Subject: Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
Referred Sections:
Section 31(i)
Section 30 & 31
Referred Cases / Judgments
CIT vs. M/s MAC Charles (India) Ltd. ITA No. 488/2009 order dated 17.11.2014 (Kar. HC)
CIT vs. TS Tech Sun India Ltd. ITA No. 335/2012 order dated 03.07.2012 (Del. HC)
Norma India Ltd. vs. ACIT ITA No. 1971/Del/2014 order dated 29.06.2016 (ITAT Del.)
DCIT vs. Ikea Trading (India) Pvt. Ltd. ITA No. 5393/Del/2010 order dated 02.06.2016 (ITAT Del.)
DCIT vs. Ahmedabad Packaging Industries Ltd. ITA No. 2375/Ahd/2013 order dated 11.05.2017 (ITAT Ahd.)
Sarang and Associates vs. DCIT ITA No. 1961/Mum/2015 order dated 24.11.2016 (ITAT Mum.)
ABM Steels Pvt. Ltd. vs. ACIT ITA No. 1855/Ahd/2011 order dated 24.04.2015 (ITAT Ahd.)
CIT Vs. Mahalaxmi Mills Ltd 1967 SCR (3) 957
1 ITA No. 4669/Del/2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `C' NEW DELHI
BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A. No. 4669/DEL/2015 (A.Y 2010-11)
Hi-Tech Gears Ltd. Vs DCIT
14th Floor, Millennium Plaza, Circle-11(2)
Tower-B, Sushant Lok 1 New Delhi
Gurgaon
AAACH0156K
(APPELLANT) (RESPONDENT)
Appellant by Sh. Ved Jain, Adv, Sh.
Ashish Gopal, CA & Sh.
Rishabh Jain, CA
Respondent by Sh. Amit Katoch, Sr. DR
Date of Hearing 28.05.2019
Date of Pronouncement
06.06.2019
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 30/04/2015
passed by CIT(A)-XV, New Delhi for Assessment Year 2010-11.
2. The grounds of appeal are as under:-
"1. That on the facts and in the circumstances of the case and under the
provisions of the law, the Ld. Commissioner of Income Tax (Appeals) erred has
erred in uphold a disallowance of Rs. 55,70,068/- (Net of Depreciation) out of
Repair and Maintenance to Building. "
3. During the Financial Year relevant to Assessment Year 2010-11, the
assessee company was engaged in the business of manufacturing of gears and
2 ITA No. 4669/Del/2015
shaft. The assessee filed return of income declaring total income of Rs.
24,02,33,040/- on 14/10/2010. Notice u/s 143(2) was sent on 29/09/2011.
The case was manually selected for scrutiny and again notices u/s 143(2) &
142(1) was issued on 12/09/2012. Subsequently, notices u/s 143(2) & 142(1)
were issued on 31/10/2012. In compliance to the statutory notices Senior
GM, Finance and Deputy Manager Taxation/ Authorized Representative
appeared from time to time. The Assessing Officer made various additions
including the disallowance of current repair out of Repairs and Maintenance of
building which is contested in the present appeal.
4. Being aggrieved by the assessment order, the assessee filed appeal
before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. AR submitted that the assessee incurred expenditure for fixing
Alco Bond Sheets on outside wall of the factory building to maintain the
present structure and also incurred expenditure in respect of interior work
which cannot be assumed to create any new asset. The Ld. AR further
submitted that the assessee incurred expenditure only for keeping an existing
asset into its present condition. Also the assessee has not carried out any
extension to the existing building, which could classify the said expenses as
capital expenditure. The Ld. AR submitted the assessee explained in detail as
regards to the nature of the expenditure and also submitted copies of all bills.
The Ld. AR further submitted that no adverse material was brought on record
by the Assessing Officer to substantiate its claim that the said expenses were
giving an enduring benefit to the assessee. The Ld. AR submitted that the
decisions of the Hon'ble Apex Court relied upon by the CIT(A) are not applicable
in the present case as assessee incurred expenses on renovation of building
and not on the replacement of asset as were the facts in those case laws
referred by the CIT(A). The Ld. AR submitted that the real test is whether all
those acts constitute replacing the existing asset. The existing asset is the
building. When no extra space was added on account of such repairs, it cannot
3 ITA No. 4669/Del/2015
be said that a new asset has come into existence. All these repairs are done to
preserve and maintain an already existing asset. In the course of such repairs,
if they have upgraded the facilities by fixing of Alco Bond sheets on outer walls
of the building, then that would not constitute a new asset or a new advantage.
