ITO, Wd-11(1), Kolkata, Kolkata v. M/s Stoll Berg India Pvt. Ltd., Kolkata

ITA 310/KOL/2014 | 2006-2007
Pronouncement Date: 19-10-2016 | Result: Dismissed

Appeal Details

RSA Number 31023514 RSA 2014
Assessee PAN AAFCS0189L
Bench Kolkata
Appeal Number ITA 310/KOL/2014
Duration Of Justice 2 year(s) 8 month(s)
Appellant ITO, Wd-11(1), Kolkata, Kolkata
Respondent M/s Stoll Berg India Pvt. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 19-10-2016
Date Of Final Hearing 15-09-2016
Next Hearing Date 15-09-2016
Assessment Year 2006-2007
Appeal Filed On 19-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED ACCOUNTANT MEMBER AND SHRI K.NARSIMHA CHARY JUDICIAL MEMBER ITA NO.310/KOL/2014 ASSESSMENT YEARS:2006-07 INCOME TAX OFFICER WARD-11(1) P7 CHOWRINGHEE SQUARE 6 TH FLOOR KOLKATA-700 069 / V/S . M/S STOLL BERG INDIA PVT. LTD. 2 ST. GEORGES GATE ROAD 6 TH FLOOR HASTINGS KOLKATA-700 022 [ PAN NO.AAFCS 0189 L ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ARUP CHATTERJEE JCIT-SR-DR /BY RESPONDENT SHRI ASHIM KUMAR SINHA FCA /DATE OF HEARING 15-09-2016 /DATE OF PRONOUNCEMENT 19-10-2016 /O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII KOLKATA DATED 20.11.2013. ASSESS MENT WAS FRAMED BY ITO WARD- 11(1) KOLKATA U/S 143(3) OF THE INCOME TAX ACT 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.12.2008 FOR ASSESSMEN T YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND AS PER LAW LD. CIT(A) ERRED IN DELETING THE ADDITION AMOUNTING RS. 576773/- ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND AS PER LAW LD. CIT(A) ERRED IN DELETING THE ADDITION WITHOUT APPR ECIATING THAT THE ADDITION MADE BY THE AO ON THE BASIS OF THE FACTS AVAILABLE ON RECORD AND CONFIRMATION OF PARTY CONSEQUENCE TO INSPECTION CONDUCTED BY DEP UTED INSPECTOR DURING ASSESSMENT PROCEEDINGS. ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 2 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND AS PER LAW LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2424763 /- ON ACCOUNT OF REPAIRING EXPENSES WHICH WAS TREATED BY AO AS CAPITAL IN NATU RE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND AS PER LAW LD. CIT(A) ERRED IN DELETING THE ADDITION WITHOUT APPRE CIATING THAT THE ADDITION MADE BY THE AO ON THE BASIS OF THE FACTS AVAILABLE ON RECORD THAT THE ASSESSEE DERIVED ENDURING BENEFIT BY SPENDING THE AMOUNT UND ER THE HEAD REPAIR. SHRI ARUP CHATTERJEE LD. SENIOR DEPARTMENTAL REPRE SENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI ASHIM KUMAR SINHA LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. 2. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING AND TR ADING OF METALLURGICAL CHEMICALS. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS F ILED ITS RETURN OF INCOME DECLARING INCOME OF 87 56 630/- WHICH IS COMPRISING OF INCOME UNDER THE HEAD BUSINESS AND PROFESSION. THEREAFTER THE CASE WAS SELECTED FOR S CRUTINY ASSESSMENT UNDER CASS AST MODULE AND ACCORDINGLY NOTICE U/S 143(2) OF THE ACT WAS ISSUED. THE ASSESSMENT WAS FRAMED U/S 143(3) AT A TOTAL INCOME OF 1 17 58 166/- BY DISALLOWING CERTAIN EXPENSES WHICH ARE DISCUSSED BELOW. 3. FIRST ISSUE RAISED BY REVENUE IN GROUND NO. 1 AN D 2 ARE THAT LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5 76 773/- (1 21 629 + 4 55 144) ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCE. THE ASSESSEE DURING THE YEAR HAS SHOWN PURCHASE FRO M SEVERAL PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO OBSERVED CERTA IN DIFFERENCE IN THE AMOUNT OF PURCHASES SHOWN BY ASSESSEE AND DETAILS RECEIVED FR OM THE RESPECTIVE PARTY IN RESPONSE TO THE NOTICE ISSUED U/S. 133(6) OF THE AC T. THE DIFFERENCE IN THE PURCHASES IS AS FOLLOWS:- SL.NO. NAME OF THE PARTY PURCHASE BY ASSESSEE SALE BY PARTY AMOUNT