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2015 (8) TMI 1205 - ITAT MUMBAI

2015 (8) TMI 1205 - ITAT MUMBAI - TMI - Treatment of expenditure incurred on repairs and maintenance as capital expenditure - Held that:- A perusal of the bills exhibited in the paper book show that the expenses have been incurred for the purchase of G.P. sheets, M. S. Angles, M. S. Channels and M. S. Beams. This clearly show that old hoardings were replaced by new hoarding with new structure. Our view is also fortified by the fact that the assessee has also incurred expenditure on fabrication o .....

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was diversion of income by overriding title - Held that:- The Undisputed fact is that in order to retire Shri Neville J. Mistry and to admit PTV and STV as partners with MS and KTV, it was agreed to pay ₹ 30 lakhs to Neville J. Mistry. Since the assessee was not having sufficient funds, the money was taken from TDV. It was agreed that on payment of said ₹ 30 lakhs Neville J. Mistry will retire from the firm. As per the agreement, Rs., 30 lakhs was given by TDV to MS, PTV, STV and KT .....

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the amount has not been paid before the due date of filing the return. - Held that:- The assessee has debited the entire sum of ₹ 18,44,091/- to its profit and loss account therefore the fact of the case are clearly distinguishable from the facts of the decision relied upon by theLd. Counsel. We also find that the Tribunal has considered the decision of the Co-ordinate Bench in the case of ACIT Vs Real Image Media Technologies (P) Ltd.(2007 (12) TMI 263 - ITAT MADRAS-C) which has been cons .....

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not to the company premises used by the assessee along with others. As the facts have not been properly appreciated by the lower authorities, in the interest of justice and fair play, we restore this issue to the file of the AO. The assessee is directed to furnish necessary details before the AO and the AO is directed to decide the issue afresh - Decided in favour of assessee for statistical purposes. - I.T.A. No.75/Mum/2011, I.T.A. No.4847/Mum/2012 - Dated:- 19-8-2015 - SHRI VIJAY PAL RAO AND .....

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o. 75/M/2011 - A.Y. 2007-08 2. The first ground relates to the treatment of expenditure of ₹ 29,16,556/- incurred on repairs and maintenance as capital expenditure. Ground No. 2 relates to the addition of ₹ 13.70 lakhs in respect of charge on income ignoring the fact that the payment was diversion of income by overriding title. Ground No. 3 relates to the disallowance u/s. 43B of the Act on account of Service tax payable amounting to ₹ 6,91,417/- and ground No. 4 relates to the .....

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al of the details filed by the assessee, the AO found that the major expenses are with respect to purchase of M. S channels, G.P. sheets and labour charges for fabrication and foundation for the hoarding structures. The AO was of the firm belief that the expenses have been incurred for capital purpose giving enduring benefit and is not in the nature of current repairs. Drawing support from the decision of the Hon ble Supreme Court in the case of Balimal Naval Kishore and Another Vs CIT 224 ITR 4 .....

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d that expenditure amounting to ₹ 40,406/- is of revenue in nature and the balance amount is of capital in nature and accordingly directed the AO to recompute the depreciation allowable. 5. Aggrieved by this, the assessee is before us. The Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. It is the say of the Ld. Counsel that the expenditure have been incurred for replacing parts, iron which has been rusted in the rains and therefore the repairs .....

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that the expenses have been incurred for the purchase of G.P. sheets, M. S. Angles, M. S. Channels and M. S. Beams. This clearly show that old hoardings were replaced by new hoarding with new structure. Our view is also fortified by the fact that the assessee has also incurred expenditure on fabrication of hoarding structures on the terrace. Obviously, the expenditures have been incurred for obtaining new advantages. The assessee has made new hoarding and supporting for the hoarding, the entire .....

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(MS) and Pareash Tulsidas Vora (PTV), Sukesh Tulsidas Vora (STV) and Kalpesh Tulsidas Vora (KTV) being the sons of TDV as the parties of the second, third, fourth and fifth parties. In this agreement it was recorded that Mr. KTV and one Mr. Neville J. Mistry (NM) were the partners of M/s. Fizza Publicity (assessee). In the said agreement, it is mentioned that NM wanted to dissolve the firm and have a receiver appointed or to be allowed to repair from the firm w. E. F. the midnight of 31.3.2006 o .....

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w. E. F. 31.3.2006. In the said agreement, it is specifically provided that the said amount of ₹ 30 lakhs shall be given back by the 2nd, 3rd, 4th & 5th parties to TDV on or before 31.12.2007 and the return to TDV was secured as a charge on the income of M/s. Fizza Publicity (assessee). The payment of ₹ 13.70 lakhs was in pursuance to this agreement and this charge on the profit. 8.1. During the course of the assessment proceedings, the assessee was asked to justify its claim. I .....

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eed to justify the claim of such expense. The AO further observed that the assessee has not given any further submission to substantiate its stand regarding the allowability of the expenses. Accordingly ₹ 13.70 lakhs was added to the income of the assessee. 9. Before the Ld. CIT(A), the assessee claimed that the said diversion was in pursuant to the partnership deed dated 11.12.2006. It was claimed that the payment was on account of charge of income and has been paid in terms of agreement .....

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portions of the assessee s income after it had accrued to him and tax was payable by him at the point of accrual. Further support was drawn from the decision in the case of CIT Vs Imperial Chemical Industries (India) Pvt. Ltd. 74 ITR 17 (SC). The Ld. CIT(A) further observed that the assessee failed to demonstrate that TDV had a pre-existing title to the monies. Merely by inserting a clause in the deed of agreement only indicates that the appellant had an obligation to pay Shri Vora a certain amo .....

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so considered the orders of the authorities below. The Undisputed fact is that in order to retire Shri Neville J. Mistry and to admit PTV and STV as partners with MS and KTV, it was agreed to pay ₹ 30 lakhs to Neville J. Mistry. Since the assessee was not having sufficient funds, the money was taken from TDV. It was agreed that on payment of said ₹ 30 lakhs Neville J. Mistry will retire from the firm. As per the agreement, Rs., 30 lakhs was given by TDV to MS, PTV, STV and KTV. A bar .....

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e disallowance u/s. 43B on account of service tax. 15. The AO found that as against ₹ 18,44,091/- billed during the year, the assessee has collected and paid only an amount of ₹ 11,52,674/-. The AO was of the opinion that the balance amount of ₹ 6,91,417/- has not been paid during the year. The AO further found that even the auditors have not certified that the said payments have been paid before the due date of filing the return. The assessee was asked to explain why the said .....

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matter before the Ld. CIT(A) but without any success. 17. Before us, the Ld. Counsel for the assessee relied upon the decision of the Tribunal in the case of Pharma Search Vs ACIT 53 SOT 01. It is the say of the Ld. Counsel that in this case, the Tribunal has held that if liability to pay service tax does not exist, service tax cannot be said to be payable and therefore provisions of Sec. 43B could not also be invoked. 18. The Ld. DR relied upon the assessment order. 19. We have carefully perus .....

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uished. Since the assessee has claimed the deduction in respect of the entire amount of service tax, the disallowance made by the AO and confirmed by the Ld. CIT(A) is upheld . Ground No. 3 is accordingly dismissed. 20. Ground No. 4 relates to the disallowance of electricity expenses of ₹ 4,84,545/-. 21. While scrutinizing the return, the AO found that the assessee has debited a sum of ₹ 6,46,061/- to its profit and loss account under the head Office Electricity expenses . The assess .....

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