The Ld. AR relied upon the following decisions:
i) CIT vs. M/s MAC Charles (India) Ltd. ITA No. 488/2009 order dated
17.11.2014 (Kar. HC)
ii) CIT vs. TS Tech Sun India Ltd. ITA No. 335/2012 order dated
03.07.2012 (Del. HC)
iii) Norma India Ltd. vs. ACIT ITA No. 1971/Del/2014 order dated
29.06.2016 (ITAT Del.)
iv) DCIT vs. Ikea Trading (India) Pvt. Ltd. ITA No. 5393/Del/2010 order
dated 02.06.2016 (ITAT Del.)
v) DCIT vs. Ahmedabad Packaging Industries Ltd. ITA No. 2375/Ahd/2013
order dated 11.05.2017 (ITAT Ahd.)
vi) Sarang and Associates vs. DCIT ITA No. 1961/Mum/2015 order dated
24.11.2016 (ITAT Mum.)
v) ABM Steels Pvt. Ltd. vs. ACIT ITA No. 1855/Ahd/2011 order dated
24.04.2015 (ITAT Ahd.)
6. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in
case of CIT Vs. Mahalaxmi Mills Ltd 1967 SCR (3) 957 wherein it is held that
extent of permissible repairs will depend upon the nature of machinery
employed by the assessee. If a part of a machine becomes unserviceable due to
wear and tear, replacement of such part will be covered by the expression
"current repairs" for purpose of Section 31(i) even though the expenditure
thereon substantial. The Ld. AR further submitted that expenditure cannot be
covered as current repairs, the same is eligible u/s 37(1) of the Income Tax Act
as revenue expenditure because neither is it a capital expenditure nor covered
u/s 30 to 36 of the Income Tax Act. Section 30 & 31 only refer to current
repairs and, therefore, non-current repairs, which are not capital in nature,
4 ITA No. 4669/Del/2015
can be claimed u/s 37 of the Income Tax Act. Therefore, the expenditure is
eligible either u/s 30 or u/s 37(1) of the Income Tax Act as per the
submissions of the Ld.AR.
7. The Ld. DR relied upon the order of the CIT(A) and assessment order.
8. We have heard both the parties and perused the material available on
record. It is pertinent to note that the assessee incurred expenditure for fixing
Alco Bond Sheets on outside wall of the factory building to maintain the
present structure and also incurred expenditure in respect of interior work.
The assessee incurred expenditure only for keeping an existing asset into its
present condition. Besides this, the assessee has not carried out any extension
to the existing building, which could classify the said expenses as capital
expenditure. The Assessing Officer has not brought any material on record to
show that it is an adverse material contrary to the bills and the work carried
out by the assessee and the said expenses were giving an enduring benefit to
the assessee. All these repairs are done to preserve and maintain an already
existing asset. In the course of such repairs, if they have upgraded the facilities
by fixing of Alco Bond sheets on outer walls of the building, which do not
constitute a new asset or a new advantage. The contention of the Ld. AR that
expenditure cannot be covered as current repairs, the same is eligible u/s 37(1)
of the Income Tax Act as revenue expenditure as the repairs were done to
preserve and maintain an already existing asset and to improve its longevity.
There was no new assets created by the assessee. Therefore, CIT(A) as well as
the Assessing Officer was not right in making disallowance of current repairs
out repairs & maintenance of building. Thus, appeal of the assessee is allowed.
5 ITA No. 4669/Del/2015
9. In result, appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 06th June, 2019.
Sd/- Sd/-
(G. D. AGRAWAL) (SUCHITRA KAMBLE)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 06/06/2019
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date of dictation 28.05.2019
Date on which the typed draft is placed before the 28.05.2019
dictating Member
Date on which the typed draft is placed before the Other
Member
Date on which the approved draft comes to the Sr. PS/PS
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr. PS/PS
Date of pronouncement: 06/06/19
Date on which the final order is uploaded on the website
of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
6 ITA No. 4669/Del/2015
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