Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 584 - ITAT KOLKATA

2016 (3) TMI 584 - ITAT KOLKATA - TMI - Addition made on account of expenditure incurred on repairs and maintenance treating the same as capital expenditure - Held that:- in the present case simply because there was massive repairs and substantial expenditure incurred by assessee on repairs the same cannot be treated as capital in nature for the reason that there was no expansion of the coke ovens but the number of ovens remained the same at 46 as in 1989. No new coke ovens were add-up by incurr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. - Decided in favour of assessee

Disallowance made by AO u/s. 35D - Held that:- We find that the assessee has claimed deduction of expenditur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

:- 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 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 [2011 (11) TMI 348 - CALCUTTA HIGH COURT] - Decided in favour of assessee - I.T.A No.1873/Kol/2008, I.T.A No.1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Addl.CIT, Range-7, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Years 2004-05 and 2005-06 vide his separate orders dated 28.12.2006 and 17.12.2007 respectively. 2. The first common issue in these two appeals of revenue is against the order of CIT(A) deleting the addition made by AO on account of expenditure incurred on repairs and maintenance treating the same as capital expenditure. 3. Briefly stated facts are that the assessee during the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

From the facts and circumstances discussed in Sr. Nos. (1) to (VII) above, it is therefore clear that the ovens in question were subject to extensive and complete overhauling during the period of those three months so as to withstand the workload over a long period of time. It is also clear that the assessee might have claimed it as repairs but in effect there was substantial reconstruction of the ovens in question. In other words, although no new asset was created, the advantage, which was cre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

owed 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) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

more in the nature of Accumulated repairs and had to be done to enable the appellant to have optimum use of the Ovens because of the circumstances and the surge in the business during the year. The decisions quoted by the A/R of the appellant also support the view that even replacement of the complete machinery will have to be treated as a Revenue expenditure. The Explanation inserted w.e.f. Asst. Yr. 2004-05 does not change the legal position regarding allowability of the expenditure, it has on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-06 also. Aggrieved against the action of the CIT(A) in both the years, revenue is now in appeals before us. 4. We have heard rival submissions and gone through facts and circumstances of the case. The Ld. Counsel for the assessee explained that there was no denial of the fact that the repairs of the Ovens were extensive, but that by itself cannot be a ground for treating the expenditure as Capital expenditure as conceived under the Act. Our attention was invited to the submissions made before t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

during 1978-79, and thereafter more coke ovens were added in subsequent years and by 1989 the assessee's plant had 46 coke ovens. There had been no addition of coke-oven thereafter and number of 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/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 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 during the repairing work was done in part, block of four ovens at a time the working in the four adj .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mperature. In view of this good quality of fire bricks was used for repairs. Further, because of setting up of many coke-ovens during the year on the Port sights the price of fire bricks had also shot up. As explained above, the repair was done in phases of four ovens at a time for getting optimum benefit of production . In view of this letter, he explained that the number of Ovens was not increased and it remained 46 as before in 1989. The nature of the expenditure and the manner in which the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

premise of the AO was on the explanation to sec.31 of the Act inserted w.e.f. AY 2004- 2005, which states that "if the cost of current repairs is of the nature of Capital expenditure then such expenditure shall not be allowed as deduction". We are of the view that the explanation referred to by the AO is not correctly set out. The explanation inserted actually reads as "For removal of doubts, it is hereby declared that the amount paid on account of current repairs shall not includ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed 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 assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

during the particular year. Payments on account of "current repairs" must be understood in contradistinction to payments for "additions". The object of the expenditure should not be to bring a new asset into existence or to obtain a new or different advantage. The quantum of expenditure incurred on the repairs is not relevant for determining whether it is an expenditure on current repairs or not, because the extent of repairs and the amount spent would depend upon various fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

& Co. (1980) 122 ITR 49 (SC). Reliance was also placed on recent decisions of the Hon'ble Madras High Court in the case of CIT Vs. Rajaram Mills P. Ltd. (2008) 302 ITR 10 (Mad) and CIT Vs. T.V.S. Sewing Needles Ltd. (2008) 302 ITR 13 (Mad). In both these cases the Hon'ble court has held that expenditure on replacement of independent complete machinery was a revenue expenditure entitled to deduction. In these cases the Hon ble court gave the decision by following their earlier decisi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

incurring the expenditure and moreover there was no vacant space in the factory to set up additional coke ovens. The expenditure was incurred only on fire bricks, fire clay and tiles and no expenditure on steel and other materials were required for construction of new coke ovens as is evident from bills and vouchers. Secondly, repairing was done from outer side of the ovens and the platform from where the heated coal is dragged out after production. This repair necessitated due to use of high V .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng 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 is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Counsel for the assessee before us explained that the expenditure was capital in nature is not denied but the assessee has claimed only one-fifth of the expenditure u/s. 35D of the Act in respect of expenditure of ₹ 75,000/- incurred in FY 2001-02. It was explained that deduction of ₹ 15,000/- out of the total expenditure of ₹ 75,000/- incurred in earlier year has all along been allowed in the past. Accordingly, the Ld. Counsel for the assessee claimed that the deduction should .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er 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. Accordingly, this issue of revenue s appeal is dismissed. 11. The next issue in ITA No. 1874/K/2008 for AY 2005-06 is as regards to the order of CIT(A) setting aside the issue to the file of the AO for verification in respect to addition of ₹ 10,50,807/- by invoking the provisions of section 40(a)(ia) of the Act for non-deduction of TDS on the expenses of securit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oan 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version