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2016 (6) TMI 114 - BOMBAY HIGH COURT

2016 (6) TMI 114 - BOMBAY HIGH COURT - [2016] 386 ITR 450 - Expenditure incurred on repairs disallowed - Held that:- All the three authorities under the Act that the expenses claimed for repairs were inflated cannot be said to be perverse so as to warrant interference. As far as the judgment cited by Ms. Mehta on behalf of the assessee is concerned, the Tribunal's conclusion that the deduction claimed was unreasonable because the assessee's income would be reduced and that there was no evidence .....

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nal was right in disallowing repair expenditure to the extent of ₹ 2,00,000/- out of ₹ 10,33,547/- claimed as repairs expenditure - Decided in favour of the revenue - INCOME TAX REFERENCE NO.1 OF 1998 - Dated:- 25-4-2016 - M. S. SANKLECHA AND A. K. MENON, JJ. For The Applicant : Ms. Neha Mehta i/b. Apte & Co. For The Respondent : Mr. Suresh Kumar ORAL ORDER (PER A.K. MENON) 1. This Reference is made under Section 256(1) of the Income Tax Act, 1961 (the Act) by the Income Tax Appe .....

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two dredgers. For assessment year 1989-90 the assessee claimed having incurred expenditure of ₹ 10,33,547/- towards cost of repairs of two dredgers which mainly pertain to replacement of steel plates in the buckets which are used for dredging. The major portion of the above expenditure was attributed to the cost of steel plates of the buckets that are actually utilized for dredging. The assessee claimed having purchased the steel scrap plates from one M/s. J.K. Industries, a partnership fi .....

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ost of ₹ 7 lakhs. He made some further additions with which we are not presently concerned. 4. Being aggrieved, the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals) (CIT(A)). By order dated 7 July, 1993 the CIT(A) held that repairs have not been substantiated and sustained the additions made by the Assessing Officer. 5. On further appeal, the Tribunal upheld the addition of ₹ 2,00,000/-out of the total addition of ₹ 5,00,000/- made by the As .....

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₹ 5,00,000/- was upheld. Therefore it is clear that out of ₹ 10,33,547/- claimed as expenditure for repairs, on account of ₹ 8,33,547/- was allowed as deduction. 6. Ms. Mehta, the learned counsel appearing for the applicant in support of the Reference submitted that the Assessing Officer, CIT(A) and the Tribunal had misdirected themselves in concluding that the assessee had not incurred the expenditure expenses of ₹ 10,33,747/- towards repairs. She submitted that the main .....

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en inflated was not justifiable. Ms. Mehta further submitted that even if one proceeds to accept the assumption of the authorities under the Act that the massive purchase of scrap steel was from its sister concern M/s. J. K. Industries yet that fact by itself would not establish that the prices were inflated in the absence of contemporaneous evidence. Ms. Mehta then contended that there is no dispute that steel scrap had been purchased and that repairs were in fact carried out and in the face of .....

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id judicial pronouncement the Gujarat High Court had held that the expenditure cannot be disallowed merely because the assessee's income would be merely reduced by the disallowance. In that case the Income Tax Officer had rejected the claim of the assessee on the ground that the expenditure claimed was disproportionate to the income. 8. Mr. Suresh Kumar appearing for the revenue submitted that there was no substance in the assessee's case and that the question referred is not the questio .....

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efore submitted that the substantial question of law needs to be answered in the affirmative i.e. in favour of the revenue. 9. We have heard both learned counsel at length. On behalf of the assessee, Ms.Mehta had contended that the Tribunal had failed to appreciate the fact that there was no dispute as to factum of purchase of steel plates by the assessee. She then submitted that the revenue had proceeded to deny expenses on the ground that the expenses were inflated only because after suspicion .....

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/s.J.K. Industries. 10. We are unable to agree with Ms. Mehta that the tribunal proceeded on assumptions and presumptions that the expenses were inflated because turnover of the assessee had remained more or less the same when compared to relevant year and the immediately preceding year. Having considered the submissions on behalf of the Respondent, we are not convinced that the tribunal had erred in upholding disallowance. Disallowance has been partial upto sum of ₹ 2 lakhs. The Tribunal .....

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h as it was for the assessee to prove that dredging buckets were in fact repaired and that such repairs required purchase of steel plates and that steel plates were utilised for repair work of buckets and in respect of which the work was actually carried out. However, what we find is that apart from a bald assertion that repairs were required to dredging buckets a sum of ₹ 10 lakhs was incurred for purchase of steel, there is nothing to establish the extent of specific work actually carrie .....

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the persons in house and who were conversant with the same. Before the revenue, the assessee contended that labour charges were incurred for carrying out repairs but when asked what labour charges were incurred for the work, the assessee submitted that the labour charges for carrying out the repairs were debited to the dredger labour account. However there is nothing to show that the labour employed for dredging work was capable of and did in fact carry out repairs of technical nature of replaci .....

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cept. There is no evidence to suggest that any such repair work of buckets was carried out mid-sea. Firstly, if dredging buckets had to be repaired, there was no reason for the dredger sailing midsea. After steel plates were purchased from M/s. J.K. Industries at Bhavnagar, as evident from the record, there is nothing to show as to why the repairs were not carried out at the ferry/wharf/port at which dredger was docked/moored. The contention that repair work was carried out mid-sea was therefore .....

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