Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (5) TMI 1504 - AT - Income TaxExpenses incurred on repair and maintenance of building and tubewell - capital expenditure OR revenue expenditure - HELD THAT:- Whether a particular repair is really needed or not or what amount to be spent, the matter is to be decided by the assessee as it is the prerogative of the assessee to take appropriate repair at appropriate time. The repairs may be major repairs, spending considerable amount of money, which amount would not take away character of repair. In our opinion, the quantum of expenditure cannot be the deciding factor as to whether the expenditure is capital or revenue in nature. There is no material on record that the assessee has created any new asset so that they could be of a lasting or enduring benefit to the enterprise in issue. CIT (Appeals) has observed that an amount spent on repairs of cabin - as observed that the assessee must have got changed everything in the cabin, which amounts to replacement of the old cabin and expenditure has to be treated as capital in nature. The findings of the learned CIT (Appeals) are based on presumptions and assumptions. He has not given any cogent reason in this regard. Thus, considering the entire facts and circumstances of the present case, we are of the view that the authorities below have not correctly appreciated the facts of the present case and also settled legal position. Accordingly, we set aside the findings of the authorities below on this issue and allow the ground raised by the assessee. Accordingly, we direct the AO to allow the entire expenditure claimed by the assessee under the head repairs and maintenance of the building (old shed), tubewell and cabin. We also direct the Assessing Officer to withdraw the amount of depreciation, if any, allowed to the assessee on the amount spent on repair of tubewell. Addition u/s 14A - HELD THAT:- Assessee had invested a sum of ₹ 10,87,172/- in the shares of various companies. The contention of the assessee is that the investments in shares had been made out of the capital and outstanding reserves of the company and that no separate amount had been borrowed for making the said investments. The assessee further claimed that no substantial expenditure was incurred for earning dividend income. Revenue Authorities have not given any finding that the assessee had earned any exempt income in this year. AO has not recorded any satisfaction to the effect that the interest bearing funds have been used to earn tax free income. There is no finding that the interest bearing funds were used for making the investments in the shares. Thus, in view of the judgment of the Hon'ble Jurisdictional in the case of Kapsons Associates [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT] we direct the Assessing Officer to delete the addition of ₹ 76,075/- made under section 14A of the Act. This ground of appeal raised by the assessee is allowed. Disallowance u/s 36(1)(iii) - HELD THAT:- The proviso to section 36(1)(iii) of the Act provides that where any amount of interest was paid in respect of capital borrowed for acquisition of assets, then such interest which is relatable to the period beginning from the date on which capital was borrowed for acquisition of asset till the date on which asset was put to use, shall not be allowed as a deduction. In the instant case, the assessee had not borrowed any capital for the purposes of investments in capital assets for extension of exiting business. It is also not the case of the Revenue that the assessee had diverted the funds borrowed on interest for the purpose of advancing the same to the aforesaid company. It is evident from the record that there were sufficient free funds and reserves available with the assessee to advance the money to the aforesaid company. Recently, the Hon'ble Supreme Court in the case of Hero Cycles P. Ltd. Vs. CIT [2015 (11) TMI 1314 - SUPREME COURT] held that no disallowance of interest under section 36(1)(iii) can be made if the advances are out of own funds. In this view of the matter also, the disallowance made by the Assessing Officer and confirmed by the learned CIT (Appeals) is uncalled for. This ground of appeal raised by the assessee is allowed.
|