TMI Blog2014 (12) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same was incurred for replacing the existing asset and not for acquiring any new asset – there was no material to show that any new asset which was not existing earlier was acquired by the assessee incurring the expenditure of Rs. ₹ 24,25,216/-, there is no reason to interfere with the order of the CIT(A) – Decided against revenue. - ITA No. 333/Ahd/2011 - - - Dated:- 12-12-2014 - Shri G. C. Gupta And Shri N. S. Saini,JJ. For the Petitioner : Smt. Sonia Kumar, Sr. DR. For the Respondent : Shri Hardik V. Vora, AR ORDER Per Shri N. S. Saini, Accountant Member: This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-VIII, Ahmedabad dated 18.11.2010 for the Assessment Year 2007-08. 2. The sole issue involved in this appeal is that the CIT(A) erred in deleting the disallowance for ₹ 56,59,254/- made by the Assessing Officer by treating the expenses on repairs as capital expenditure. 3. The brief facts of the case are that the Assessing Officer observed that the assessee has claimed expenditure on building repairs of ₹ 1,11,58,688/-. The assessee in reply to show-cause notice has stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52/-, the Assessing Officer observed that the assessee was claiming this expenditure as revenue expenditure and the plea is that it is incurred as per the norms of Landmark Honda. He observed that, while going through the expenses, it is found that they cannot be held as revenue. The expenditures are for fixing of ALU siding windows, various expense towards renovation of building at different places which cannot be held as revenue. It includes the entire renovation instead of repair. The assessee was trying to hide the expenditure of capital nature by claiming it as revenue repair. The expenditure on tiles, floorings, new sanitary and electrical fittings cannot be revenue expenditure. The same will amount to nearly 45 to 50% of the total expenditure. Therefore, he held that 45% of ₹ 71,86,752/- is to be disallowed as capital expenses and therefore made disallowance of ₹ 32,34,038/-. 8. On appeal, the CIT(A) allowed the claim of the assessee for entire expenses of ₹ 1,11,58,689/- as revenue expenditure and while doing so, he held as under:- It is to be appreciated that the appellant is carrying on the same business at the very same premises since 1998. The exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 4. SS Railing in the stairs. 1,37,709/- 5. Sanitary Hardware fittings 25,193/- 6. Venetian Blinds 51,857/- 7. Fiber sheet shade and M.S.grill 39,865/- 8. Misc. 96,296/- Total 24,25,216/- Since the appellant has only changed the existing floor or re-laid the existing workshop floor, the expenses are purely revenue in nature. The AO after summarizing the expenses of ₹ 24,25,216/, on Page 10 of his order observed that the assessee is spending amounts in the purchase of tiles, blinds, sanitary fittings, electrical fittings, partition of floor. All these expenses cannot be claimed as revenue expenses However, the AO lost sight of the fact that all these expenses are incurred by way of replacing the existing floor/fittings. What is disallowable is expenses being capital in nature but not which are incurred by replacing the existing one. The reliance of the AO on the decision of Hon'ble ITAT, Delhi in the case of Punj Hospit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was evolved to emphasize the element of a sufficient degree of durability appropriate to the context. There is also no single definite criterion which by itself, is determinative whether a particular outlay is capital or revenue. The 'once for all' payment test is also inconclusive. What is relevant is the purpose of the outlay and its intended object and effect, considered in a common-sense way having regard to the business realities. In a given case, the test of 'enduring benefit' might break down. In CIT v. Associated Cement Co. Ltd. JT 282 (2) 287 this Court said: ..... As observed by the Supreme Court in the decision in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) that there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that no material was brought on record to show that any new asset was acquired by the assessee. We find that the Hon ble Gujarat High Court the case of ACIT vs. Desai Bros., (1977) 108 ITR 14 (Guj.), held that even replacement of the petrol engine by a diesel engine would not bring into existence a new asset and was allowable as current repairs. Further, the Hon ble Calcutta High Court in the case of CIT vs. Rameshwar Prasad Kejriwal Sons (P.) Ltd., (1994) 74 taxman 124 (Cal.), held that replacement of parts of a machine, even if such replacement was more than cost of the machine itself, would qualify for deduction as revenue expenditure as no new asset or advantage of enduring benefit was brought into existence by any such expenditure. 11. We agree with the finding of the CIT(A) that after treating 55% of the expenditure of ₹ 71,86,752/- as revenue, there was no justifiable basis for the Assessing Officer to arbitrarily treat 45% of the same expenditure as capital in nature. The expenditure incurred can be either capital or revenue but it cannot be partly Revenue and partly capital. In respect of balance amount of ₹ 24,25,216/-, the CIT(A) found that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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