TMI Blog2012 (5) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... cate. O R D E R Revenue in this appeal under Section 260A of the Income Tax Act, 1961 (Act) impugns the order dated 17th June, 2011 passed by the Income Tax Appellate Tribunal (tribunal) in the case of Imperial Fasteners Pvt. Ltd., the respondent-assessee. The appeal pertains to the assessment year 2006-07. 2. Having heard learned counsel for the parties, we frame the following substantial question of law:- Whether the Income Tax Appellate Tribunal was right in holding that the expenditure of Rs.31,54,844/- was a revenue expenditure and not a capital expenditure? 3. As we have heard learned counsel for the parties, we proceed to dictate our decision. 4. The respondent-assessee is a company and for the assessment year in question it had filed its return of income on 8th December, 2006 declaring loss of Rs.19,84,799/- under the normal provisions and book profit of Rs.7,36,458/- under Section 115JB of the Act. The Assessing Officer in the assessment order has recorded that the assessee had debited a sum of Rs.31,54,844/- in the computation of income as deferred revenue expense and 10% of the said amount was debited to the profit and loss account as deferred revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Replacement 143,899.60 6. Advant Automation Solutions Private Limited, 11/124, Indira Nagar, Lucknow (U.P) 13.3.06 0139 Hot Well Level Switch Hot Well Replacement 107,640 7. R.K. Automobiles (P) Ltd. 2620/3, Hamilton Road, Kashmere Gate, Delhi-6. 16.03.06 1245 Valves Bearings Oil Seals etc. Replacement 208,000 8. Anil Rubber Mills (P) Ltd. Plot no.30, Sector-6, Faridabad 121006 25.03.06 146 Conveyor Belt Replacement 750,031 9. Dhanbad Electro Power Meters, 28, Binod Market, (Near Court More), Hirapur, Dhanbad 860002 31.01.06 06 Electric Meter Replacement 109,695 TOTAL 3,154,843.60 9. We may note that the two expenses i.e. expense of Rs.4,43,906/- on T.R. Oil meant for lubrication of the equipment and Rs.2,27,908/- on replacement of Steel Hammer (Coal Crusher) were incurred before the lease agreement dated 14th October, 2005 was executed between the respondent-assessee and the Central Coalfield Limited. 10. The tribunal after referring to the nature and character of the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be brought by the lessee at the station. On such determination the schedule station shall rest in and be the absolute property of lesser. 12. Another clause in the lease stipulated that it was the obligation of the respondent-assessee to supply electricity to the lessor at a prescribed rate. After examining the clauses the tribunal has held:- 10. A cumulative reading of all these clauses will show that assessee was to operate the plant of generation of electricity and part of the generation of electricity was to be supplied to the lessor at prescribed rates. The assessee was to incur expenses on repairs and maintenance of the plant was to generate electricity and generate revenue in the year under consideration but the payment of lease rent was to start from 14th April, 2006 which date falls in the next financial year. The term of lease is 20 years. As per clause 17.3, upon expiration of lease, the assessee was to handover the plant in good running condition except liability of lessor to pay to the assessee the written down value of the additions and alterations of the building, station or additional machinery that may be brought by the lessor at the station and on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of a new or fresh advantage. This can be the only definition of repairs‟ because it is only by reason of this definition of repairs that the expenditure is a revenue expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the legislature has permitted under Section 10(2)(v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure. In the said judgment, it has been further observed by Chagla, C.J. that the definition of the word repair does not create much difficulty, but the difficulty is created by the word current which qualifies the expression repair . This adjective, namely, current is put in by the legislature. It indicates that the legislature did not intend that the assessee should be permitted to claim allowance for all kinds of repairs, even though conceptually the expenditure may be revenue expenditure. The legislature intended to stress that under Section 31(i) the permissible deduction admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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