TMI Blog2011 (10) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... tal nature of ₹ 52,71,300/- incurred in respect of the factory building resulting in enduring benefit to the business of the assessee. 3. The only issue for consideration relates to as to whether the expenditure incurred in respect of the factory building is capital or revenue expenditure. The facts of the case stated in brief are that the assessee had booked expenditure of ₹ 58,57,000/- towards repairs and maintenance of the building. To a query raised by the assessing officer, it was submitted by the assessee that the amount of ₹ 48.05 lakhs booked on 28th February, 2006 was incurred on repairs and renovation of the existing factory building. It included the amount spent on change of roof and flooring of shop floor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed capital assets and was not working expenses relating to ordinary business activities of the assessee. New floors and roof have come into existence. He placed reliance on the decision of Hon ble Karnataka High Court in the case of Senapathy Synams Insulations (P) Ltd. Vs. CIT [2001] 248 ITR 656 (Kar.) wherein demolishing of the existing wall and constructing the new wall was held be capital expenditure. The AO, therefore, treated the expenditure incurred on replacement of floor and roof capital in nature. The assessing officer, however, allowed 10 per cent depreciation, which resulted in disallowance of ₹ 52,71,300/-. 4. Before the ld. CIT (Appeals) the ld. AR of the assessee reiterated the similar arguments as were made before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the roof was of asbestos sheets, which has been replaced by steel sheets. The assessee had incurred expenditure of ₹ 4.58 lakhs for dismantling and clearing of Malba. The replacement of floor shop and roof of the factory building has resulted into creation of new assets and hence, the expenditure incurred is in the capital field. He further submitted that the case laws relied upon by the assessee are prior to the insertion of the Explanation to section 30 of the Act. Hence, these are not applicable to the facts of case. 6. On the other hand, the ld. AR of the assessee submitted that the assessee had incurred expenditure in order to preserve and maintain the existing floor and roof, which are integral part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub clause (ii) of clause (a) shall not include any expenditure in the nature of capital expenditure. Therefore, even after insertion of Explanation it has to be seen whether the expenditure incurred by the assessee is in the nature of capital expenditure. Hon ble Supreme Court in the case of CIT Vs. Sarvana Spg. Mills P. Ltd. has held that to decide the applicability of section 31(i) the test was not whether the expenditure was revenue or capital in nature, but whether the expenditure was current repairs. The basic test was to find out whether the expenditure was incurred to preserve and maintain an already existing asset and the expenditure must not be to bring a new asset into existence or to obtain new advantage. Provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipments, pipe fittings etc. There is no material on record to suggest that the assessee had created extra space or extra capacity by incurring the expenditure. Therefore, the expenditure has to be treated in the nature of current repairs. Under section 30(a)(ii) the expenditure in the nature of capital expenditure is not allowable as deduction. As discussed above, the assessee has incurred expenditure on current repairs and, therefore, it is allowable as deduction. The facts of the case are identical to the facts in the case of Honda Siel Cars India Ltd. Vs. ACIT (supra) wherein ITAT under identical situation has allowed the expenditure as revenue expenditure. In view of the above facts, in our considered opinion, since no new assets ..... X X X X Extracts X X X X X X X X Extracts X X X X
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