TMI Blog2014 (3) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowed – Held that:- The expenditure which is in the nature of capital is entitled to depreciation in accordance to law and the AO is directed to give consequential depreciation to the capital expenditure for which depreciation was not given - Other than that there was no merit in the contention of the assessee that certain items for which expenses was made by them was erroneously held as capital in nature by the CIT(A) – there was no infirmity in the order of the CIT(A) – Decided partly in favour of Assessee. - ITA No. 2588,2445 /Del/ 2011 & ITA No. 2298,2289/Del/2010 - - - Dated:- 20-12-2013 - S V Mehrotra And A T Varkey, JJ. For the Appellants : Smt Awnish Ahlawat, Adv. Shri Mohd Amin, Adv. For the Respondents : S Mishra, DR Y Kakkar, DR ORDER:- PER : A T Varkey These are cross appeals of assessee and revenue for assessment years 2004-05 and 2006-07. 2. For the assessment year 2004-05, the assessee's appeal travelled up to ITAT in respect of various issues regarding capital and revenue expenditure. The tribunal by order dated 17.11.2008, restored the issue back to the AO to frame a fresh assessment. The appeals for assessment year 2004-05 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred on the maintenance of market yard (civil) Electrical. The assessee filed the appeal against the order of the Assessing Officer before the CIT(A) who vide its order dated 10.02.2011 partly allowed the appeal. That so far as disallowance incurred on account of market yard (civil) and market yard (electrical) is concerned the CIT(A) allowed further expenditure to the extent of Rs.2,62,92,432/- to be Revenue in nature. However expenditure amounting to Rs.2,07,28,388/- on account of repairs and maintenance of market yard (civil) excluding Rs.36,11,153/- of market yard (electrical) have been declared as capital in nature. The assessee is aggrieved that no reasons has been cited by the ld CIT(A) as to why the electrical expenses to the tune of Rs.3,61,11,153/- are treated as capital in nature. 5. Likewise the assessee filed returned of income for the relevant Assessment Year 2006-07 under consideration, declared as NIL taxable income and claimed except u/s 10(20) of the Act as they have been doing so in the earlier years. Assessing Officer computed on the basis of figures declared on the audited report. Assessing Officer rejected the claim of the assessee regarding exemption o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails filed for expense and the relevant vouchers filed at the time of finalization of assessment." 8. The grounds raised in the Assessment Year 2004-05 by the Revenue is as follows:- "1. The CIT(A) erred in law and on the facts and circumstances of the case in deleting the addition of Rs.4,62,92,432/- by treating the same as revenue expenditure out of total disallowance of Rs.5,04,44,839/- made by the A.O. on account of Capital expenditure on account of maintenance of market yard (Civil) and Market Yard (Electrical) bring about benefits that lasts for many years to come and add to the capital of infrastructure of the assessee in the set aside proceedings by the Hon'ble ITAT vide its order dated 07.11.2008. 2. That appellant craves leave to amend or alter all or any of the aforesaid grounds of appeal and add any other ground of appeal." 9. The grounds raised by the assessee in the Assessment Year 2006-07 are as follows:- "1. That the learned CIT (Appeals)-XXII was not justified in disallowing part of the expenses incurred on the maintenance of market yard (civil)being capital in nature whereas the assessee had debited the same in the Income Expenditure account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of footpaths, repair of boundary wall, sewerage, streets, sheds and water supply. Since the assessee earns income by making available these facilities to the farmers, it is obligatory to keep all these facilities in good and proper condition so as to enable the farmers, traders, to carry out their activities in an efficient manner. Ld counsel also brought to our notice that in asseessee's own case of AY 2003-04 2005-06, the tribunal upheld the ld CIT(A) decision of treating these expenditures as revenue in nature and the appeal preferred by the revenue against it was dismissed by Hon'ble High court of Delhi. The following expenses of the assessee for the AYs 2005-06 and 2003-04 was held to be of revenue in nature:- "(i) Major repair of road (exit gate NSM) (ii) Major repair of footpath (D-block NSM) (iii) Improvement work of the market RCC UG Tank (iv) Major repair of boundary wall at Okhla Sub Yard (v) Major repair of Okhla Sub Yard and NSM (vi) Improvement of sewerage and Storm water drain (NSM) (vii) Major repair of street at NSM A-Block (viii) Improvement of water line work (NFM NSM)" 13. Thus, according to the ld AR, the ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctible allowance under section 10(2)(xv) Income-tax Act." 14. In the case of Lakshmiji Sugar Mills Co Pvt Limited Vs Commissioner of income Tax New Delhi, 82 ITR 376, the Hon'ble Supreme Court answered to the question Whether expenditure incurred by sugar mills towards contributions to cane development council for development of roads between sugar-cane producing centers and the mills would be capital expenditure? The apex could held that the expenditure was not of capital nature and reasoned that it was incurred for facilitating the running of assessee's motor vehicles and other means employed for transportation of sugarcane to its factories and therefore incurred for running the business or working it with a view to producing profits without the assessee gaining any advantage of an enduring benefit to itself. 15. Ld DR referred to the following decisions 224 ITR 414, 303 ITR 93, 267 ITR 64 to substantiate her argument that the ld CIT(A) has erred in allowing certain expenses as revenue, whereas it was capital in nature. 16. We have gone through the citations stated by both the sides as well as the contentions of both the partiers we find that ld CIT(A) has examined all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee (as reproduced above), was absolutely in the realm of revenue expenditure as there has been no construction which had enduring benefit to the assessee. The Hon'ble High court also observed that it was difficult to say that the repairs carried out by the asseesee have any enduring benefit to its assets. And also observed that the expenditure was recurring in nature and the assessee was required to do the same to carry out the business. In the light of the said decision of the jurisdictional High Court which upheld the tribunal's finding in this matter, we are fortified in our decision to uphold the decision of the CIT(A) in treating the aforesaid expenditure for the AYs 2004-05 and 2006-07 as correct and legal. 19. Therefore, in our considered view, all these expenses are revenue in nature and we find no infirmity in the impugned orders of the ld CIT(A) to have held so, and consequently revenue's grounds on this account for both the assessment years are dismissed. 20. For the AY 2006-07, the assessee is aggrieved that ld CIT(A) and AO, did not allow depreciation on the capital expenditure added to the income which the assessee is entitled as consequentia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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