DCIT 8(2), MUMBAI v. KARAMTARA ENGG. P. LTD, MUMBAI

ITA 7331/MUM/2008 | 2005-2006
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 733119914 RSA 2008
Bench Mumbai
Appeal Number ITA 7331/MUM/2008
Duration Of Justice 1 year(s) 5 month(s)
Appellant DCIT 8(2), MUMBAI
Respondent KARAMTARA ENGG. P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Date Of Final Hearing 18-05-2010
Next Hearing Date 18-05-2010
Assessment Year 2005-2006
Appeal Filed On 30-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D.MANMOHAN HONBLE VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER ITA. NO. 7134/MUM/2008 ASSESSMENT YEAR 2005-2006 M/S. KARAMTARA ENGINEERING PVT. LTD. MUMBAI 400 053. PAN AABCK-1921-E VS. DCIT 8 (2) MUMBAI 400 020 (APPELLANT) (RESPONDENT) ITA. NO. 7331/MUM/2008 ASSESSMENT YEAR 2005-2006 DCIT 8 (2) MUMBAI 400 020 VS. M/S. KARAMTARA ENGINEERING PVT. LTD. MUMBAI 400 053. PAN AABCK-1921-E (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B.V. JHAVERI FOR REVENUE : S/SHRI S.S. RANA & PEEYUSH JAIN (D R) ORDER PER D.MANMOHAN V.P. 1. THESE CROSS-APPEALS ARE DIRECTED AGAINST THE OR DER DATED 13-10-2008 PASSED BY THE CIT(A)-VIII AND THEY PERT AIN TO THE ASSESSMENT YEAR 2005-2006. GROUND URGED BY THE REVE NUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW RS.17 34 466/- AS REVENUE EXPENDITURE OUT OF TOTAL AMOUNT OF RS.45 38 595/- DISALLOWED BY THE A.O. BEI NG REPAIR AND MAINTENANCE EXPENSES WITHOUT APPRECIATIN G THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 1.1. IN THE APPEAL FILED BY THE ASSESSEE THE FOLLO WING GROUND WAS URGED : THE LEARNED CIT(A) HAS ERRED IN DISALLOWING REPAIR S AND MAINTENANCE EXPENSE OF RS.28 01 129/- BY TREATING I T AS CAPITAL EXPENDITURE. AS EXPENDITURE IS REVENUE IN N ATURE IT SHOULD BE ALLOWED IN FULL. 2. FACTS OF THE CASE REVOLVE IN A NARROW COMPASS. ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE O F TRANSMISSION TOWERS AND WAS ALSO DOING GALVANIZING WORK. IN RESP ECT OF PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-2006 IT DECLA RED TOTAL INCOME OF RS. 1.03 CRORES ACCOMPANIED BY AUDIT REPORT. TH OUGH THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT LAT ER IT WAS TAKEN-UP FOR SCRUTINY. ON VERIFICATION OF THE RECORD IT WAS NOTICED THAT ASSESSEE- COMPANY DEBITED TO THE P & L ACCOUNT AN AMOUNT OF R S.60 50 687/- ON ACCOUNT OF REPAIRS AND MAINTENANCE WHICH ARE CAP TIONED AS REPAIRS TO SHED COMPOUND WALL ETC. AS REGARDS EXPENDITURE OF RS.45 38 595/- THE ASSESSING OFFICER CALLED UPON TH E ASSESSEE TO SHOW CAUSE AS TO WHY THE SAID EXPENDITURE SHOULD NOT BE CAPITALIZED. IN RESPONSE THERETO THE ASSESSEE-COMPANY SUBMITTED THA T NO ASSET OF ENDURING BENEFIT HAS COME INTO EXISTENCE BY VIRTUE OF SUCH EXPENDITURE SINCE REPAIRS OF COMPOUND WALL ETC. CA NNOT BE CONSIDERED AS NEW CONSTRUCTION. 3. HOWEVER ASSESSING OFFICER REJECTED THE CONTENT ION OF THE ASSESSEE. HE OBSERVED THAT DESCRIPTION OF THE WORKS DONE CLEARLY SHOW THAT ASSESSEE HAD ACQUIRED ENDURING BENEFIT AND HEN CE EXPENDITURE IS OF CAPITAL IN NATURE. ACCORDINGLY HE ALLOWED DEPREC IATION @ 10% ON SUCH EXPENDITURE. THUS A NET AMOUNT OF RS.40 84 73 5/- CAME TO BE DISALLOWED. 3 4. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) DISPOSED OF THE APPEAL BY APPLYING THE PRINCIPLES OF NATURAL JUSTICE WITHOUT GOING INTO THE MAIN ISSUE AS TO WHETHER ASS ET CREATED BY INCURRING SUCH EXPENDITURE GIVES THE ASSESSEE AN EN DURING BENEFIT. OBSERVATIONS OF THE LEARNED CIT(A) ARE EXTRACTED FO R IMMEDIATE REFERENCE : 2.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ORDER OF THE A.O. FROM THE PERUSAL OF THE DETAILS OF REPAIR & MAINTENANCE EXPENDITURE AS GIVE N ABOVE IT IS TRUE THAT IT INCLUDES GENUINE REPAIRS AND ALSO EXPENDITURE OF CAPITAL NATURE. THE GENERAL REPAIRS & MAINTENANCE OF SHED AND COMPOUND WALL CANNOT BE RULED OUT. HOWEVER TO REACH AT A CONCLUS ION THAT WHICH AMOUNT IS OF REVENUE NATURE AND WHICH ON E IS OF CAPITAL NATURE. KEEPING IN VIEW THE PRINCIPLE OF NATURAL JUSTICE A PARAMETER IS ADOPTED THAT THE EXPENDITURE SHOWN AT MORE THAN RS.2 LACS IS TAKEN A S EXPENDITURE UNDER THE HEAD CAPITAL WHICH IS OF EN DURING NATURE AND THE AMOUNT LESS THAN RS. 2 LACS IS TREAT ED AS REVENUE EXPENDITURE ALLOWABLE TO THE APPELLANT. BY ADOPTING THIS PARAMETERS THE AMOUNT OF RS.28 01 12 9/- OUT OF THE TOTAL AMOUNT OF RS. 45 38 595/- IS TAKEN AS CAPITAL EXPENDITURE AND THE BALANCE AMOUNT OF RS.17 37 466/- (RS.45 38 595/- (-) RS.28 01 129/-) IS TREATED AS REVENUE EXPENDITURE. THE DEPRECIATION AT THE RATE OF 10% IS ALLOWABLE ON THIS AMOUNT OF RS.28 01 129/- . THE A.O. IS DIRECTED TO RECOMPUTED DEPRECIATION R ELIEF AND WITHDRAW THE EXCESS DEPRECIATION ALLOWED BY THE A.O. ON RS.45 38 595/-. 5. LEARNED COUNSEL SUBMITTED THAT ASSESSEE IS ENG AGED IN DEALING WITH CORROSIVE MATERIALS BECAUSE OF WHICH C OMPOUND WALL AND MAIN SHED FREQUENTLY GETS DAMAGED AND IT IS A RECUR RING EXPENDITURE 4 INCURRED BY THE ASSESSEE TO BRING THE MAIN SHED AND COMPOUND WALL TO ITS ORIGINAL SHAPE. THEREFORE NO NEW ASSET HAS COME INTO EXISTENCE. IT HAS TO BE THEREFORE TREATED AS CURRENT REPAIRS . WHEN QUERIED AS TO WHETHER ASSESSEE CLAIMED DEDUCTION UNDER SECTION 30 OF THE ACT IT WAS INITIALLY SUBMITTED THAT A CLAIM WAS MADE BUT L ATER STATED THAT IT WAS MENTIONED AS REVENUE EXPENDITURE WITHOUT SPECIF YING THE SECTION UNDER WHICH IT IS ALLOWABLE. LEARNED COUNSEL FURTHE R SUBMITTED THAT EXPENDITURE IS ALLOWABLE EITHER UNDER SECTION 30 OF THE ACT OR UNDER SECTION 37 OF THE ACT. ACCORDING TO HIM ANY EXPEND ITURE WHICH SATISFIES THE TESTS LAID DOWN UNDER SECTION 30 OR 3 7 OF THE ACT HAS TO BE ALLOWED IN FULL AND THUS THE LEARNED CIT(A) WAS JUSTIFIED IN APPORTIONING THE EXPENDITURE ON ESTIMATE BASIS BETW EEN REVENUE AND CAPITAL. 6. ON THE OTHER HAND LEARNED DR SUBMITTED THAT THE RE IS NO FINDING BY THE LEARNED CIT(A) AS TO WHETHER EXPENDI TURE WAS CAPITAL OR REVENUE. IF EXPENDITURE IS CAPITAL IN NATURE ENTIRE EXPENDITURE HAS TO BE CAPITALIZED AND THERE IS NO ROOM FOR APPORTIONIN G SUCH EXPENDITURE. HE THUS STRONGLY RELIED UPON THE ORDER PASSED BY TH E ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IN THE LIGHT OF PRINCIPLES LAID DOWN BY THE APEX COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS (P) LTD. 293 ITR 201 IF AN EXPENDITURE IS INCURRED TO PRESERVE AND MAINT AIN AN ALREADY EXISTING ASSET AND IF IT IS PROVED THAT THE OBJECT IS NOT TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE SUCH EXPENDITURE CAN BE TREATED AS REVENUE IN NATURE. IT IS NOT CLEA R AS TO WHETHER ASSESSEE CLAIMED DEDUCTION UNDER SECTION 30 OR 37 O F THE I.T. ACT. FIRST APPELLATE AUTHORITY HAS ALSO NOT PROPERLY EXA MINED THE ISSUE BY APPLYING THE CORRECT LEGAL PRINCIPLES. THEREFORE I N THE INTEREST OF JUSTICE THE ISSUE IS SET ASIDE TO THE FILE OF ASSES SING OFFICER WHO IS 5 DIRECTED TO RE-EXAMINE THE CLAIM IN ACCORDANCE WITH LAW AFTER GIVING ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. N EEDLESS TO OBSERVE THAT WITH REGARD TO A CLAIM OF DEDUCTION THE INITIA L ONUS IS UPON THE ASSESSEE TO PROVE THAT EXPENDITURE IS OF REVENUE CH ARACTER. 8. IN THE RESULT APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 3 1 ST DAY OF MAY 2010. SD/- SD/- (J.SUDHAKAR REDDY) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 31 ST MAY 2010. VBP/- COPY TO 1.M/S. KARAMTARA ENGINEERING PVT. LTD. 117 MOURYA ESTATE OSHIWARA LINK ROAD ANDHERI (E) MUMBAI 400 05 3. PAN AABCK-1921-E 2. DCIT 8 (2) 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-020. 3. CIT (A)-VIII MUMBAI 400 051. 4. CIT-VIII MUMBAI. 5. D.R. A BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. 6 SNO DATE INITIALS 1 DRAFT DICTATED ON 19-05-2010 SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR 20-05-2010 SR.P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 20-05-2010 V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 20-05 -2010 A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS -05-201 0 SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON -05-2010 SR.P.S. 7. FILE SENT TO THE BENCH CLERK -05-2010 SR.P.S. 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER