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Asstt. Commissioner of Income tax Circle 13 (1) , Hyderabad Versus M/s. SPI Cinemas (P) Ltd.

2015 (9) TMI 705 - ITAT HYDERABAD

Repairs and maintenance expenses incurred on building and theatres - revenue v/s capital expenditure - Held that:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of assessment years 2003-04, 2005-06 and 2006-07, we respectfully follow the order passed by the Tribunal for the said years, and uphold the impugned order of the learned Commissioner of Income-tax (Appeals), allowing the deductions claimed by the assessee on .....

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bad dated November 29, 2013 and in the solitary substantive ground raised therein, the Revenue has challenged the action of the learned Commissioner of Income-tax (Appeals) in deleting the disallowance made by the Assessing Officer by treating the repairs and maintenance expenses of ₹ 4,40,12,739 incurred by the assessee on building and theatres as capital expenditure. 2. The assessee in the present case is a company, which is engaged in the business of operating cinema theatres (multiplex .....

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ot be treated as capital expenditure, it was pointed out by the assessee that similar expenditure incurred by it during the assessment years 2003-04, 2005-06 and 2006-07 has been allowed by the Tribunal treating the same as revenue in nature, vide its common order dated June 30, 2010 in I. T. A. Nos. 250 to 252/Hyd/2010. Since the said decision of the Tribunal was not accepted by the Department, and an appeal under section 260A was filed before the hon'ble Andhra Pradesh High Court, the Asse .....

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er considering the submissions made by the assessee as well as the material available on record, the learned Commissioner of Income-tax (Appeals) deleted the disallowance made by the Assessing Officer for the following reasons given in paragraphs 5.3 and 5.4 of his impugned order : "5.3 I have carefully considered the submissions of the appellant, assessment order, case-law, orders of the Commissioner of Income- tax (Appeals)-II, Hyderabad and Income-tax Appellate Tribunal, Hyderabad. The C .....

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upheld the contention of the appellant and directed the allowance of the revenue expenditure incurred by the appellant on repairs and maintenance of building and theatre. On appeal by the Department, the hon'ble Income-tax Appellate Tribunal, Hyderabad in I. T. A. Nos. 250, 251, 252/Hyd/10 dated June 30, 2010 for the assessment years 2003-04, 2005-06 and 2006-07, in the appellant's own case, also upheld the decision of the Commissioner of Income-tax (Appeals). The Assessing Officer had t .....

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ly revenue in nature. 5.4 I have carefully examined the details submitted by the appellant for the total expenditure of ₹ 4,40,12,749 and found them to be correct and the explanation of the appellant is accepted. Respectfully following the orders of the Commissioner of Income-tax (Appeals) and hon'ble Income-tax Appellate Tribunal, Hyderabad and the case law cited by the appellant, I hold that the expenditure of ₹ 4,40,12,739 incurred towards repairs and maintenance of building a .....

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and theatres is capital or revenue will depend on the cost of acquisition of the relevant assets and the turnover of the assessee, we are unable to accept the same. In our opinion, the nature of the expenditure incurred by the assessee on repairs and maintenance of the building and theatres is required to be seen in the light of the nature of the business of the assessee in order to decide whether the same is capital or revenue. In this regard, we have perused the details of the expenditure incu .....

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agraph 23. "23. In view of the above case law, it is obvious that whenever an expenditure was incurred in the process of earning of profit it has to be allowed as revenue expenditure. In such a case the expenditure incurred by the assessee would be outside the purview of Explanation 1 to section 32 of the Act. In the case before us, it is not in dispute that the expenditure was incurred for earth filling, repair of chairs, replacement of damaged chairs, repair of underground slump, drainage .....

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