TMI Blog2020 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 143(3) proceedings in Assessment Years 2010-11 and 2011-12. Disallowance of regular repairs and maintenance of Aircraft after capitalizing the same and allowing depreciating thereon - As per AO this replacement was in the nature of major repairs which added to the life of the asset - CIT (A), while dismissing the assessee s appeal, also held that these were repairs of a nature which enhanced the efficiency of the Aircraft and were not part of the regular maintenance expenses - HELD THAT:- We agree with the contention of AR that the quantum of expenditure cannot determine whether a particular expenditure is capital or revenue in nature. In our opinion, replacement of Primary Adaptive Display and Tail Rotor Blade are essential to keep the aircraft in a running usable condition and the replacements do not enhance the useful life of the aircraft. Thus, the impugned repairs would fall under current repairs which were essential to keep the aircraft in a running condition. Therefore, we set aside the order of the Ld. CIT (A) on the issue and direct the Assessing Officer to delete the disallowance. Interest of Income Tax Refund - assessee s contention that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the assessing officer in making a disallowance of ₹ 92,63,156 on account of deduction for deferred revenue expenditure incurred in respect of maintenance and overall check-up (in compliance with DGCA guidelines) of helicopter EC145 taken on lease. 1.1 That the CIT (A) erred on facts and in law in confirming the order of the assessing officer in making the aforesaid disallowance without appreciating that maintenance and overall check-up expenses under consideration were incurred in a preceding assessment year and suo motu amortized by the appellant over the lease period of the helicopter. 1.2 That the CIT (A) erred on facts and in law in confirming the order of the assessing officer in making the aforesaid disallowance on the basis that copy of lease agreement and invoices were not furnished by the appellant without appreciating that the fact of taking helicopter on lease and payment of lease rentals by the appellant were undisputed and agreed facts. 1.3 That the CIT (A) erred on facts and in law in confirming the order of the assessing officer in making the aforesaid disallowance on the basis that copy of lease agreement and invoices were not furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest separately. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing. 3.0 The Ld. Authorized Representative (AR) submitted that Ground No.1 challenges the disallowance of ₹ 92,63,156/- made on account of deduction for deferred revenue expenditure in respect of maintenance and overall check-up of helicopter EC145 taken on lease. It was submitted that this helicopter had been taken on lease and the assessee had incurred an amount of approximately 2.6 Crores on account of maintenance and repairs carried out in compliance with the DGCA guidelines. It was submitted that during the Assessment Year 2010-11 both the engines of the helicopter had got damaged and, therefore, the engines were repaired and a major change was done on the recommendation of the manufacturer of the Aircraft. It was submitted that in view of the quantum of expenditure, it was felt necessary to amortize the expenditure over the unexplained lease period. It was submitted that the accounting treatment adopted for booking the expenditure by spreading the expenses over the remaining period of lease was justified not only because o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that both these units were found faulty and were not required to be replaced as per the DCGA guidelines and therefore the same was not a capital expenditure. Reliance was placed on the judgment of the Hon ble Apex Court in the case of New Shorrock Spinning and Manufacturing Co. Ltd. vs. CIT [ 1956 ] 30 ITR 338 (SC) and also in the case of Mr. Ballimal Naval Kishore vs. CIT reported in [1997] 224 ITR 414 (SC). Reliance was also placed on the judgment of the Hon ble Delhi High Court in the case of CIT vs. Jagatjit Industries Ltd. reported in [2000] 241 ITR 566 for the proposition that the replacement of parts of existing machinery will be revenue expenditure. 3.2 With respect to Ground No.3 challenging the addition of ₹ 3,41,268/- made on account of interest on Income Tax Refund, the Ld. Authorized Representative submitted that the assessee had never received the said interest. The Ld. Authorized Representative submitted that the Assessing Officer may be directed to verify the fact and allow relief to the assessee after such verification. 4.0 In response, the Ld. Sr. Departmental Representative (DR) submitted that the documents and vouchers relevant to the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it is our considered opinion that the issue be restored to the file of the Assessing Officer for duly considering the claim of the assessee after going through contents of the lease deed as well as the relevant bills and vouchers. It is so directed accordingly. While the Assessing Officer is re-examining the issue, he should also consider the factum of similar expenditure having been allowed in 143(3) proceedings in Assessment Years 2010-11 and 2011-12. The Assessing Officer is also directed to give proper opportunity to the assessee to present its case before passing the order in accordance with law. 5.1 So far as the Ground No.2 of the assessee s appeal is concerned, it is seen that the assessee had debited an amount of ₹ 5,34,10,000/- on account of repairs and maintenance and out of this expenditure, replacement of Primary Adaptive Display amounting to ₹ 9,51,000/- and replacement of Tail Rotor Blade Assembly amounting to ₹ 9,57,376/- was disallowed on the ground that the same was capital in nature. As per the Assessing Officer, this replacement was in the nature of major repairs which added to the life of the asset. The Ld. CIT (A), while dismissing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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