TMI Blog2012 (9) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not produce all the bills and vouchers in relation to expenditure incurred on repairs to building and the CIT(A),without ascertaining the nature of construction or verifying the bills/vouchers or any other material concluded that expenditure was incurred on temporary structures. There is nothing to suggest that the assessee produced the relevant bills & vouchers before the ld. CIT(A) nor seems to have verified the genuineness of expenditure or even recorded any such findings - as CIT(A) without disclosing any basis or giving opportunity to the AO, concluded that expenditure was on temporary structure it is appropriate to vacate the findings of the CIT(A) and the matter is to be remanded to the AO to go into the matter afresh - in favour of revenue. - ITA No.154/D/2009 - - - Dated:- 31-8-2012 - A N Pahuja, C M Garg, JJ. For Appellant: Shri K Sampath, AR For Respondent: Dr B R R Kumar, DR ORDER Per: A N Pahuja: This appeal filed on 15.01.2009 by the Revenue against an order dated 10.11.2008 of the CIT ( A ) -I, New Delhi, raises the following grounds:- 1) On the facts and in the circumstances of the case, the ld . CIT(A) has erred in deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed their submissions before the AO and further contended that the amount paid by the assessee as compensation was treated as revenue expense even in the preceding years. In the AY 2001-02, though the ld. CIT(A) allowed their claim vide order dated 6th January, 2005,on further appeal, the ITAT vide their order dated 5.10.2007 in ITA no. 1505/Del./2005 restored the issue to the file of the ld. CIT(A) with the directions to re-examine the issue afresh in the light of various decisions cited before the CIT(A), the method of accounting followed and method of valuation of closing stock and also verify the facts as to whether or not such expenses were allowed in the earlier years. The said matter is stated to be still pending before the ld. CIT(A).As regards accounting policy being consistently followed by the assessee, it was submitted that the assessee was paying compensation every year and claimed the same as revenue expenditure in the books of accounts year after year, as detailed hereinbelow:- Assessment year Amount of compensation claimed [InRs.] Amount of compensation allowed[In Rs.] 1995-96 4,98,250 4,98,250 1996-97 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o circumstances be termed as amount paid for acquisition of stock in trade. Assessee cannot be considered to be acquiring any new asset. In fact, theory of purchasing something of which he himself is the owner is in itself misconceived. 16. Looking to the facts and circumstances as stated here in above and the law applicable, the addition made by the Assessing Officer of Rs.36,60,500/- is deleted. 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR contended that when advance was not credited in profit and loss account nor was there any commercial expediency in making the payment of compensation and no such compensation was provided in the agreement, the claim could be not allowed. Inter alia, the ld. DR relied upon decision in Commissioner of Income-tax v. H. P. Housing Board, 340 ITR 388 (H.P.) . 5. On the other hand, the ld. AR on behalf of the assessee supported the findings of the ld. CIT(A) while relying upon the decision dated 24th August, 2004 in ITA nos.3096 3686/Del./2000 for the AY 1997-98 in the case of Gopal Das Estates Housing Ltd. wherein, according to the ld. AR, a similar claim was allowed in the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract, therefore, claim of the assessee was denied. The rule of general and nominal damages have not been considered. The reasons given for cancellation of the contract is also not considered while allowing relief to the revenue. Therefore, in our, view, the order of the ITAT dated 28th February2002 which has not reached finality can not be relied upon at this stage. We, therefore, respectfully do not propose to rely upon the order of the appellate Tribunal dated 28.2.2002.This order is of no help to the revenue as such. Considering the above discussion, and facts of the case, we are of the view that assessee has rightly claimed the expenditure as revenue expenditure. The CIT(A)is therefore, justified in allowing the appeal of the assessee. We uphold the findings of the CIT(A)and dismiss the appeal of the revenue on this issue. We may clarify that the findings in this order shall not prejudice, the rights and contention of the parties in the matter subjudice in other year. 5.1 The ld. AR pointed out that Hon ble High Court admitted a question of law on this issue vide order dated 10.10.2007 in ITA no. 772/2005. 6. We have heard both the parties and gone through the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n land is not evident from the impugned order in this case also. In fact, the ld. CIT(A) did not even attempt to analyse the relevant facts and circumstances in each of the aforesaid seven cases nor recorded his specific findings as to how the amount of refund of advance paid to the first four parties referred to above in the table or the amount paid by the assessee to the remaining three persons is compensation for reacquiring the rights in plots. No such material is referred to in the impugned order nor has been placed before us. As regards issue of principles of consistency, the ITAT in the AT 2001-02 analysed the facts and circumstances in the preceding/succeeding years and recorded their findings as under: 6 We have carefully considered rival submissions along with the order of the Tax Authorities and the various case laws cited before us. We have also gone through the paper book and the copy of the assessment order placed before us by the learned AR in the paper book. From the order for the assessment year 1995-96, 1997-98, 1998-99 2004-05, the copies of which are placed at page No.73 to 75, 76 to 79, 80 to 85, 89 to 90 of the paper book, we find that there is no descri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been allowed to the assessee in the earlier years or not after giving the proper and sufficient opportunity to the assessee. The assessee is also free to adduce all the necessary evidence on which he may rely before the CIT(A). Thus, the appeal of the revenue is allowed for statistical purposes. 