The ACIT,(OSD) Circle-8, Ahmedabad V. Sarkar Jewellers (P) Ltd., Ahmedabad

ITA 969/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76743 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N DIVETIA
• Keywords: Capital asset; Depreciation; Revenue expenditure

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.969/AHD/2011 [ASSTT.YEAR : 2007-2008] ACIT(OSD), CIR.8 AHMEDABAD. /VS. SARKAR JEWELLERS P. LTD. 302, B.K. HOUSE, C.G. ROAD AHMEDABAD. PAN : APCCS 1094 D ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI P.L. KUREEL, SR.DR 4& 1 2 )/ ASSESSEE BY : SHRI S.N. DIVETIA 5 1 &(*/ DATE OF HEARING : 9 TH MAY, 2014 678 1 &(*/ DATE OF PRONOUNCEMENT : 06-06-2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-2008 IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A). 2. THE GROUND NO. OF THE APPEAL OF THE REVENUE IS A S UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DIRE CTING TO ALLOW THE DEDUCTION OF THE ENTIRE AMOUNT OF SHOP RENOVATI ON AND CURRENT REPAIRS EXPENDITURE AMOUNTING TO RS.10,33,984/- AS CLAIMED BY THE ITA NO.969/AHD/2011 -2- ASSESSEE AND WITHDRAW DEPRECIATION ALLOWANCE OF RS. 51,699/- GRANTED THEREUPON. 3. THE LEARNED DR SUBMITTED THAT THE AMOUNT WAS SPE NT BY THE ASSESSEE ON RENOVATION OF ITS JEWELLERY SHOP AND THE ASSESSE E HAS PURCHASED NEW TILES DURING THE YEAR, AND THEREFORE, COULD NOT BE ALLOWED AS REVENUE EXPENDITURE. HE REFERRED TO RELEVANT PORTIONS OF T HE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISIONS OF THE HONBLE COURTS CITED BY THE AO WERE DISTINGUISHABLE ON FACTS. HE SUBMITTED THAT THE BU SINESS PREMISES OF THE ASSESSEE WERE TAKEN ON LEASE AND THE ASSESEE HAS RE PLACED OLD TILES, WOODEN PARTITION, PEST CONTROL, COLOURING, ROLLING SHUTTER, FLAT GLASS, PLYWOOD, SANITARY WARE, HARDWARE AND LABOUR CHARGES . HE RELIED ON THE ORDER OF THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT NO NEW ASSET HAS C OME INTO BEING ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON REPLACEMENT OF OLD TILES, WOODEN PARTITION, PEST CONTROL, COLOURING, R OLLING SHUTTER, FLAT GLASS, PLYWOOD, SANITARY WARE, HARDWARE AND LABOUR CHARGES THEREON. THE BUSINESS PREMISES OF THE ASSESSE WERE TAKEN ON LEAS E. IN THE FACTS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ESSEN TIALLY WERE REVENUE IN NATURE AND NOT FOR ACQUISITION OF NEW ASSET. ACCOR DINGLY, THE GROUND NO.1 OF THE REVENUE IS DISMISSED. 5. THE GROUND NO.2 OF THE REVENUE IS AS UNDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.1,00,962/- MADE BY THE AO ON ACCOUNT OF COMPUTER ITA NO.969/AHD/2011 -3- SOFTWARE MAINTENANCE EXPENSES AND WITHDRAW THE DEPR ECIATION ALLOWANCE OF RS.20,756/- ON THIS SCORE. 6. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS R EPLACED SOFTWARE, AND THEREFORE, WAS RIGHTLY TREATED AS CAPITAL IN NA TURE AND DISALLOWED BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS MERE REPLACEMENT OF OLD SOFTWARE AND THE ASSESSEE HAS TO UPDATE LATEST VERSION OF THE SOFTWARE FOR THE BUSINESS PURPOSE AND HAS NO T RESULTED IN CREATION OF A NEW ASSET. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). THE BASIC FACTS OF THE ISSUE AR E NOT IN DISPUTE. THE EXPENDITURE INCURRED BY THE ASSESSEE ON REPLACEMENT OF OLD SOFTWARE FOR RS.69,187/- AND REST OF THE EXPENDITURE ON ACCOUNT OF ANNUAL MAINTENANCE CHARGES. THIS REPLACEMENT OF LATEST VERSION OF THE SOFTWARE DOES NOT RESULT IN CREATION OF A NEW CAPITAL ASSET OR IN EXPANSION OF THE CAPITAL BASE, AND THEREFORE, HAS TO BE ALLOWED AS REVENUE EXPENDITURE UNDER SECTION 37(1). ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO.2 OF THE REVENUE IS DISMISSED. 8. THE GROUND NO.3 OF THE REVENUE IS AS UNDER: 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DIRE CTING TO ALLOW THE CLAIM OF SHORT TERM CAPITAL LOSS AMOUNTING TO R S.84,174/- ON MOTOR CAR (DEPRECIABLE ASSET) U/S.50 OF THE ACT. 9. THE LEARNED DR SUBMITTED THAT THE ASSESSEE COULD NOT EXPLAIN THAT WHY THE MOTOR CAR WAS SOLD AT A PRICE WHICH WAS LES S THAN THE WDV OF THE CAR TO IS OWN DIRECTOR, AND THEREFORE, DISALLOWANCE OF RS.84,174/- ON MOTOR CAR WAS RIGHTLY MADE BY THE AO. THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE MOTOR CAR WAS REFLECTED IN THE A SSESSEES BALANCE SHEET ITA NO.969/AHD/2011 -4- YEAR AFTER YEAR AND IT IS USUAL PRACTICE TO SELL TH E OLD VEHICLES TO ITS OWN EMPLOYEES. HE RELIED ON THE ORDER OF THE CIT(A). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE HAS N OT EXPLAINED THE REASON THAT WHY THE MOTOR CAR WAS SOLD AT AN AMOUNT LESS THAN RS.84,174/- THAN THE WDV OF THE CAR TO ITS OWN DIRECTOR. THE C IT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THE MOTOR CAR SHOWN BY T HE ASSESSEE IN ITS BALANCE SHEET IN THE PREVIOUS YEAR AND THE DEPARTME NT HAS ALLOWED ADMISSIBLE DEPRECIATION IN THE HANDS OF THE ASSESSE E. IN THESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT SATISFACTOR ILY EXPLAIN THE REASON FOR SELLING THE MOTOR CAR TO ITS OWN DIRECTOR AT A PRIC E LESS THAN THE WDV AS PER THE RECORD OF THE ASSESSEE. IN THESE FACTS, WE HOLD THAT ENDS OF JUSTICE SHALL BE MET, IF THE CLAIM OF THE ASSESSEE OF SHORT TERM CAPITAL LOSS OF RS.84,174/- ON SALE OF MOTOR CAR IS RESTRICTED TO R S.40,000/- AS AGAINST THE CLAIM OF RS.84,174/- ALLOWED BY THE CIT(A), AND ACC ORDINGLY, THE GROUND NO.3 OF THE REVENUE IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD