TMI Blog2012 (10) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... been made through the credit card by one Shri Gunjit Singh. As is apparent from the aforesaid provisions, mode of payment is immaterial, thus CIT(A) was justified in upholding the disallowance in terms of provisions of sec. 40a(ia) - against assessee. Disallowance of Purchase and installation of a new transformer - Held that:- The assessee incurred expenses towards purchase of a new transformer installed in the premises taken on lease, contending replacement of existing HT transformers and related panels by a new LT Transformer, since the premises prior to accommodation was used as studio and the electrical systems worn out were inadequate for the purpose of business of the assessee. The assessee claimed that since it was not the owner of the premises where these assets were fixed and had only a limited period of tenancy rights, the entire expenditure was revenue in nature. The purchase of a new transformer does not have any apparent relation with lease or otherwise of the premises. The assessee placed no material to show how this expenditure on purchase/installation of transformer has any relation with lease of the premises. In any case, there is nothing to suggest that this ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal at any time. I.T.A. No.887/Del./2012[Assessee] 1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs.29,857/- reimbursed by the assessee in respect of payment made to network solutions by one Shri Gurjot Singh. 2. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs.10,96,704/- being the amount out of the purchase and installation cost of a new transformer replacing the existing transformer on the property taken on lease by the assessee at Noida. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.3,37,500/- being the amount of liability due by the assessee to Pravin Anand partners towards reimbursement of a capital account transaction of an erstwhile partner and further erred in holding that there could be no liability on capital account in cash system of accounting. 4. That the orders of the learned authorities below being contrary to the facts and circumstances of the case and in law, the appeal be allowed. 2. Adverting first to ground nos.1 and 2 in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edecessor for assessment year 2007-08 and also putting my reliance of the judgment of Hon ble Delhi High Court in the case of CIT Vs. Sushma Kapoor, reported at 188 Taxman 24, Hon ble Delhi High Court has held that loans were raised subsequent to the debit in the account of sister concern is a finding of act and no disallowance out of interest paid for the reasons that such old debits existed prior to raising of loan. Accordingly, Hon ble Delhi High Court has dismissed departmental appeal. The judgment of Hon ble Delhi High Court is clearly attracted in the instant case. Hence grounds No.1 to 3 of the appellant are allowed. 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld.DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the findings in the impugned order. Inter alia, the ld. AR relied upon decision of the Hon ble Jurisdictional High Court in the case of CIT Vs. H.B. Stock Holdings Ltd. (2009) (Delhi). 5. We have heard both the parties and gone through the facts of the case. Indisputably, the assessee did not divert borrowed funds to M/s Anand and Anand Associates and the amount of Rs.36,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the course of assessment proceedings that the assessee did not deduct tax at source from payment of Rs.29,857/- made to Network Solutions. To a query by the AO, the assessee replied that the assessee engaged one Shri Gurjot Singh, a qualified engineer on computer technology systems, who incurred expenses on behalf of the assessee firm. Since the expenditure was incurred by Shri Gurjot Singh with his credit card the assessee reimbursed the expenses, no tax was deducted from these amounts. However, the AO did not accept the submissions of the assessee on the ground that the charges of Rs.29,857/- were paid to Network Solutions towards software/web charges and since tax required to be deducted in terms of provisions of sec. 194J of the Act, was not deducted, deduction for the amount had to be disallowed. Accordingly, the AO disallowed the amount in terms of provisions of section 40(a)(ia). 7. On appeal, the ld. CIT(A) upheld the disallowance, holding as under:- 5.2 I have gone through the finding of the Assessing Officer in the assessment order and written submission of the learned AR. Reliance on the judgment of the Mumbai ITAT in the case of National Aviation Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of provisions of sec. 194J of the Act, we are of the opinion that the ld. CIT(A) was justified in upholding the disallowance in terms of provisions of sec. 40a(ia) of the Act, TDS having not been deducted on payment made to Network Solutions. Therefore, ground no.1 in the appeal of the assessee is dismissed. 