6.2 Admittedly, the matter is still pending before the ld. CIT(A) in the AY 2001-02. The ld. AR also relied upon a decision dated 24th August, 2004 in the case of Gopal Das Estates Housing Ltd..(supra) This decision was not cited before the lower authorities. Since there is nothing to suggest that the facts and circumstances in the instant case are parallel to facts and circumstances in the aforesaid cited decision while as already observed ,the ld. CIT(A) did not analyse the nature of each of the aforesaid seven amounts , apparently, the view taken in the said decision cannot be followed. 7. As is apparent from the aforesaid observations in the impugned order, the ld. CIT(A) dismissed the appeal without even analyzing the nature of each of the amount paid to aforesaid seven persons as to how the amount is compensation in nature and what were the circumstances in each of these ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act. With these observations, ground no. 1 in the appeal is disposed of. 8. Ground no.2 in the appeal relates to disallowance of expenditure on account of repair and maintenance of building. On perusal of profit and loss account, the AO noticed that the assessee debited an amount of Rs.24,30,474/- under the head repair and maintenance of building. Of these, ledger account revealed that an amount of Rs.21,81,197/- related to coriander leaf and other repair expenses at Vatika Triangle. Even when the AO asked the assessee to submit bills/vouchers for these expenses, the assessee did not produce the same. Accordingly, while observing that the assessee incurred expenditure on construction of commercial complex and basement at vatika Triangle, the AO disallowed the claim of the assessee, treating the amount capital in nature. 9. On appeal, the ld. CIT(A) concluded in the following terms:- 18. The property was fully occupied by the owners of the respective portions of the property or tenants in earlier years. Income there from has been disclosed by the assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) nor seems to have verified the genuineness of expenditure or even recorded any such findings. In these circumstances, especially when complete bills and vouchers in relation to the aforesaid expenses were not produced before the AO or the ld. CIT(A) nor the latter allowed any opportunity to the AO before concluding that expenditure was incurred on temporary structures, entitled to depreciation @100%, we are of the opinion that the ld. CIT(A) was not justified in deleting the disallowance. The question which arises for determination in this case is whether the assessee was entitled to claim the aforestated amounts as "current repairs" under sections 30 of the Act or u/s 37 (1) of the Act as revenue expenditure. In this connection the judgment of Hon ble Bombay High Court in the case of New Shorrock Spg.. Mfg. Co. Ltd. v. CIT [1956] 30 ITR 338 is the leading case, which was approved by the Hon ble Supreme Court in the case of Ballimal Naval Kishore v. CIT [1997] 224 ITR 414 . The Hon ble Bombay High Court explained the expression "repairs" in the following words :- "The expression repairs must be understood in contradistinction to renewal or restoration. A bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated, such expenditure partakes more of the nature of capital expenditure than of revenue expenditure. In our opinion, the latter view as to the expression current repairs is the better view and more consistent with the language used by the Legislature. It may also be pointed out that since 1953 when section 10(2)(xv) was amended, no deduction is permissible under section 10(2)(xv) which is an allowance of the nature described in any of the clauses (i) to (xiv)." 12.2 Whether or not expenditure is on current repairs, Hon ble Supreme Court in the case of Ballimal Naval Kishore v. CIT [1997] 2 SCC 449 , while approving the test formulated by Shri Chagla C J. in the case of New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT [1956] 30 ITR 338 (Bom) ,observed as follows: "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of 'repairs' be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.4 Hon ble Apex Court in the aforecited case further observed that the Legislature intended to stress that under section 31(i) of the Act, the permissible deduction admissible is only for current repairs and therefore, the question as to whether the expenditure incurred by the assessee conceptually is revenue or capital in nature is not relevant for deciding the question as to whether such an expenditure comes within the etymological meaning of the expression "current repairs". In other words, even if the expenditure is revenue, it may not fall in the connotation of "current repairs" in section 31(i). It was further observed that replacement generally may not fall under the expression "current repairs" but, in certain cases, where the old parts were not available in the market or where the old parts had worked for 50 to 60 years, replacement can, in such cases of exception, fall within the expression "current repairs". 12.5 Under section 37, a particular item of expenditure may be deductible if the expenditure does not fall within sections 30 to 36 ; that it should have been incurred in the accounting year; that it should be in respect of a business carried an by the assessee; t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
