M/S. TASNEEM YASIR VARAWALA, MUMBAI v. THE ACIT CIR 13(3),

ITA 2609/MUM/2008 | 2005-2006
Pronouncement Date: 16-03-2011 | Result: Dismissed

Appeal Details

RSA Number 260919914 RSA 2008
Assessee PAN AAFPV5723J
Bench Mumbai
Appeal Number ITA 2609/MUM/2008
Duration Of Justice 2 year(s) 11 month(s)
Appellant M/S. TASNEEM YASIR VARAWALA, MUMBAI
Respondent THE ACIT CIR 13(3),
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 16-03-2011
Date Of Final Hearing 21-02-2011
Next Hearing Date 21-02-2011
Assessment Year 2005-2006
Appeal Filed On 15-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 2609/MUM/2008 (ASSESSMENT YEAR: 2005-06) SMT. TASNEEM YASIR VARAWALA ACIT CIRCLE 13(3) 15/17 BHANDARI CROSS LANE MUMBAI 7 OFF JANJIKAR STREET VS. MUMBAI 400003 PAN - AAFPV 5723 J APPELLANT RESPONDENT APPELLANT BY: SHRI K. GOPAL & SHRI S. PANDEY RESPONDENT BY: SHRI SUMEET KUMAR O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XIII MUMBAI DATED 09.01.2008. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING DISALLOWANCE OF REPAIRS EXPENSES OF RS.7 31 081/-. 2) WITHOUT PREJUDICE THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEPRECIATION ON THE SAID AMOUNT. 3) THE APPELLANT PRAYS THAT: I) DISALLOWANCE OF REPAIRS EXPENSES OF RS.7 31 081 /- MAY BE DELETED II) DEPRECIATION MAY BE DIRECTED TO BE ALLOWED ON THE SAID AMOUNT III) ANY OTHER RELIEF YOUR HONOURS MAY DEEM FIT. 3. BRIEFLY STATED THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 7 31 081/- IN HER P & L A/C. UNDER THE HEAD REPAIRS & MAINTENANC E. AO FOUND THAT ASSESSEE HAD UNDERTAKEN RENOVATION OF HER OFFICE PR EMISES LOCATED AT PREMISES NO. 7 3 RD FLOOR IN RAHIMTOOLA HOUSE FORT MUMBAI. THE ASSES SEE SUBMITTED THAT THE TENANCY OF THE PLACE IS IN THE N AME OF HER HUSBAND SHRI ITA NO. 2609/MUM/2008 SMT. TASNEEM YASIR VARAWALA 2 YASIR VARAWALA. THE PLACE WAS UNDER OCCUPATION OF T HE ASSESSEE FOR THE USE OF HER PROFESSIONAL ACTIVITIES. HOWEVER THE ASSESS EES HUSBAND HAD NOT SUB- LET THE PREMISES TO THE ASSESSEE I.E. SHE WAS NOT P AYING ANY RENT TO HER HUSBAND FOR THE PREMISES. SHE ONLY OCCUPIED THE PRE MISES FOR CARRYING OUT HER PROFESSIONAL ACTIVITIES. THE AO WAS OF THE OPIN ION THAT ASSESSEE WAS NEITHER A TENANT NOR A SUB-TENANT NOR THE OWNER O F THE PREMISES WHERE SHE UNDERTOOK RENOVATION WORK THEREFORE IT WAS NOT TH E LIABILITY OF THE ASSESSEE TO INCUR THE EXPENDITURE AND DEBIT THE SAME TO HER P & L ACCOUNT. THUS THE AMOUNT OF ` 7 31 081/- DEBITED BY THE ASSESSEE IN HER P & L ACC OUNT UNDER THE HEAD REPAIRS & MAINTENANCE WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE CIT(A) CONFIRMED THE SA ME STATING AS UNDER: - 3.4 I HAVE CONSIDERED THE CONTENTION OF THE APPELL ANT. EXPENDITURE ON REPAIRS AND RENOVATION CAN BE ALLOWED U/S. 31 OF THE I.T. ACT IF THE EXPENSES ARE ON CURRENT REPAIR. CURRENT REPAIR MEAN S REPAIRS UNDERTAKEN IN THE NORMAL COURSE OF USER FOR THE PUR POSE OF PRESERVATION MAINTENANCE OR PROPER UTILIZATION OR FOR RESTRING IT TO THE ORIGINAL CONDITION. SUCH REPAIR SHOULD NOT BRING IN TO EXISTENCE NOR CONTAIN NEW OR DIFFERENT ADVANTAGE. IN THE PRESENT CASES THE EXPENSES WERE AS ON MAKING THE FLAT OR