TMI Blog2017 (4) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it can be seen that by carrying out the repairs, the assessee did not bring into existence any new assets but was required to expend amount to preserve and maintain the asset already in existence. TDS u/s 194H - Addition u/s 40(a)(ia) - amount to various dealers as incentives - HELD THAT:- The Hon ble Supreme Court in the case of Ahmedabad Stamp Vendors Association [ 2012 (9) TMI 298 - SC ORDER] had held that the discount given to stamp vendors for purchasing stamps in bulk quantity was in nature of cash discount in transaction of sale, and, therefore, section 194H has no application to that transaction. - Decided in favour of assessee - ITA. No: 2369/AHD/2010, 2313 & 2504/AHD/2011, 2001/AHD/2012 & C.O. No. 191/Ahd/13 - - - Dated:- 10-4-2017 - Shri N.K. Billaiya, Accountant Member And Shri Mahavir Prasad, Judicial Member Appellant by : Shri S. N. Soparkar Parin Shah K.D. Shah, A.R. Respondent by: Shri Pradip Kumar Majumdar, Sr.DR ORDER N.K. Billaiya, 1. ITA No. 2369/Ahd/2010 is appeal by the Assessee preferred against the order of the Ld. CIT(A)-III, Baroda dated 14.05.2010 pertaining to A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in Tax Appeal No. 769 of 2015. 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law and on facts in reversing the order of the Commissioner of Income Tax (Appeals) deleting disallowance made by the Assessing Officer on total investment made in shares of subsidiary company? 2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law and on facts in holding that the investment made for the purchase of shares of subsidiary company was not a legitimate business activity of the appellant? 6. After considering the facts in totality, the Hon ble Jurisdictional High Court observed as under:- 7. Before us learned counsel Shri Soparkar for the assessee submitted that the assessee had sizeable interest free funds for investment which were utilized for investment in the subsidiary company. The Assessing Officer as well as the Tribunal committed a serious error in disallowing the same. Certain borrowings were made during earlier assessment years. Such funds were invested for business purpose. Deduction of interest under section 36(1)(iii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent year such shares did not yield any return would not imply that in future also no return would accrue. Quite apart from this angle, even the question of investment in subsidiary company has not been properly examined by the Assessing Officer. Merely because the assessee company had interest bearing funds for its capital investment, claiming deduction under section 36(l)(iii) of the Act would not automatically imply that any diversion of funds without interest to a subsidiary would automatically give rise to disallowance. So much has been discussed by the Supreme Court in case of S.A. Builders Ltd.(supra). The assessee had demonstrated before the Assessing Office that it had sizeable net profit and availability of interest free funds for investment in subsidiary company. 11. In case of Raghuvir Synthetics ltd (supra), Division Bench Of this Court following the decision of Supreme Court in case of S.A. Builders Ltd.(supra), upheld the view of the Tribunal rejecting the appeal of the Revenue on the ground that substantial interest free funds were available, the Commissioner and the Tribunal also considered the question of business expediency. In case of Hitachi Home and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding that the investment made by the assessee company for purchase of shares in the subsidiary company was not a legitimate business activity, was in fact, an expansion beyond what the Assessing Officer had himself envisaged. It was not even the case of the Revenue that investment made by the assessee in subsidiary company was for some illegitimate purpose or a mere device to divert its tax bearing income. 13. In view of above, we answer the question in favor of assessee, allow the appeal and reverse the judgement of the Tribunal on this issue. 7. A perusal of the aforementioned judgment of the Hon ble Jurisdictional High Court qua the facts in issue before us clearly tilts the balance of convenience in favour of the assessee and against the revenue. Since, the issue is now well settled by the decision of the Hon ble Jurisdictional High Court (supra), we direct the A.O. to delete the disallowance of ₹ 31,87,067/-. This ground of the appeal is allowed. 8. The next ground relates to the disallowance of repairs for water proofing and replacement of corrugated sheets aggregating to ₹ 25.11 lacs treating them as capital expenses. 9. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is replaced then it will amount to capital expenditure. The ld. CIT(A) further observed that the Hon ble Supreme Court in the said case has also held that if part of a machine which is vital for its working is replaced then the same will amount to current repairs. The ld. CIT(A) accordingly directed the A.O. to delete the impugned disallowance. 16. Before us, the ld. D.R. could not point out any factual error in the findings of the First Appellate Authority. 17. After giving a thoughtful consideration to the factual matrix qua the findings of the First Appellate Authority, in our considered opinion, by incurring the impugned expenditure no new asset has come into existence. Therefore, there is no error or infirmity in the findings of the ld. CIT(A). This ground is accordingly dismissed. 