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2016 (6) TMI 285 - ITAT DELHI

2016 (6) TMI 285 - ITAT DELHI - [2016] 49 ITR (Trib) 244 - Expenditure on repair and maintenance of building - revenue v/s capital expenditure - Held that:- As during the course of hearing before us the Ld DR has also referred the various vouchers and bills extensively and could not point out that how these expenditure are capital in nature and what kind of benefit of enduring nature is derived by the assessee. Therefore setting aside the issue back to the file of the ld. AO does not serve any p .....

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the Assessee : Shri Salil Kapoor, Sumit Lal Chandani, Adv And Ms. Ananya Kapoor, Advocate ORDER Per Prashant Maharishi, Accountant Member 1. This appeal is filed by the revenue against the order of Ld. CIT(A) XIII New Delhi vide order dated 30th September, 2010 treating the expenditure on repair and maintenance of ₹ 1,44,25,239/- as revenue expenditure and deleting the addition made by the Ld. AO. The following grounds of appeal have been taken :- i. The order of Ld. CIT (A) is wrong, per .....

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ile, metal, plastic items etc. The company purchases these products locally and exports them. For the assessment year 2005-06 it filed its return of income on 28th October, 2005 declaring an income of ₹ 15,88,70,103/-. During the course of assessment proceedings, it was found that the company has debited expenses of ₹ 20,988,343/- on account of repair and maintenance of building expenditure. Assessee was asked to explain nature of such huge expenditure and in response to that assesse .....

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f ₹ 15,76,638/-, lease rentals of ₹ 44,11,920/-, security costs of ₹ 53,87,700/- and cleaning charges of 6,19,116/- amounting in all to ₹ 14,425,239/- are in nature of capital expenditure and therefore it was held that these expenses are in nature of repairs and renovation of building which is not owned by the assessee and hence disallowed as capital expenditure. Ld. AO further allowed depreciation @ 10% on these expenses. Aggrieved by the order of the AO assessee preferr .....

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t Ld. CIT (A) has deleted the disallowance by admitting the new evidences. He further submitted that there is no documentary evidence submitted by the assessee about the nature of the claim of the expat employees and their work detail and why the expenditure incurred is treated as revenue expenditure. He further submitted that the terminology of the expenditure is not to be seen but the nature of expenditure is required to be seen. He further stated that even otherwise, the expenditure is not cu .....

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r period expenses. He further submitted the details of expenditure at page No. 762, 765, 771, 786-790, 836, 842 - 846, 866 and 1277 to 1280. These pages show that expenses are of the accumulated repairs, personal expenses of employees, speed money and prior period expenses. Therefore, it was submitted that these expenses should not have been allowed as revenue expenditure and the Ld. CIT (A) has deleted the disallowance after admitting the additional evidences. He relied up on the decision of ho .....

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assessee but on rented premises. He submitted the complete details in the form of vouchers, bills etc, of expenditure submitted before AO and before ld CIT (A). He submitted that genuineness of the expenditure has not been doubted by the Ld. AO but only issue is whether this expenditure are capital or revenue in nature. He further submitted that the undisputedly these are repair and maintenance expenditure and assessee has not derived any benefit of enduring nature, no capital assets is acquire .....

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e revenue. Further, he submitted that the Ld. CIT (A) has deleted this disallowance after obtaining remand report of the ld. AO. He referred to various expenditure and stated that they are neither speed money and nor personal expenditure. He also took us through the details of the expenditure pointed out by the Ld. DR. Therefore, he submitted that the Ld. CIT (A) has correctly deleted this disallowance holding that the expenditure incurred by the assessee are revenue in nature. He further took u .....

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urity charges, cleaning charges. No new assets has been purchased by the assessee and it is functioning on rented premises. Regarding the decision of Honourable Supreme court relied up on by the Ld DR he placed reliance on decision of Bharat Gears Limited V CIT [ 337 ITR 368 (del)] where repairs expenditure was allowed considering the decision of honourable supreme court. 7. In the rejoinder Ld. DR submitted that it has for the first time come to the notice of the revenue that building is not ow .....