OFFICE SPACE HABITABLE. IN FACT THERE WAS NOTHING IN THE FLAT WHICH WAS REPAIRED OR RENOVATED. THE NATURE OF EXPENDITURE CLEARLY INDICATES THAT NEW AS SET OF ADVANTAGE HAVE COME INTO EXISTENCE. THE EXPENSES ARE NOTHING BUT CAPITAL IN NATURE. HENCE THE SAME CANNOT BE ALLOWED U/S. 31 O F THE I.T. ACT. THE SAME CANNOT BE ALLOWED U/S. 37 OF THE I.T. ACT BECAUSE CAPITAL EXPENDITURE IS NOT ALLOWED UNDER THAT SECTION. HENC E BOTH THE PLEA OF THE APPELLANT IS NOT ACCEPTABLE. THE AOS DISALLOWA NCE OF THE AMOUNT IS THEREFORE CONFIRMED ON ABOVE SAID GROUNDS. THE G ROUNDS FAIL. 4. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE IS DOING BUSINESS OF MUTUAL FUND PROVIDER AND WAS DOING BUSINESS ELSEWHE RE EARLIER. DURING THE YEAR THE PROPERTY WAS OBTAINED ON LEASE BY HER HUSB AND AND SHE WAS OPERATING FROM THE PREMISES. IT WAS SUBMITTED THAT NO RENT WAS PAID AND THERE WAS NO CLAIM OF MAINTENANCE. THE ONLY CLAIM W AS OF CURRENT REPAIRS UNDERTAKEN TO MAKE THE PROPERTY SUITABLE FOR CONDUC TING THE BUSINESS. HE PLACED ON RECORD THE DETAILS OF EXPENDITURE AND REL IED ON THE FOLLOWING CASE LAWS FOR SUBMITTING THAT THE EXPENDITURE IS ALLOWAB LE AS REVENUE EXPENDITURE: - I. ACIT VS. RABO INDIA FINANCE (P) LTD. 42 DTR (MUM ) (TRIB) 153 ITA NO. 2609/MUM/2008 SMT. TASNEEM YASIR VARAWALA 3 II. DCIT VS. EDS ELECTRONICS DATA SYSTEMS (INDIA) ( P) LTD. 26 SOT 483 (DEL) 5. THE LEARNED D.R. HOWEVER REFERRED TO THE PROVISIO NS OF SECTION 30 TO SUBMIT THAT THE CASE LAWS RELIED ON BY THE ASSESSEE PERTAIN TO CLAIM UNDER SECTION 30(A)(I) WHEREAS IN THE ASSESSEES CASE PRO VISIONS OF SECTION 30(A)(II) IS APPLICABLE AS THE ASSESSEE IS OCCUPYING THE PREM ISES OTHERWISE THAN AS A TENANT. ONLY CURRENT REPAIRS CAN BE ALLOWED AND RE LIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CAS E OF CIT VS. SARAVANA SPINNING MILLS P. LTD. 293 ITR 201. IT WAS HIS SUBM ISSION THAT THE EXPENDITURE WAS NOT A ROUTINE EXPENDITURE TO BE TAK EN AS CURRENT REPAIRS WHICH CAN ONLY INCLUDE NORMAL MAINTENANCE EXPENDITU RE TO MAINTAIN THE SAME IN NORMAL SHAPE AND CANNOT INCLUDE MAJOR EXPEN DITURE WHICH CAN ONLY CAPITAL EXPENDITURE IN NATURE. IT WAS ALSO FURTHER SUBMITTED THAT THERE WAS NOTHING ON RECORD TO INDICATE THAT ASSESSEE HAS TO INCUR SUCH EXPENDITURE AS THE PREMISES WAS TAKEN ON LEASE BY HUSBAND OF THE A SSESSEE. 6. WE HAVE CONSIDERED THE ISSUE. THE DETAILS OF EXPEND ITURE CLAIMED ARE AS UNDER: - PARTICULARS AMOUNT ( ` `` ` ) ARCHITECT FEES 17 500.00 HARDWARE ELECTRICAL & OTHER MATERIAL 90 298.00 LABOUR 202 700.00 WOOD MATERIAL 304 945.00 TILES 67 176.00 PAINTER 10 000 00 GRILL 16 800.00 MOULDING CHARGES 6 000.00 WATER TANK 12 000.00 OTHER 3 662.00 ----------------- 731 081.00 =========== 7. THE ENTIRE EXPENDITURE SEEMS TO BE IN THE NATURE OF PREPARATION OF CABIN ON THE PREMISES RELATING TO FALSE CEILING FL OORING ETC. THE ADMITTED FACTS ARE THAT THE ASSESSEE IS A CHARTERED ACCOUNTA NT AND CARRIES ON PROPRIETARY BUSINESS AS AN INDEPENDENT FINANCIAL AD VISER DISTRIBUTING VARIOUS MUTUAL FUND SCHEMES. THE TENANCY OF THE PRE MISES IS IN THE NAME OF ITA NO. 2609/MUM/2008 SMT. TASNEEM YASIR VARAWALA 4 ASSESSEES HUSBAND AND IS IN OCCUPATION