIND NO FORCE IN GROUND NO. 5 ALSO AND IT IS REJECTED . ANOTHER POINT PERTINENT TO MENTION HERE IS THAT ALL THESE FOCAL POINTS HAD ALREADY BEEN DEVELOPED LONG BACK EXCEPT ONE AT PATHANKOT, BHATINDA, TANDA, MALOT AND RAJKOT AND THE SYSTEM WAS EXPLAINED TO BE DERIVED DECADE BACK FROM PWD ON ANY COST OF PROJECT, 12% AR E THE SUPERVISION CHARGES AND THIS SYSTEM WAS CONSISTENTLY FOLLOWED FROM YEAR TO YEAR AND ACCEPTE D IN THE PAST BY THE DEPARTMENT. ADMITTEDLY, WHETHE R A PARTICULAR EXPENDITURE IS CAPITAL OR REVENUE IS AGE LONG DEBATABLE POINTS. THESE ARE REALLY ABSTRACT CONCEP TS WHICH HAVE NOT BEEN DEFINED BY THE ACT OF PARLIAME NT, THEREFORE, IN THE ABSENCE OF LEGISLATIVE DEFINITION , IT BECOMES NECESSARY FOR THE COURT TO FIND OUT THEMSEL VES WHETHER THE EXPENDITURE IN A GIVEN CASE FALLS UNDER THE CATEGORY OF CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. THE VARIOUS DECISIONS BY THE VARIOU S FORUMS RECOGNIZED THE NECESSITY AND PROVIDED INNUMERABLE ILLUSTRATIONS AND THE LEGAL CRITERIA AN D THEIR APPLICABILITY. LORD REDELIFFE OBSERVED THAT THE SUBJECT IS ONE WHERE IT IS DIFFICULT TO FIND ANY FR ESH GROUND UPON WHICH TO STAND, SO MUCH HAS BEEN TRAMPL ED DOWN BY ARMIES OF CONFLICTING WORDS. AND YET PEACE 11 HAS NOT COME TO THIS POOR SECTION (INSTITUTION OF MECHANICAL ENGINEERS V CANE (1961) A.C. 696, 718 (HL) IN THE CASE OF BUCKLEY L.J. IN LURCOTT V WAKE LY & WHELLERS [1911] 1 KB 905, 923, 924 (CA), THE MEANIN G OF REPAIR IT WAS OBSERVED AS UNDER:- REPAIR AND RENEW ARE NOT WORDS EXPRESSIVE OF A CLEAR CONTRAST. REPAIR IS RESTORATION BY RENEWAL OR REPLACEMENT OF SUBSIDIARY PARTS OF A WHOLE. RENEWAL, AS DISTINGUISHED FROM REPAIR, IS RECONSTRUCTION OF THE ENTIRETY, MEANING BY THE ENTIRETY NOT NECESSARILY THE WHOLE BUT SUBSTANTIALLY THE WHOLE SUBJECT-MATTER UNDER DISCUSSION. THE QUESTION OF REPAIR IS IN EVERY CASE ON OF DEGREE, AND THE TEST IS WHETHER THE ACT TO BE DONE IS ONE WHICH IS SUBSTANCE IS THE RENEWAL OR REPLACEMENT OF DEFECTIVE PARTS, OR THE RENEWAL OR REPLACEMENT OF SUBSTANTIALLY THE WHOLE . IF THE TEST LAID DOWN BY VARIOUS AUTHORITIES/HON'BLE COURTS ARE KEPT IN JUXTAPOSITIO N WITH THE FACTS OF THE PRESENT APPEAL, THEN IT CAN B E SAID THAT THE CONCLUSION LEADS TO A CONCEPT THAT WHETHER A THING IS REPAIR OR NOT IS TO BE SEEN WHETHER THE EXPENDITURE INCURRED WAS FOR THE PURPOSES OF REPLACEMENT OF DEFECTIVE PARTS OR REPLACEMENT IS IN ITS ENTIRETY OR OF A SUBSTANTIAL PART HAS TO BE CONSIDE RED. THE HON'BLE PRIVY COUNCIL IN RHODESIA RAILWAYS LTD V INCOME TAX COLLECTOR (1933) 1 ITR 227, A SUM OF POUND 252174 WERE SPENT FOR THE PURPOSES OF RENEWIN G 74 MILES OF ITS RAILWAY TRACK OUT OF 394 MILES OF I TS TOTAL LENGTH OF THE TRACK OWNED BY THEM WAS HELD TO BE AN ALLOWABLE DEDUCTION AS IT WAS NOT OF CAPITAL NATURE BUT WAS EXPENDED FOR THE REPAIR OF THE PROPERTY OCCUPIE D FOR THE PURPOSES OF TRADE. OPPOSITE TO THE ABOVE, IN THE CASE OF HIGHLAND RAILWAY COMPANY V BALDERSTON (1889 ) 2 TC 485, IT WAS HELD THAT SUBSTITUTION OF ONE KIND OF RAIL