TMI Blog2019 (6) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... the form of Master Agreement dated 31.07.2010, financial statements of the assessee for Financial Year 2010-11 and Financial Year 2011-12, Bank guarantee, letter for invocation of bank guarantee, etc. to support the claim of adjustments stipulated in the Master Agreement. Assessee has correctly reduced the secured liabilities and bank guarantee, which was invoked by the purchaser, while arriving at total consideration for the purpose of computation of capital gains in terms of section 50B Disallowance of repairs and maintenance expenses - HELD THAT:- Admittedly, it is not the case of the Assessing Officer that the impugned expenditure has resulted into creation of a new asset. The quantum of expenditure cannot be the guiding factor to decide whether the expenditure is in the nature of capital expenditure or revenue expenditure. The expenditure incurred by the assessee is towards maintenance of the existing godown and was thus in the nature of current repair. Further more, the benefit to the assessee is in the revenue field in as much as assessee is earning income which is being assessed as business income. We, thus, set-aside the order of the CIT(A) and allow the assessee s cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments (Netherlands) B. V. the total consideration was to be reduced by the debts payable by the assessee. (d) The learned CIT (Appeals) has erred in law and on the facts of the case in not appreciating the fact that the assessee has only one manufacturing unit at Ankleshwar which was demerged and the demerger involved transfer of all fixed assets, current assets, secured loans and current liabilities. 2. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer disallowing repairs and maintenance ₹ 94,11,574/-. 3. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer disallowing depreciation on motor car and other related expenses to the tune of ₹ 6,17,865/-. 4. The assessee company craves leave to add, alter or amend the above grounds of appeal . 3. In this appeal, the grievance raised by the assessee is against the actionof the income tax authorities in rejecting the manner of computing Long Term Capital Gain in terms of section 50B of the Act, dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act reporting different figures for computation of Long Term Capital Gains under section 50B of the Act. The Assessing Officer further noted that the Master Agreement provides for certain adjustments to the total consideration stated in the agreement, but in absence of any details and explanation, the adjustments mentioned in the Master Agreement for computation of total sale consideration was not taken into consideration and gross consideration of ₹ 78,98,20,000/- was taken as base to compute Long Term Capital Gain. The assessee, in the course of assessment proceedings explained the reason for difference in two reports in Form 3CEA. The CIT(A), however, noticing that no adjustment is permissible to consideration as per section 50B of the Act, rejected the submissions of the assessee and confirmed the action of Assessing Officer. 5.1 Before us, the learned representative for the assessee explained that in terms of the Master Agreement, the total consideration is to be determined after making certain adjustments provided therein, and accordingly the assessee was justified in claiming adjustment for the same while computing the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for a period of 18 Months from Closing date. The Purchaser invoked the Bank Guarantee provided by the assessee and withdrawn the amount of ₹ 9,29,20,000/-. The copy of the bank guarantee provided by the assessee is placed at page no. 120-125 of the Paper Book. Further, letter from the bank confirming invocation of the bank guarantee by the Purchaser is placed at page no. 127 of the Paper Book.The learned representative for the assessee explained that the payment for bank guarantee is covered under the head adjusted by the Audited Net working Capital Differential , and thus, was also reduced while arriving at the total consideration. In this context, the learned representative for the assessee referred to letter addressed by the Purchaser for invoking bank guarantee. Further, assessee reduced miscellaneous liabilities of ₹ 95,646/-. Lastly, assessee deducted the loss on sale of vehicle of ₹ 17,70,034/-. 5.2 The learned representative for the assessee further submitted that in principle, the Assessing Officer agreed with the fact that Master Agreement provides for adjustments to be made for arriving at total consideration. However, he himself d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king, which fact is not disputed by the Assessing Officer. The said clause provides for certain adjustment to be made to the consideration of ₹ 78,98,20,000/- stated in the Agreement to arrive at the amount of Total Consideration . Admittedly, the Assessing Officer has not made those adjustments and has directlytaken consideration at ₹ 78,98,20,000/-.As can be seen from the assessment order, even Assessing Officer states that certain adjustments were in fact required to be made as per the agreement, however in absence of details and explanation with respect to those adjustments he has not carried out the same. The CIT(A) has also confirmed the action of the Assessing Officer and further held that no adjustment to the amount of consideration is permissible in terms of section 50B of the Act. Before us, the learned representative for the assessee explained the adjustments carried out by the assessee while arriving at the amount of total consideration along with the supporting documents, which are placed in the Paper Book. Thus, limited issue before us is whether assessee is justified in carrying out the adjustments as per the Master Agreement while arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses are one time expenditures, the benefit of which is not restricted to one year. The Assessing Officer, thus, treated these expenses to be capital in nature and disallowed the same under section 37(1) of the Act. It was explained that during the year assessee was engaged in the warehousing business; the godown was in a dilapidated condition, the same was got repaired and was brought to a condition acceptable to the lessee i.e. Laffans Fine Chemicals Pvt. Ltd. During the year under consideration, the assessee has declared income from warehousing of ₹ 45,50,000/-, which is offered as business income and thus, corresponding business expenses should be allowed. So it cannot be said that assesse has not carried out any business activities. Before CIT(A), assessee reiterated the submission made before the Assessing Officer, however same did not find any favour with the assessee. 6.1 Before us, the learned representative for the assessee pointed out that the assessee has entered into logistic agreement with the resulting company, M/s. Laffans Fine Chemicals Pvt. Ltd. Pursuant to the said agreement, the assessee is to provide warehousing and transportation servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conditions to make it acceptable to the lessee. 6.4 It is pertinent here to refer to the decision of the Hon ble Bombay High court in the case of CIT v. Chowgule Co. Pvt. Ltd. (1995) 214 ITR 523 (Bom) wherein court has considered the expression current preceding repairs as under : (i) The amount should be paid on account of repairs. (ii) Current repairs means repairs undertaken in the normal course of user for the purpose of preservation maintenance or proper utilization or for restoring it to its original condition. (iii) Current repairs do not mean only petty repairs or repairs necessitated by wear and tear during the particular year. (iv) Such repairs should not bring into existence nor obtain a new or different advantage. (v) The quantum of expenditure nor the fact that in the process of repairs, there was substantial replacement of the parts of machine or ship is decisive of the true nature of the expenditure. (vi) The original cost of the asset is not at all relevant of or ascertainment of the true nature of the expenditure on repair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be related to the motor car purchased during the year in the name of director and thus not wholly and exclusively incurred for the purpose of business of the assessee company. The assessee explained that though the car was purchased in the name of the director, payment for the same was made by the assessee and the car was used for the purpose of business.The assessee also relied on the decision of Hon ble Bombay High Court in the case of CIT vs. Dilip Singh Sardar singh Bagga [1993] 201 ITR 995 (Bombay), decision of coordinate bench in the case of Kisan Ratilal Choksey Shares Securities P. Ltd. vs. ACIT [2015] 41 ITR(1) 114 (Mumbai- Trib) and various other decisions. On appeal to CIT(A), CIT(A) agreed with the contention of the assessee that the depreciation cannot be disallowed merely on the ground that the asset is in the name of the director. However, CIT(A) stated that the assessee has not submitted the details such as RC book, date on which car was put to use and has not established that it was used for the purpose of assessee s business. The CIT(A), thus, disallowed the claim of depreciation. 7.1 Before us, the learned representative for the assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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