IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `A' : NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND
SHRI A.N. PAHUJA, ACCOUNTANT MEMBER
ITA Nos.1798 & 1799/Del./2012
(Assessment Years : 2004-05 & 08-09)
DCIT, Circle 6(1), Vs. Anand Health Care Ltd.,
New Delhi (Presently known as M/s Metro Medical
Services Pvt. Ltd.), 21, Community
Centre, Preet Vihar,
New Delhi.
(PAN/GIR No.AABCA4199G)
(Appellant) (Respondent)
Assessee by : S/Shri Hiren Mehta & Sanjeev Kwatra, CAs
Revenue by : Ms. Anusha Khurana, Sr.DR
ORDER
PER U.B.S. BEDI, J.M.
These two appeals of the Revenue are directed against separate orders of the CIT
(A), Chandigarh, both dated 13.01.2012, relevant to assessment years 2004-05 & 07-08,
whereby deletion of addition of Rs.1,32,380 and Rs.15,85,580/- being 30% of the repairs
and maintenance having been treated as to be of capital nature by the Assessing Officer,
respectively has been challenged.
2. For assessment year 2004-05, Assessing Officer made disallowance as under:
"Perusal of P&L A/c of the assessee reveals that it has debited an amount of
Rs.441269/- on account of building maintenance. Assessee was asked to furnish
complete details of the same which it furnished vide its reply dated 21.12.2009.
Perusal of above details reveal that part of the said expenses is on account of new
tiles, new doors, electrical items etc. which are capital in nature as assessee would
draw enduring benefit form it. When assessee was asked regarding the same it
submitted, "Expenditure on Building maintenance is to keep the building in
running conditions which includes paining and while washing, repairs of
2 I.T.A. Nos.1798 & 1799/Del./2012
(A.Ys. : 2004-05 & 07-08)
bathrooms, doors etc. Thus whole of the expenses is revenue in nature."
Assessee's reply has been considered, however, 30% of the said expenses of
Rs.441269/- i.e. Rs.132380 is disallowed on estimate basis u/s 37(1) of the I.T.
Act.
3. Assessee challenged such disallowance made by the Assessing Officer and it was
submitted before first appellate authority that the assessee is engaged in the business of
running of hospitals. In order to provide best patient care, the assessee is required to
provide excellent atmosphere and hygienic conditions in the hospitals. The assessee is
having hospital building at 21, Community Centre, Preet Vihar, Delhi and during the year
under consideration, assessee had incurred general repair and maintenance in respect of
the hospital building, including the expenses on plastic and while paint, tiles fixing of
nursery and OT room, repair of door closer, lock parts, repairs of bathrooms and other
building repairs etc. and labour charges on the same. The details of "Repair and
Maintenance Building" filed during the assessment proceedings were also filed before
CIT(A). In order to indicate that it would clearly substantiate the above averment
inasmuch as all payments with regard to repair work have been made for purchase of
building material, paints, tiles etc. Therefore, in essence, the entire amount of
expenditure incurred was for preservation and maintenance of existing asset i.e. hospital
building at Preet Vihar. So, Assessing Officer was not justified in arbitrarily disallowing
the part of repairs expenses. It is trite law that the dispute between capital and revenue
expenditure is to be decided on the facts and circumstances of each case. There is no
definite test or straight jacket formula for determining whether a particular expenditure is
capital or revenue. So, reliance was placed on the decision of Hon'ble Supreme Court in
Abdul Kayoom vs. CIT, 44 I.T.R. 689 to plead for deletion of the part of the expenses
disallowed.
4. CIT(A) while considering and accepting the plea of the assessee has concluded to
delete the impugned addition as per para.3.3 of his order as under:
"I have considered the submission of Ld.Counsels for the appellant and have gone
through judgment dated 24.09.2009 of Hon'ble ITAT, Chandigarh in the case of
the group company U.G. Hospitals (P) Ltd. (supra). The appellant company was
taken over by the Metro Group of Hospitals and after the change in the ownership
of the shares holding, the hospital became part of the "Metro Group' and had to
conform to certain minimum standards. The repairs were carried out to provide
3 I.T.A. Nos.1798 & 1799/Del./2012
(A.Ys. : 2004-05 & 07-08)
best patient care, excellent atmosphere and hygienic conditions. Similar repairs
had been carried out in the case of another hospital of the group company M/s
U.G. Hospitals (P) Ltd. and the Assessing Officer had treated the repair and
maintenance of the building in that case also as capital expenditure. The addition
made was deleted by the Hon'ble ITAT, Chandigarh vide order dated 24.09.2009
in I.T.A. Nos.1037 & 1057/Chandi/2008 for assessment year 2005-06. Hence, by
respectfully following the decision of the Hon'ble ITAT, Chandigarh (supra), the
addition made of Rs.1,32,380/- by treating the expenditure claimed on account of
repair and maintenance as capital expenditure is deleted. Ground of appeal No.2
is allowed."
