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International Tobacco Co. Ltd C/o Godfrey Philips India Ltd. V.K.K. Menon Marg ( Sahar Road), Chakala, Andheri (E), Mumbai-400 099 Vs. JCIT OSD Cir- 2(2) 545 5th Floor, Aayakar Bhavan, M.K. Road Mumbai- 400-020
August, 30th 2014
                       MUMBAI BENCH "I", MUMBAI
                            ITA No. 277/Mum/2013
                           Assessment Year: 2009-10
         International Tobacco Co.             JCIT OSD Cir- 2(2)
         Ltd                                   545 5th Floor, Aayakar
         C/o Godfrey Philips India             Bhavan, M.K. Road
         Ltd. V.K.K. Menon Marg (       Vs.    Mumbai- 400-020
         Sahar Road), Chakala,
         Andheri (E),
         Mumbai-400 099
         PAN: AAACI 3492 H
                (Appellant)                       (Respondent)
                          Assessee by     :   Shri Manish V. Shah
                           Revenue by     :   Shri Sumit Kumar
                     Date of hearing  : 01.07.2014
                Date of Pronouncement : 28.08.2014


      This appeal filed by the assessee is directed against the order of the
Ld.CIT(A) -5, Mumbai dated 25.10.2012 for the Assessment Year 2009-10.

2.    In this appeal, the assessee has agitated the decision of the Ld.CIT(A)
confirming the action of the AO in disallowing the expenditure claimed by the
assessee on repairs and maintenance of building, plant and machinery.
3.    Briefly stated, during the course of the assessment proceedings, the AO found
that the assessee had debited various expenses under the head `repairs and
maintenance of building' which included an amount of Rs.7,78,200/- on account of
renovation of godown floor. Further, under the head `repairs and maintenance of
plant and machinery', the assessee had debited an amount of Rs.11,26,818/- on
account of the expenditure incurred for replacement of Sintex tank with pipeline for
ETP plaint, ETP waste water line for toilets and water tanks, PLC system for HLP
packing machine, electrical, mechanical spares cost and software charges for Jet
pack boxing machine PLC and replacement of wooden walls of CRS Silo with
                                                                                     ITA No. 277/Mum/2013
                                                  2                                International Tobacco Co. Ltd
                                                                                  Assessment Year: 2009-10

stainless steel sheets. According to the AO, the said expenses conferred enduring
benefit on the assessee and hence the AO treated the total impugned expenditure of
Rs.30,74,928/- as capital in nature. In the process, the AO, while allowing
depreciation on the said expenditure, had disallowed the claim of deduction of the
expenditure. On appeal, the Ld.CIT(A) upheld the disallowance by reiterating the
reasoning of the AO that the said expenditure were capital in nature. Aggrieved by
the impugned decision, the assessee is in the appeal before us.

4.        Having heard both the sides and perused the material on record, it is
observed that the Tribunal in the assessee's own case, in ITA Nos. 8389,
8467/Mum/2011 for the A.Y. 2008-09, has decided a similar expenditure on account
of renovation of godown floor as revenue in nature. Following the said order, we are
of the considered opinion that the expenditure on account of replacement and
maintenance on building amounting to Rs.7,78,200/- has to be treated as revenue
expenditure and the assessee is entitled for the claim of deduction.

4.1       On the issue of disallowance of repairs and maintenance expenditure of plant
machinery amounting to Rs.11,26,818/-, the details of the expenditure disallowed by
the authorities below are extracted here under:-
      A    Replacement of Sintex tank with pipeline for ETP plant                    Rs.56,886/-
      B     ETP Waste water line for Toilets & water tanks 16.09.2008                 Rs.131582/-
      C    PLC System for HLP packing machine                                        Rs.100000/-
      D    Electrical, Mechanical Spares cost and software charges for Jet pack      Rs.300000/-
           boxing machine PLC
      E    Replacement of wooden walls of CRS Silo with Stainless steel sheets       Rs.358900/-
      F    Replacement of wooden walls of CRS Silo with stainless steel sheets       Rs.17,94,50/-
           Total Rs.131582/- more than 180 days, Rs.995236/- less than 180 days      Rs.1126818/-

As regards the expenditure incurred by the assessee on account of replacement of
Sintex tank in ETP plant amounting to Rs.56,886/-, it is relevant to state that the
Tribunal, in the assessee's own case (supra) for the A.Y. 2008-09, has decided a
similar expenditure as revenue in nature and thereby allowed the claim of the
assessee. Following the said order of the Tribunal, we direct the AO to allow the
expenditure incurred by the assessee on account of replace of Sintex tank in ETP
Plant. As regards the other expenditure claimed by the assessee on account of
                                                                          ITA No. 277/Mum/2013
                                          3                             International Tobacco Co. Ltd
                                                                       Assessment Year: 2009-10

repairs and maintenance to plant and machinery, after considering the nature of the
expenditure incurred by the assessee as aforementioned in the table, we are of the
considered view that the said expenditure do not result in any enduring benefit to
the assessee as the expenses are periodically necessary for running the business of
the asseseee. Therefore, the authorities below are not justified in treating the same
to be capital in nature. Accordingly, we set aside the order of the Ld.CIT(A) and
direct the AO to allow the expenditure claimed by the assessee as revenue
expenditure. Resultantly, the additions sustained/made by the Ld.CIT(A)/AO stand

5.      In the result, the appeal filed by the Assessee is allowed.

     Order pronounced in the open court on this 28th day of August, 2014.

              Sd/-                                                  Sd/-
          (N.K. BILLAIYA)                                 (Dr. S.T.M. PAVALAN)
        ACCOUNTANT MEMBER                                   JUDICIAL MEMBER
Mumbai, Dated: 28.08.2014
Copy to: The Appellant
         The Respondent
         The CIT, Concerned, Mumbai
         The CIT(A) Concerned, Mumbai
         The DR "I" Bench
                                   //True Copy//

                                                      By Order

                                         Dy/Asstt. Registrar, ITAT, Mumbai.
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