OF THE ASSE SSEE WITHOUT ANY RENT OR LICENCE FEE. NO AGREEMENT WAS PLACED ON RECORD T O SUBSTANTIATE THAT THE ASSESSEE IS TENANT. IN SUCH A CASE PROVISIONS OF SE CTION 30(A)(II) WILL APPLY. SECTION 30 IS AS UNDER: - 30. IN RESPECT OF RENT RATES TAXES REPAIRS AND INSURANCE FOR PREMISES USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED (A) WHERE THE PREMISES ARE OCCUPIED BY THE ASSES SEE (I) AS A TENANT THE RENT PAID FOR SUCH PREMISES ; AND FURTHER IF HE HAS UNDERTAKEN TO BEAR THE COST OF REPAIRS TO THE PREMISES THE AMOUNT PAID ON ACCOUNT OF SUCH REPAIR S ; (II) OTHERWISE THAN AS A TENANT THE AMOUNT PAID BY HIM ON ACCOUNT OF CURRENT REPAIRS TO THE PREMISES ; (B) ANY SUMS PAID ON ACCOUNT OF LAND REVENUE LOC AL RATES OR MUNICIPAL TAXES ; (C) THE AMOUNT OF ANY PREMIUM PAID IN RESPECT OF I NSURANCE AGAINST RISK OF DAMAGE OR DESTRUCTION OF THE PREMIS ES. [EXPLANATION.FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT THE AMOUNT PAID ON ACCOUNT OF THE COST OF REPAIRS R EFERRED TO IN SUB- CLAUSE (I) AND THE AMOUNT PAID ON ACCOUNT OF CURRE NT REPAIRS REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) SHALL NOT INC LUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE.] 8. SUBSEQUENT TO THE DECISION OF THE HON'BLE SUPREME C OURT IN THE CASE OF CIT VS. MADRAS AUTO SERVICE P. LTD. 233 ITR 468 THE EXPLANATION WAS INTRODUCED WITH EFFECT FROM 01.04.2004. THEREFORE ONLY CURRENT REPAIRS NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE CAN BE A LLOWED UNDER SECTION 30(A)(II). THE WORD CURRENT REPAIRS ( WHICH WAS ALS O USED IN SECTION 31) WAS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS P. LTD. 293 ITR 201 AND HELD AS UNDE R: - (II) THAT TO DECIDE THE APPLICABILITY OF SECTION 31 (I) THE TEST WAS NOT WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN N ATURE BUT WHETHER THE EXPENDITURE WAS CURRENT REPAIRS. THE BASIC TEST WAS TO FIND OUT WHETHER EXPENDITURE WAS INCURRED TO PRESE RVE AND MAINTAIN AN ALREADY EXISTING ASSET AND THE EXPEND ITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN NE W ADVANTAGE. ITA NO. 2609/MUM/2008 SMT. TASNEEM YASIR VARAWALA 5 9. CONSIDERING THE ABOVE PRINCIPLES IT IS TO BE HELD THAT THE EXPENDITURE IS NOT FOR CURRENT REPAIRS. THE SAME CANNOT BE ALLO WED UNDER SECTION 30(A)(II). SINCE THE PROVISIONS OF SECTION 37 EXCLU DE THE CLAIM UNDER SECTION 30 THE SAME ALSO CANNOT BE ALLOWED UNDER SECTION 3 7(1) ON THE PRINCIPLE OF COMMERCIAL EXPEDIENCY. AS RIGHTLY POINTED OUT THE C ASE LAWS RELIED ON BY THE LEARNED COUNSEL ARE WITH REFERENCE TO LEASED PREMIS ES WHERE PROVISIONS OF SECTION 30(A)(I) ARE APPLICABLE AND COST OF REPAIR S TO THE PREMISES CAN BE ALLOWED WHEREAS ONLY CURRENT REPAIRS CAN BE ALLOW ED UNDER SECTION 30(A)(II). THEREFORE WE DO NOT INTEND TO DISCUSS THE CASE LAW AS THEY ARE NOT APPLICABLE IN THE FACTS OF THE CASE. IN VIEW OF THE SAME THE ORDER OF THE AO AND CIT(A) DO NOT REQUIRE ANY INTERFERENCE. THE GRO UNDS ARE THEREFORE REJECTED. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 16 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIII MUMBAI 4. THE CIT XIII MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.