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i High Court in the case of CIT vs. M/s. Jansampark Advertising and Marketing (P) Ltd. (supra) requested that matter may be set aside back to the file of the AO. He further submitted that according to sub rule 3 of Rule 46A no evidence can be taken into account unless the AO has been given reasonable opportunity to examine and rebut the same. For these propositions, he relied on the decision of Hon ble Delhi High Court in the case of CIT vs. Manish Build Well Pvt. Ltd. [ITA no 9258/2011 dated 15 .....

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22,32,507 Upkeep maintenance at office building 1,97,358 Repair and maintenance -office premises 15,76,638 Lease rentals 44,11,920 Security costs 53,87,700 Cleaning costs 6,19,116 Total 1,44,25,239 9. It is evident from the assessment order itself that the expenditure has been incurred by the assessee on renovation and repair of building, which is not owned, by the assessee. This fact has been recorded on the last page of the assessment order wherein this fact has been recorded by the AO that th .....

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reement entered into with that company. According to that agreement, the assessee is entitled to use air conditioners, lifts and other building facilities, which are maintained by M/s. AB Hotels Ltd. c) The security charges are paid to an outside security agency for security of office premises and residential premises of the employees of the assessee company. d) Repairs and maintenance of office premises includes expenditure such as plumbing charges, photocopy charges and binding charges etc. e) .....

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- I have carefully gone through the submissions filed by the appellant as also the break up of the payments under the head - EDP maintenance cost: lease rentals: security cost: repair and maintenance of office premises, cleaning charges and upkeep maintenance and office building. Further the bills/vouchers filed by the appellant vide paper book on several occasions and the balance vouchers filed vide letter dated 27.9.10 have also been cross verified by me with reference to the break up of the a .....

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t for its registered office at Radisson Commercial Plaza New Delhi. As per the said agreement a maintenance charge totalling to ₹ 44.11.920/- (Rs. 3,67,660/- per month @ 12 Months) has been paid to M/s AB Hotels Ltd. for the latter having provided the appellant the use of facilities like air conditioning plant. generators, compressors, electric installation, lifts, fire-fitting equipment etc. which has been operated and maintained. by M/s A.B. Hotels Ltd. An amount of ₹ 53,87.700/- h .....

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wel. machine repair, indoor foliage, flower supply, washing towels, cell phone repair etc. The cleaning charges amounting to ₹ 6,19,1161- have been paid as house keeping expenses for its office premises on a monthly basis. In support thereof the appellant had provided bills for such expenses. Lastly an amount of ₹ 1,97,358/- has been paid towards annual maintenance contract of office Air-conditioners: AMC for Hello mineral water: door access and IBM server office. In view of the deta .....

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ation-1 to section 32(1) of the Act and has allowed depreciation on the same. As has already been discussed in detail above none of these expenses are capital in nature and therefore the question of these expenses falling within the meaning of section 32 of the IT Act itself and therefore capitalization of these expenses and allowing depreciation thereon do not arise. In view of the above the addition on account of expenditure on repair and maintenance for ₹ 1,44,25,239/- is directed to be .....

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nclined to uphold that these expenditure are of capital in nature. The contention of the revenue that Hon ble Supreme Court has held in CIT vs. M/s. Saravana Spinning Mills Pvt. Ltd. 293 ITR 201 pleading that the most of the expenditure are not in the nature of current repair expenditure but accumulated repairs so even though the expenditure is revenue in nature, same is not allowable. We find that the reliance on this decision by the revenue is misplaced as in that case, Hon ble Supreme Court w .....

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the business or 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 .....

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ns building and therefore as a tenant cost of repairs to the premises is allowable whether they are accumulated or current. 10. Further, regarding the issue of admission of additional evidences by the CIT (A) , we are of the view that after obtaining remand report of the ld AO he has decided the issue on merit. However, on looking at the grounds of appeal of the revenue, we did not find any such ground. Revenue has not taken a ground in its appeal against the admission of addition evidence there .....

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