FOR ANOTHER STEEL RAILS FOR IRON RAILS WAS H ELD TO BE CAPITAL EXPENDITURE AS THERE WAS MATERIAL ALTERNATI ON AND IMPROVEMENT IN THE CORPUS OF THE HERITABLE ESTA TE OF THE COMPANY. THE REPAIR AFTER SPENDING CONSIDERAB LE AMOUNT OF MONEY BUT THAT ALONE WOULD NOT TAKE AWAY ITS CHARACTER AS REPAIR. FOR THIS PROPOSITION, WE CAN DRAW SUPPORT FROM THE DECISION OF THE HON'BLE APEX COURT IN CIT VS MAHALAXMI TEXTILE MILLS LTD (1967) 66 ITR 71 0 (SC). THE DECISION BY THE HON'BLE MADRAS HIGH COUR T IN CIT VS SHRI RAM SUGAR MILLS (1952) 21 ITR 191 CA N ALSO BE RELIED UPON. IDENTICAL RATIO WAS LAID DOW N IN THE CASE OF C.R. CORERA V CIT (49 ITR 188)(MAD) AND HANUMAN MOTOR SERVICE V CIT (66 ITR 88)(MYSORE) AND THE HON'BLE PUNJAB HIGH COURT IN CIT VS KHALSA NIRBHAI TRANSPORT COMPANY PVT LTD (82 ITR 741). IDENTICAL RATIO WAS LAID DOWN IN THE CASE OF RAMKIS HAN SUNDER LAL V CIT (19 ITR 324) (ALL), CIT V DHARBHAN GA 12 SUGAR COMPANY LTD (29 ITR 21)(PATNA), CIT VS SHRI RAM SUGAR MILLS (21 ITR 191)(MAD) AND BOMBAY HIGH COURT IN THE NEW SHORROCK SPINNING & MANUFACTURING COMPANY LTD V CIT (30 ITR 338), CIT VS OXFORD UNIVERSITY PRESS (108 ITR 166) AND THE HON'BLE GUJ RAT HIGH COURT IN THE CASE OF ADDL. CIT V DESAI BROTHER S (108 ITR 14). IN THE LIGHT OF THE AFORESAID FACT S AND JUDICIAL PRONOUNCEMENTS, WE HAVE NOT FOUND ANY INFIRMITY IN THE IMPUGNED ORDER, THEREFORE, IDENTIC AL VIEW WILL BE APPLICABLE FOR DEVELOPMENT EXPENDITUR E ALSO, CONSEQUENTLY, THIS GROUND OF THE REVENUE IS H AVING NO MERIT. 6. THE FACTS OF THE PRESENT YEAR AND THE FACTS OF T HE ASSESSMENT YEAR 2005-06 ARE SIMILAR. IT IS ALSO STATED THAT THERE IS NO CHANGE IN THE FACTS. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), WE DISMISS GROUND NO.1 OF THE REVENUES APPEAL. 7. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 6,86,266/- ON ACCOUNT OF UDYOG SAHAYAK EXPENSES . 8. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFI CER MADE AN ADDITION OF RS. 6,86,266/- BY DISALLOWING THE EXPE NDITURE UNDER THE HEAD UDYOG SAHAYAK EXPENSES. 9. ON APPEAL, THE CIT(A) DELETED THE ADDITION FOLLO WING THE ORDER OF THIS BENCH OF THE TRIBUNAL DATED 30.7.2009 PASSED IN ASSESSEES CASE IN ITA NO. 627/CHD/2009 RELATING TO ASSESSMENT YEAR 20 06-07. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE ORDER OF THE TRIBUNAL DATED 30.7.2009 IN ITA NO. 62 7/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07. WHILE DECIDING A SIMIL AR ISSUE IN ASSESSMENT YEAR 2006-07, THE TRIBUNAL HELD AS UNDER:- 13 4. AS FAR AS THE ISSUE ON ACCOUNT OF UDYOG SAHAYA K EXPENSES ARE CONCERNED, THIS IS ALSO COVERED BY THE AFORESAID DE CISION. THE RELEVANT PORTION OF THE AFORESAID ORDER IS REPRODUC ED HEREWITH: - 4. THE NEXT ADDITION OF RS. 27,85,764/- , CHALLENG ED BY THE REVENUE, PERTAINS TO EXPENSES ON ACCOUNT OF UDH OG SAHAYAK. BOTH THE LD REPRESENTATIVE AGREED THAT TH IS ISSUE HAS ALSO BEEN CONSIDERED BY THE TRIBUNAL IN THE AFO RESAID ORDER. