TMI Blog2013 (8) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... urt] - Decided in favour of assessee. Disallowance of annual maintenance charges - Revenue or capital expenditure - Held that:- Disallowed the expenses which pertained to the subsequent period. The rule of taxation rests on the matching principle in which cost incurred to earn revenue is recognized as expense in the period when related revenue is recognized as earned. The A.O. has rightly applied the matching principle and the portion of AMC expenses which does not relate to the maintenance costs for the year was rightly disallowed - Decided against assessee. Deduction under sec. 80IA - CIT granted deduction - Held that:- whether initial assessment year in section 80-IA(5) would only mean the year of commencement and not the year of claim ? - Unabsorbed depreciation - Held that:- Assessee has been setting off the loss against the income of the company for the earlier years. During the assessment year, the assessee exercised the option claim of deduction under section 80-IA of the Act. But the Assessing Officer denied the exemption on the finding that loss or depreciation already allowed and set off against other sources of the income of the assessee has to be notionally carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,035/- respectively. There is no dispute regarding clause (i) because it was Nil. The appellant, in its submission, has argued that all the investments during the year were made from its own fund and no borrowed fund was utilized for investments. I have considered the above contention and perused the details submitted by the appellant. The appellant had sufficient own funds and internal accruals to meet its investments. The share capital was ₹ 2,55,04,750/- and the set apart as prepaid costs and could not be allowed as expenditure for the year. He arrived the value of such prepaid cost at ₹ 4,93,170/- and disallowance the same as it was not incurred wholly and exclusively in respect of the business carried on during the year. He also stated that the addition was agreed to by the authorized representative of the assessee. On going through the order of Commissioner of Income Tax (Appeals), we find no infirmity or good reason to interfere with his order and hence we confirm the order of the Commissioner of Income Tax (Appeals) on this issue. 6. The next issue in the grounds of appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in sustaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expenditure. The assessee in this case contended that no part of the expenditure is capital in nature because it was spent only for repairing and replacing and modernizing the hotel and replacing the existing components of the buildings, furniture etc. The Revenue contended that the modernization programme involved large amounts spread over three years and, therefore, it should have definitely given the assessee enduring benefit and, therefore, such expenditure is capital in nature. In the circumstances, the Hon'ble High Court held as under :- The issue falling for consideration in the question under reference is as to whether the expenditure incurred by the assessee for the relevant assessment years is one falling under capital expenditure and consequently not allowable as a deduction or falling under revenue expenditure and therefore to be allowed as a deduction under section 31(1) or section 37 of the Income Tax Act. Our attention had been drawn to the assessee's own case in CIT v. Dasaprahash (1978) 114 ITR 210 (Mad), wherein the assessee claimed a deduction of an expenditure of ₹ 37,390 incurred in providing decorated mirrors, plaster-mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated to be of enduring in nature, in the nature of being a capital expenditure ; but, definitely such an expenditure would fall under the category of revenue expenditure in nature to be allowed, as a deduction under section 37 of the Income Tax Act. 11. As could be seen from the above, the High Court in an almost identical facts held that repairing and replacing the existing components of portion of the buildings, furniture and buildings cannot at all be stated to be of enduring nature but such expenditure would fall in the category of revenue expenditure allowable as deduction under sec.37 of the I.T. Act. Following the above decision, we hold that the expenditure incurred by the assessee for repairs and replacements as revenue in nature. The grounds raised by the assessee on this issue are allowed. 12. The next issue in the grounds of appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of annual maintenance charges amounting to ₹ 4,93,170/-. 13. The Assessing Officer, while completing the assessment, disallowed ₹ 4,93,170/- stating that the said expenditure had not been incurred wholly and exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessee submitted that the ground taken by the assessee in this appeal with regard to proper opportunity not given by the Commissioner of Income Tax (Appeals) is also not pressed and may be dismissed as not pressed. Accordingly, this ground is also dismissed as not pressed. 19. The last issue in the grounds of appeal of the assessee is on deduction under sec.80IA of the I.T. Act with reference to the wind energy generator installed at Udumalpet to the extent of ₹ 72,88,585/-. The assessee raised the following grounds of appeal:- 17. The CIT(A) erred in not granting deduction u/s.80IA of the Act with reference to the wind energy generator installed at Udumalpet to the extent of ₹ 72,88,585/- in the computation of taxable total income without assigning proper reasons and justification. 18. The CIT (Appeals) failed to appreciate that having accepted the eligibility to make such deduction in the computation of taxable total income, the directions issued for verification of the accepted facts before granting such deduction were erroneous and invalid. 20. The Assessing Officer while completing the assessment denied deduction under sec.80IA of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of AO. On further appeal, the Hon'ble High Court allowed the appeal of the assessee., It held that there was no dispute that losses incurred by the assessee were already set ,off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised option u/s 80-IA(2). During this period, there was no unabsorbed depreciation or loss of the eligible undertaking and these were already set off in the earlier years. There was positive income during the year. The loss in the year earlier to Initial assessment year already absorbed against the profit other business could not be notionally brought forward and set off against the profit eligible business as no such mandate was provided in section 80-IA(5). Accordingly the order of the ITAT Was set aside and the question was answered in favour of assessee. The Hon'ble Court also relied on the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Mewar Oil and General Mills Ltd, 271 ITR 311 (Raj.). ratio of the above decision Is applicable to the facts of the present case. The Assessing Officer is, therefore, directed to verify whether the unabsorbed depreciation a ..... 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