10. Ground no.2 in the appeal of the assessee relates to disallowance of Rs.10,96,704/- on account of purchase and installation of a new transformer. The AO noticed during the course of assessment proceedings a bill dated 13.8.2007 raised by M/s Kirsun Engineering Ltd., regarding purchase and installation of a new transformer. To a query by the AO, the assessee replied that amount of Rs.25,66,721/- included under the head repair and maintenance was on account of payment to M/s Kirsun Engineering Ltd. for replacement of the HT panels and transformers with the LT transformer and panels, as load output factor for office was lower than that in a studio. The replacement of existing transformer for better and efficient running of assessee s office as law firm was claimed to be revenue in nature in view of judgment of Hon ble Rajasthan High Court in CIT Vs. Udaipur Distilla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh has rightly been allowed by Assessing Officer as revenue expenditure. I do not find any infirmity in the action of Assessing Officer rather I appreciate the action of Assessing Officer as very judicious and right approach. Thus, making disallowance of Rs.10,96,704/- deserves to be confirmed. The reply of learned AR of the appellant has been considered and it is found that stand taken by learned AR has no leg to stand. The case law relied upon by learned AR of the appellant is distinguishable on facts because of the fact that Assessing Officer has already allowed a sum of Rs.10 lakhs as revenue expenditure out of total expenditure of Rs.25,66,721/-. In view of the above discussion ground No.7 of the appellant is dismissed. 12. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee reiterated their submissions before the ld. CIT(A) while relying upon decision in CIT Vs.. Udaipur Distillary Company Ltd 143 Taxman 616 (Rajasthan) and Hindustan Times Ltd. Vs. CIT (1980) 4 Taxman 91 (Delhi).On the other hand, the ld. DR supported the findings in the impugned order of the ld. CIT(A). 13. We have heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in Balimal Naval Kishore (supra) in the context of current repairs within the meaning of section 10(2)(v), approved the aforesaid test evolved by Chagla C. J., as the most appropriate one having regard to the context in which the said expression occurs. It has also been followed by a majority of the High Courts in India. 13.2 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 on by the assessee; that it should not be on personal account of the assessee; that it should not be in the nature of capital expenditure and that it should be spent wholly and exclusively for business. Whether expenditure is "revenue" or "capital in nature" would depend upon several factors, namely, nature of the expenditure, nature of business activity etc..In the instant case, the assessee claimed that the premises in which the expenditure in question had been incurred by the assessee was not in their ownership but taken on lease. Here we may refer to following explanation 1 to sec.32(1) of the Act, inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital expenditure, the expenditure having brought a new advantage and enduring benefit to the assessee. In Udaipur Distillary Company Ltd (supra), the issue did not relate any expenditure on repairs while in Hindustan Times (supra) it related to laying of cables which were property of the NDMC. Such are not the facts and circumstances in the instant case. We have gone through these two decisions and find that facts and circumstances in these two decisions are totally different from the facts and circumstances in the instant case before us. In Ullal Dinkar Rao v. N. Ratna Bai, AIR 1958 77 Mys, the Hon ble Mysore High Court was considering the expression "repair". In that case the view taken by the court was that "when we think of repair of the original equipment as such is to set right the old equipment and it is restored back to its original utility, The repair does not contemplate large scale alteration of the existing structure or equipment as the case may be." Similar is the view expressed by the decision of the Allahabad Court in Girdhari Dass and Sons v. CIT [1976] 105 ITR 339, wherein their Lordships have expressed that repair should be current repairs and not the total re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that one of the partners retired from the assessee firm as well as firm Pravin Anand Partners and the latter firm made payment to the said partner and therefore, the assessee had to adjust the capital account of the said partner in its books. Accordingly, capital account of the said partner stood reduced and amount was payable to Pravin Anand Partners. In these circumstances, there was no justification for disallowance of the amount, the ld. AR argued. On the other hand, the ld. DR supported the order of the ld. CIT(A). 17. We have heard both the parties and gone through the facts of the case. As is apparent from a mere glance on the impugned order, neither the AO nor the ld. CIT(A) recorded any findings on the submissions of the assessee that the amount was not claimed in the profit and loss account and that one of the partners having retired from the assessee firm as well as firm Pravin Anand Partners and the latter firm having made payment to the said partner, the assessee was required to adjust the capital account of the said partner in its books. In net effect, the transaction represented reduction of capital account of the partner. In the absence of any findings on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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