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE HAVE FOUND THAT THE TRIBUNAL IN ORDER DATED 30.5.2008 (S UPRA) VIDE PARA 8 (PAGE 14) HELD AS UNDER:- 8. THE NEXT GROUND I.E. GROUND NO. (III) OF THE IMPUGNED APPEAL PERTAINS TO DELETING THE ADDITION O F RS. 22,23,328/- MADE ON ACCOUNT OF UDYOG SAHAYAK EXPENSES. AT THE OUTSET IT WAS POINTED OUT THAT TH IS ISSUE HAS BEEN DELIBERATED UPON BY THE TRIBUNAL I N THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 1996-97 (ITA NO. 243/CHD/2000). THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY THE LD COUNSEL FOR THE ASSESSEE. WE HAVE FOUND THAT THE TRIBUNAL VIDE PARA 11 HAS DELIBERATED UPON THIS ISSUE IN THE AFORESAID ORDER DT 27.1.2004, THE SAME IS REPRODUCE D HEREWITH: WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE EVIDENCE AND MATERIAL PLACED ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE- CORPORATION HAS BEEN SET UP MAINLY FOR PROMOTING INDUSTRIES IN THE STATE OF PUNJAB AND TO ASSIST THE ENTREPRENEURS TO SET UP VARIOUS PROJECTS. AS A PART OF SUCH ACTIVITY AND IN PURSUANCE OF THE NOTIFICATION ISSUED BY THE GOVT. OF PUNJAB DATED 20.11.92, THE ASSESSEE WAS ASKED TO BEAR 30% OF THE EXPENDITURE TO BE INCURRED BY UDHYOG SAHAYAK. THUS, INCURRING OF SUCH EXPENDITURE WAS OBLIGATORY AND DIRECTLY CONNECTED WITH THE ACTIVITIES OF THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD NO SHARE OR RIGHT IN THE ASSETS ACQUIRED BY THE UDHYOG SAHAYAK WITH THE ASSISTANCE OF THE ASSESSEE. THEREFORE, BY INCURRING SUCH EXPENDITURE, THE ASSESSEE HAS NEITHER ACQUIRED ANY CAPITAL ASSET NOR ANY BENEFIT OF ENDURING IN NATURE. THUS, WE ARE OF THE CONSIDERED OPINION THAT LD CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION OF THE SAME AS SUCH EXPENDITURE WAS REVENUE IN NATURE. WE CONFIRM HER ORDER AND DISMISS THIS GROUND OF THE REVENUES APPEAL AS WELL . 14 IN THE LIGHT OF THE AFORESAID CONCLUSION AND SPECIA LLY THE FACTS WERE CONSENTED TO BE IDENTICAL, WE UPHOLD THE STAND OF THE LD CIT(A). IT IS PERTINENT TO MENTION HERE THAT WHILE COMING TO THE AFORESAID DECISION THE BENCH HAS ALREADY CONSIDERED THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 1996-97 (ITA NO. 243/CHD/2000). IN VIEW OF THESE FACTS, SINCE NO CONTRARY DECISIONS OR CHANGE IN FAC T WAS BROUGHT TO OUR NOTICE BY THE RESPECTIVE PARTIES, RESPECTFULLY FOLLOWING THE SAME, WE UPHELD THE IMPUGNED ORDER. IN THE ABSENCE OF ANY CONTRARY DECISION / FACTS, WE HAVE NO HESITATION TO UPHOLD THE STAND OF THE LEARNED CIT(A) SPECIALLY WHEN HE HAS FOLLOWED THE DECISION OF THE TRIBUNAL F OR EARLIER YEARS, CONSEQUENTLY, THIS GROUND IS ALSO HAVING NO MERIT. 11. IT IS AN ADMITTED POSITION THAT THERE IS NO CHA NGE IN THE FACTS AS COMPARED TO THE ASSESSMENT YEAR 2006-07. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DATED 30.7.2009 RELATING TO ASSESSMENT YEAR 2006-07, WE DISMISS GROUND NO. 2 OF THE APPEAL . 12. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF OCTOBER, 2011. SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 24 TH OCTOBER, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR