TMI Blog2016 (3) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... hich resulted in increase in temperature, repair had to be done by using good quality of fire bricks to safeguard the ovens from melting, bending and other damages. In view of these facts, we consider the repairs carried out by the assessee as revenue in nature and we confirm the order of CIT(A) on this issue. - Decided in favour of assessee Disallowance made by AO u/s. 35D - Held that:- We find that the assessee has claimed deduction of expenditure at one-fifth u/s. 35D of the Act in respect of expenditure of ₹ 75,000/- incurred in FY 2001-02 relevant to AY 2002-03 and subsequent years the same has all along been allowed being one-fifth as per the provisions of section 35D of the Act. We find no infirmity in the order of the CIT(A) in allowing this claim of assessee. Disallowance u/s 40(a)(ia) of the Act for non-deduction of TDS on the expenses of security guard and import expenses as well as interest on loan - Held that:- We find from the order of the CIT(A) that the assessee has made payments of TDS and these payments are made within the due date of filing of return of income by the assessee as is evidenced from the details given before the CIT(A). We find that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 46,65,954/- incurred towards repairs and maintenance of ovens in the period from 10.12.2003 to 1.3.2004 is treated as capital in nature whether considered u/s. 31 or u/s. 37(1) of I. T. Act. The said expense is therefore disallowed as deduction from total income but capitalized within fixed assets under the block of plant machinery . Accordingly, depreciation u/s. 32 is allowed on such addition of ₹ 46,65,954/-. Since the additions were made after 30.09.2003, depreciation is allowed only at the half of the prescribed rate of 25%. In consequence of the same, the assessee gets additional depreciation of ₹ 5,83,244/- (50% of 46,65,954). Penalty proceedings u/s. 271(1)(c) of I. T. Act are initiated for furnishing inaccurate particulars of total income on this issue. Aggrieved against the action of AO in both the years, assessee went in appeal before CIT(A), who allowed the claim of the assessee and the relevant finding given in AY 2004-05 by CIT(A) in his appellate order in para 2.5 reads as under: 2.5 I have considered the submission of A/R of the appellant and also gone through the assessment order. The fact that simply because repairs were massive and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coke-ovens remains same even now. In the year 1978 / 1979 when the first block of coke-ovens was made the price of fire bricks was about ₹ 1/ - per piece only. It remained at ₹ 2/ - to 3/ - per piece till 1985 whereas during the F. Y.2003-2004 the fire bricks were purchased @ ₹ 2 7/- per piece. The coke oven plant of the assessee was pretty old and had not been working in full capacity mainly because of shortage in getting coal from BCCL. The opportunity arose during this year because of import of coal during the year from Australia. The assessee-company therefore embarked upon fast repairing the coke ovens on war-scale for obtaining the optimum results. The company started repairing the ovens in blocks of four ovens at a time so that the entire production was not affected. Repairing of one block of coke oven takes approximately 15/20 days during which the production in those ovens remained suspended. By this process the company got about 20/25 ovens repaired during the period from December to March, 2004 without disturbing the production. The repairing during the earlier period was very little, which was mainly done by the company's own labour/workers. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve because the Ovens had become very old and needed substantial repairs to withstand sudden surge in quantity as well as quality of production during the year. Our attention was specifically invited to the huge increase in the turnover and income during the year, which was about 500% of the preceding year. It was explained that the quantum of expenditure incurred for repairs should not have influenced the decision of the AO. Reliance was placed on the decision in the case of CIT Vs. Chowgule And Co. Pvt. Ltd. (1995) 214 ITR 523 (Bom) - wherein the Hon'ble Court held that On a plain reading of section 31 of the Income-tax Act, 1961, it is clear that in order to entitle an assessee to claim deduction under section 31 of the Act, the amount must be paid on account of 'current repairs. The expression current repairs has not been defined in the Act. It has, therefore, to be taken in its popular or commercial sense. In commercial parlance, it means repairs which are undertaken in the normal course of user for the purpose of preservation, maintenance or proper utilization. It does not mean ''petty repairs or repairs necessitated by wear and tear during the particular y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. This repair necessitated due to use of high V.M. and low ash contents of imported coal, which resulted in increase in temperature, repair had to be done by using good quality of fire bricks to safeguard the ovens from melting, bending and other damages. In view of these facts, we consider the repairs carried out by the assessee as revenue in nature and we confirm the order of CIT(A) on this issue. This issue of revenue s appeal is dismissed. 8. The next issue in ITA No. 1873/K/2008 for AY 2004-05 is as regards to the order of CIT(A) deleting the disallowance made by AO u/s. 35D of the Act amounting to ₹ 15,000/-. For this, revenue has raised following ground no2: 2. That the Ld. CIT(A)-VII, Kolkata erred in law as well as in facts by deleting the addition of ₹ 15,000/- which was added u/s. 35D of the Act in view of the judgment held in the case of Punjab State Industrial Development Corporation Ltd. vs. CIT 225 ITR 792 (SC) and Brooke Bond (India) Ltd. Vs. CIT, 225 ITR 798 (SC). 9. Brief facts relating to the above issue that the assessee claimed expenses of ₹ 23,000/- towards amortization of share issue expenses written off. According to AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment 13 14 19 23 Security Guard Services Import Expenses Import expenses Interest on loan 29,440/- 8,39,789/- 1,64,615/- 16,963/- 601/- 17,561/- 3,694/- 1,731/- 15.06.2005 29.04.2005 19.09.2005 06.06.2005 07.04.2005 07.04.2005 07.04.2005 31.05.2005 We find that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Calcutta High Court in the case of CIT v Virgin Creations, ITAT No. 302 of 2011, GA 3200/2011, decided on November 23, 2011, wherein even amendment made by the Finance Act 2010 in section 40(a)(ia) of the Act is held to be retrospective. Hon ble High Court held as under: We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted. It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(a)(ia) is having retrospective operation or not. 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