18. The next ground relates to the deletion of the addition of ₹ 27.67 lacs out of ₹ 31.39 lacs made by A.O. treating the same as capital expenditure. 19. During the course of the assessment proceedings, the assessee was asked to furnish the details of repairs to building amounting to ₹ 66.18 lacs. The requisite details were furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side plaster at Ankleshwar Colony 1,35,133 2. Super Products Fencing work at Ankleshwar Factory 2,61,632 3. AOS Systems Sanitary Items 1,10,137 4. Jaiswal Sons Civil work at Ankleshwar Blocks 1,71,363 5. -do- Plaster work at Ankleshwar colony 1,94,147 6. -do- Plaster work at Ankleshwar plant 1,58,509 7. S.S. Gorecha Dismantling of RCC work etc. 4,43,240 8. Jaiswal Sons Painting work at Ankleshwar colony 1,68,883 9. Rockman Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Authority (supra). We have also gone through the decision of the Hon ble Supreme Court in the case of Saravana Spinning Mills (P) Ltd. (supra) relied upon by the A.O. In our considered opinion, the decision of the Hon ble Supreme Court relied upon by the A.O. if considered in the light of the facts of the case in hand, is more in favour of the assessee then the revenue. The Hon ble supreme Court in the said case has laid down the ratio that the basis test to find out as to what would constitute current repairs is that the expenditure must have been incurred to preserve and maintain an already existing asset, and the object of the expenditure must not be to bring a new asset into existence or to obtain a new advantage . A similar view has been taken by the Hon ble High Court of Gujarat in the case of Hotel Oasis (Surat) (P.) Ltd. in Tax Appeal No. 289 of 2012. 23. The Hon ble Jurisdictional High Court of Gujarat in the case of Manoj B. Mansukhani in Tax Appeal No. 941 of 2010 was, interalia, seized with the following question of law:- (C) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and thereby de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current repairs, the Apex Court observed as under:- 13. An allowance is granted by clause (i) of Section 31 in respect of amount expended on current repairs to machinery, plant or furniture used for the purposes of business, irrespective of whether the assessee is the owner of the assets or has only used them. The expression current repairs denotes repairs which are attended to when the need for them arises from the viewpoint of a businessman. The word repair involves renewal. However, the words used in Section 31 (i) are current repairs . The object behind Section. 31 (i) is to preserve and maintain the asset and not to bring in a new asset. In our view, Section 31 (i) limits the scope of allowability of expenditure as deduction in respect of repairs made to machinery, plant or furniture by restricting it to the concept of current repairs . All repairs are not current repairs. Section 37(1) allows claims for expenditure which are not of capital nature. However, even Section 37(1) excludes those items of expenditure which expressly falls in Sections 30 to 36. The effect is to delimit the scope of allowability of deductions for repairs to the extent provided for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and such incentives are given by the assessee company to the dealers directly on principal to principal basis. 29. After considering the facts and the submissions, the ld. CIT(A) was of the opinion that the views of the A.O. are not correct. The ld. CIT(A) observed that such incentives are paid to the wholesalers when the minimum meters mentioned for the entire period of the claim is achieved by them. The ld. CIT(A) concluded by holding that the dealers are getting incentives not on the basis of sales made by them but on the basis of orders placed with the appellant. Hence, no TDS required to be made by the assessee company of such payment. The ld. CIT(A) accordingly directed the A.O. to delete the impugned addition. 30. The ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee relied upon the findings of the ld. CIT(A). Strong reliance was place on the decision of the Hon ble Jurisdictional High Court of Gujarat in the case of Gujarat Tea Processors Packers Ltd. 28 taxmann.com 187. 31. We have given a thoughtful consideration to the orders of the authorities below. We find force in the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. The next grievance relates to the disallowance of ₹ 3,71,819/- being expenditure treated as capital in nature. 39. An identical issue has been considered by us in revenue s appeal in ITA No. 2504/Ahd/2011 qua ground no. 3 of that appeal. For our detailed discussion therein, the A.O. is directed to delete the addition of ₹ 3,71,819/-. This grievance is accordingly allowed. 40. In the result, the appeal filed by the Assessee is partly allowed. ITA No. 2001/Ahd/2012 Revenue s appeal for A.Y. 2009-10 41. The first grievance relates to the deletion of the addition of ₹ 89.71 lacs being interest on the investment made in subsidiary company. 42. This issue has been considered by us in detail in assessee s appeal in ITA No. 2369/Ahd/2010 for A.Y. 2007-08. For our detailed discussion therein, this grievance of the revenue is dismissed. 43. The next grievance relates to the deletion of the addition of ₹ 2.78 crores made by the A.O. u/s. 40(a)(ia) of the Act. 44. A similar issue has been considered by us in ITA No. 2504/Ahd/2011 for A.Y. 2008-09 qua ground no. 4 of that appeal. For our detai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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