TMI Blog2013 (9) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... AJIVE BHALLA,J. The assessee lays challenge to order dated 09.11.2011, passed by the Income Tax Appellate Tribunal, Delhi, Bench-'D', affirming order passed by the Assessing Officer and the CIT (Appeals). Counsel for the appellant submits that the impugned orders are null and void as revenue expenditure spent for repair and maintenance of a leased building has been treated as capital expenditure . The mere fact that teak, plywood, glass, electrical fittings, sanitary fittings, aluminium sections, handles, knobs, locks, latches, cement, granite/tiles, plaster of paris, iron sheets, saria, ingot etc. was used, would not alter the nature of expenditure. The assessee has merely made alterations for creating partitions to ensure optimum utilisation of space and not to create a new asset or avail a new advantage. It is further submitted that the Income Tax Appellate Tribunal has erred in placing reliance upon a judgment of the Hon'ble Supreme Court in CITU v. Sarvana Spining Mills P. Ltd., 293 ITR 201(SC), as the dispute before the Hon'ble Supreme Court related to the meaning of the expression current repairs and whether replacement of a motor leads to creati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w or fresh advantage. Thus, as the assessee has brought into existence a new asset, that has altered the very nature of the premises and resulted in a new advantage to the assessee, the expenditure is necessarily capital expenditure. We have heard counsel for the parties and perused the impugned order. The assessee filed a return claiming deduction of ₹ 8,03,468/-, spent on repair and maintenance of tenanted premises. An Inspector of Income Tax prepared a report that primafacie indicated that the expenditure was capital in nature. The Assessing Officer called for the assessee's explanation. The assessee, filed a reply averring that it has created temporary wooden structures fitted with iron sections and glass panels for creating office cabins, repaired toilets and changed electrical fittings, as follows:- Teak/ply wood Rs.154564 Glass ₹ 37613 Paints ₹ 81017 Elect. Fittings ₹ 76529 Sanitary Fittings ₹ 43902 Aluminium sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax (Appeals) reversed the order passed by the Assessing Officer, by holding that the entire expense is in the nature of revenue expenditure. The revenue filed an appeal, before the Income Tax Appellate Tribunal, Delhi Bench-'D', New Delhi. The appeal was allowed, order passed by the CIT(Appeals) was set aside and the CIT(Appeals) was directed to pass a fresh order. The CIT(Appeals) reconsidered the matter and dismissed the appeal, on 18.03.2011, by affirming the order passed by the Assessing Officer. An extract from the order reads as follows:- 1.10 In view of the various case law discussed above, it is noted that expenditure incurred to 'preserve and maintain' the existing asset is to be taken as current repair but if as a result of expenditure, the new asset cam into existence or new advantage is obtained by the assessee, the same is to be taken as capital expenditure. In view of the factual and legal position discussed above, the issue is examined. Details of expenses incurred by the assessee was given by the Assessing Officer in para 14(ii) of the asst. order which is reproduced as under:- The details of expenditure furnished by the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sides on the issue. After hearing both the sides, we are of the view that in case of current repairs, the basic test to decide the nature of the expenditure is that the expenditure must be incurred to preserve and maintain an already exiting asset then only the expenditure can be said as revenue in nature. Whenever an expenditure brings a new asset into existence or the expenditure is made to obtain a new advantage, then the expenditure is definitely of capital in nature. This test has been decided by Hon'ble Supreme Court in the case of CIT vs. Saravana Spinning Mills P. Ltd., 293 ITR 201(SC) wherein the Hon'ble Supreme Court has held as under:- Held, reversing the decision of the High Court, (i) that the manufacturing process in the textile mill was not one continuous integrated process; (ii) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a new advantage. The questions that require an answer and would lead to answers to substantial questions of law framed by the appellant is the test to be applied while determining whether expenditure incurred on repairs is capital or revenue expenditure and as a consequence is allowable as a deduction under Section 30(a)(i) of the Act, which reads as follows:- Rent, rates, taxes, repairs and insurance for buildings. Section 30 . In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business of profession, the following deductions shall be allowed-- (a) where the premises are occupied by the assessee- (i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the premises; (b) any sums paid on account of land revenue, local rates or municipal taxes; (c) the amount of any premium paid in respect of insurance against risk of damage or destruction of the premises. [Explanation.-- For the removal of doubts, it is here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by the Hon'ble Supreme Court in Ballimal Naval kishore Another v. Commissioner of Income Tax (1997) 224 ITR 414(SC), by holding as follows:- The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure on repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of 'repairs' because it is only by reason of this definition of repairs that the expenditure is a revenue expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure or a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the legislature has permitted under S. 10(2) (v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure. The judgments in New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (supra) and Ballimal Naval kishore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 137 ITR 689 (P H), Commissioner of Income Tax v. Sree Narsimha Textiles (O) Ltd. 238 ITR 351 (Mad.), and Commissioner of Income Tax v. Hi Line Pens (P) Ltd. (2008) 13 DTR 233 (Del) (2008) 306 ITR 182 (Del), to contend that mere creation of partitions for better use of tenanted premises cannot be said to be capital expenditure. A perusal of the judgment in Allied Metal Products v. Commissioner of Income Tax, Patiala-II,(supra) reveals that as the assessee repaired the roof of his tenanted premises, it was held that the expenditure is revenue in nature. The repair of a roof would necessarily fall within meaning of the word repairs . A perusal of the judgment in CIT v. Hi Lines Pens (P) Ltd.(supra) reveals that the test laid down in New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (1956) 30 ITR 338 (Bom) duly approved by the Hon'ble Supreme Court in Ballimal Naval kishore Another v. Commissioner of Income Tax (supra) and C.I.T. v. Saravana Spinning Mills P Ltd., (supra) was not applied on the ground that these judgments relate to current repairs . With due deference to the opinion recorded by the Delhi High Court, the test laid down in New Shorrock Spinning and Manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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