|H. S. Sidhu (JM), Prashant Maharishi (AM)
|capital vs. revenue expenditure, repairs
|Ananya Kapoor, Salil Kapoor
|June 2, 2016 (Date of pronouncement)
|June 28, 2016 (Date of publication)
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|S. 30/ 37(1): Expenditure on repairs of rented premises, even if huge and accumulated, are allowable as revenue expenditure. Fact that CIT(A) admitted additional evidence is no justification for seeking a set aside to the AO if the CIT(A) called for a remand report from the AO: Savarana Spinning mills Limited 293 ITR 201 (SC) distinguished
(i) The expenditure are purely of revenue in nature and the assessee obtains no advantage of enduring nature. These are purely routine, miscellaneous expenditure, rent charges, cleaning charges and repairs on computer & other equipment and cannot be held to capital expenditure by any stretch of imagination. On perusal of the order of CIT (A) and details of expenditure shown to us, we are not inclined to uphold that these expenditure are of capital in nature. The contention of the revenue that Hon’ble Supreme Court has held in CIT vs. M/s. Saravana Spinning Mills Pvt. Ltd. 293 ITR 201 pleading that the most of the expenditure are not in the nature of current repair expenditure but accumulated repairs so even though the expenditure is revenue in nature, same is not allowable. We find that the reliance on this decision by the revenue is misplaced as in that case, Hon’ble Supreme Court was concerned about the modernisation and replacement expenses on the textile mill and it was held that it was not allowable. In the present case, the issue is not of repairs on plant and machinery but related to expenditure on building, further the building is also not owned by the assessee but is a rented premises. The expenditure would be dealt with by the provision of section 30. On reading of the above section, the accumulated repairs are not allowed when the assessee owns building and therefore as a tenant cost of repairs to the premises is allowable whether they are accumulated or current.
(ii) Further, regarding the issue of admission of additional evidences by the CIT (A) , we are of the view that after obtaining remand report of the AO he has decided the issue on merit. However, on looking at the grounds of appeal of the revenue, we did not find any such ground. Revenue has not taken a ground in its appeal against the admission of addition evidence therefore the various decisions cited before us of Hon’ble Delhi High Court in the case of CIT vs. Manish Build Well Pvt. Ltd. and of Supreme Court in the case of M/s. Deepak Agro Foods vs. State of Rajasthan & Ors (2008)-TIOL-134-SC-CIT(supra) do not apply to the facts of this case. Furthermore the request of revenue to set aside the appeal to the file of AO also cannot be accepted as that would not serve any purpose as the AO has got an opportunity to frame its case against the assessee at the assessment stage and further next time at the stage of hearing before CIT (A) where the remand report is submitted. Now we do not find that setting aside issue to the file of AO will serve any purposes as on the first two occasions either the AO has not carried on proper examination or on examination nothing adverse against the assessee has been found. On examination of the details of expenditure, we also could not find that any of the expenditure incurred by the assessee are capital in nature. Further, during the course of hearing before us the DR has also referred the various vouchers and bills extensively and could not point out that how these expenditure are capital in nature and what kind of benefit of enduring nature is derived by the assessee. Therefore setting aside the issue back to the file of the ld. AO does not serve any purpose. In view of the above facts we do not find any infirmity in the order of the CIT(A) in holding that the expenditure incurred by the assessee are repair and other expenditure and are also allowable u/s 30a(i) and 37(1) of the Income Tax Act and they are not capital expenditure in nature.