5. Aggrieved by this order of CIT(A), department has come up in appeal and it is
strongly pleaded and while relying upon order of Assessing Officer it was urged for
reversal of the order of CIT(A) and restoring that of the Assessing Officer because the
Assessing Officer has not disallowed the entire expenditure, but only 30% of the same
and has given valid reason for making the impugned addition at 30% of the total
expenditure claimed. Therefore, his action being legally valid, which may be restored by
setting aside the order of the CIT(A).
6. Ld.Counsel for the assessee, while relying upon the order of CIT(A), has pleaded
for similar treatment as given to another hospital where identical addition was made with
respect to repair and maintenance, in which Ld.CIT(A), while relying upon ITAT,
Chandigarh bench decision for the assessment year 2005-06 in the case of M/s U.G.
Hospital (P) Ltd., has deleted such addition and CIT(A) followed the ITAT decision to
delete the impugned addition, since no contrary material or higher court's order/decision
has been cited and facts and circumstances of the case in hand and case relied upon by
the CIT(A) of ITAT, Chandigarh bench decision are similar, therefore, action of the
CIT(A) is fully justified, which should be upheld.
7. We have heard the rival submissions and considered the material on record as
well as precedent relied upon by the CIT(A) and find that on the basis and reasoning
given by Ld.CIT(A) are the second and convincing and neither any contrary material is
placed on record nor any higher court's order is filed when it is otherwise a covered
matter. Therefore, we do not find any infirmity or flaw in the order of he CIT(A) which
is confirmed and plea of the revenue for assessment year 2004-05 is rejected. Therefore,
the appeal of the Revenue for assessment year 2004-05 is dismissed.
4 I.T.A. Nos.1798 & 1799/Del./2012
(A.Ys. : 2004-05 & 07-08)
8. As regards appeal for assessment year 2007-08 is concerned, addition of
Rs.15,85,850/- being 30% of the expenditure on account of repair and maintenance of
building has been made by the Assessing Officer, which came to be deleted by the
CIT(A) while following Chandigarh bench in the case of U.G. Hospitals (P) Ltd. (supra).
Against such order of CIT(A), department has come up in appeal and it is strongly
pleaded that CIT(A) has not appreciated the fact that expenditure on repair and
maintenance of building is more than 35% of the value of the asset. So, CIT(A) has
erred in not appreciating the fact that expenditure on account of putting up false ceiling,
new tiles/windows etc. cannot be treated as revenue expenditure. Therefore, it was
pleaded for setting aside the order of CIT(A) and restoring that of the Assessing Officer.
9. Ld.Cousnel for the assessee has relied upon the order of CIT(A) and pleaded for
its confirmation as issue is covered in favour of the assessee by ITAT decision cited
supra.
10. We have heard both the sides, considered the material on record and find that
there is no difference in material facts of the present case and the case decided for the
earlier year and since in earlier year, CIT(A) has deleted the impugned addition by
following the ITAT bench decision cited supra and same has been applied here in this
year when neither any distinguishable feature is there nor any infirmity is pointed out or
found, therefore, following our decision for the earlier year, we uphold the order of the
CIT(A) and dismiss the appeal of the Revenue for this year also.
11. As a result, both the appeals filed by the Revenue get dismissed.
Order pronounced in open court on 05.10.2012.
Sd/- Sd/-
(A.N. PAHUJA) (U.B.S. BEDI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : Oct. 05, 2012.
SKB
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A), Chandigarh.
5. CIT(ITAT) Deputy Registrar, ITAT
5 I.T.A. Nos.1798 & 1799/Del./2012
(A.Ys. : 2004-05 & 07-08)
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