OF DIFFERENCE 1 AVM SALES PVT. LTD 8731196 8852825 121629 2 EVERETT KEIHIN CARGO LOGISTICS PVT. LTD. 461802 1054622 592820 ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 3 ON QUESTION BY THE AO ABOUT THE DIFFERENCE SHOWN AB OVE ASSESSEE MADE SUBMISSION WHICH STANDS AS UNDER:- A. AVM SALES PVT. LTD . THE DIFFERENCE OF 121629 IS ARISING ON ACCOUNT OF THE DEBIT NOTE ISSU ED BY THE ASSESSEE TO THE PARTY WHICH HAS NOT BEEN ACCOUN TED FOR BOOKS OF ACCOUNT OF THE PARTY. B. EVERETT KEIHIN CRAGO LOGISTICS PVT. LTD . THE ASSESSEE SUBMITTED THAT FOLLOWING CHEQUES HAVE NOT BEEN ISSUED TO THE PARTY THOUGH THE PARTY HAS GIVEN ITS CLAIM IN ITS B OOKS OF ACCOUNT AS RECEIVED FROM THE ASSESSEE. CHEQUE NO . AMOUNT (RS) 047409 2 30 300.00 531691 1 10 444.02 103003 1 14 700.00 THE ASSESSING OFFICER DEPUTED THE DEPARTMENTAL INSP ECTOR TO CONDUCT THE INQUIRY ABOUT THE CHEQUE ISSUED BY THE ASSESSEE TO THE PART Y. THE DEPARTMENTAL INSPECTOR IN ITS REPORT HAS CONFIRMED THE RECEIPT OF 4 55 144/- BY THE PARTY FROM THE ASSESSEE WITH THE HELP OF BANK STATEMENT. ACCORDINGLY AO OBSERVED TH AT THE PAYMENT OF 4 55 144/- HAS BEEN MADE BY THE ASSESSEE FROM ITS UNDISCLOSED SOURCE WHICH IS NOT REFLECTED IN ITS REGULAR BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE AO HAS DISALLOWED A SUM OF 5 76 773/- (4 55144 + 1 21 629) AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE MADE A SUBMISSION WHICH STANDS AS UNDER:- I) DIFFERENCE WITH AVM SALES CORPN LTD. IT WAS SUBMITTED THAT LEDGER COPY OF THE ASSESSEE I N THE BOOKS OF ACCOUNT OF AVM SALES CORPN. LTD. WAS NOT PROVIDED THEREFORE IT W AS DIFFICULT TO POINT OUT THE EXACT DIFFERENCE. THEREFORE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO MAKE THE DETAILED AND RELEVANT REPLY TO THE AO FOR HAVING THE DIFFERENCE IN THE AMOUNT OF PURCHASE. THE ASSESSEE WAS ALSO APPREHENDED THAT THE DEBIT NOTE I SSUED TO THE PARTY MIGHT NOT HAVE ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 4 BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT OF AVM SALES CORPN. LTD. THE AMOUNT OF DIFFERENCE AS FOUND OUT BY THE AO IS INSIGNIFICANT IN RELATION TO THE VOLUME OF TRANSACTIONS THAT AVM SALES CORPN. LTD. I.E. 1.5% OF THE TOTAL TRANSACTIONS. THE ASSESSEE ALSO SUBMITTED THAT THE LOWER AMOUNT OF PU RCHASE WAS SHOWN IN THE BOOKS OF ACCOUNT AND SO THE PROFIT HAS BEEN ENHANCED BY 1 21 629/-. THEREFORE MAKING FURTHER ADDITION TO THE TOTAL INCOME OF THE ASSESSEE WILL A MOUNT TO DOUBLE TAXATION. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5.2.3 DECISION: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSIONS PUT FORTH ON BEHALF OF THE APPELLANT. THE APE HAD NOT ACCOUNTED FOR THE PURCHASES TO THIS EXTENT PRESUMABLY ON ACCOUNT OF DEBIT NOTE PASSED ON BY IT BUT WHICH WAS NOT ALLOWED BY THE SELLER. THERE IS NO MATERIAL BROUGHT ON RECORD TO SHOW THAT THE APPELLANT HAD SUPPRESSED ITS PURCHASES AND THE PAYM ENTS HAVE BEEN MADE TO THE SELLER. THE ASSESSING OFFICER HAS MADE THE ADDI TION MERELY ON THE BASIS OF STATEMENT OF ACCOUNT GIVEN BY THE SELLER AND WITHOU T VERIFYING THE RECONCILIATION STATEMENT OF THE APPELLANT. HAVING R EGARD TO THE FACT AND CIRCUMSTANCES THE ASSESSING OFFICER IS HEREBY DIRE CTED TO VERIFY THE RECONCILIATION STATEMENT ALONG WITH SUPPORTING EVID ENCE OF THE APPELLANT WITH REGARD TO THE DETAILS OF SALES AS RECORDED IN THE B OOKS OF THE SELLER AND THEN MAKE ANY ADDITION OF UNEXPLAINED DIFFERENCE IF ANY WHILE GIVING EFFECT TO THIS ORDER. THUS THIS GROUND OF APPEAL IS DECIDED ACCOR DINGLY. (II) DIFFERENCE WITH M/S EVERETT LOGISTICS PVT. LTD . THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE R EPORT OF THE INSPECTOR IS INCORRECT AS IT CLEARLY STATES THAT CHEQUE PAYMENT OF 4 55 144/- HAS BEEN MADE FROM THE UNDISCLOSED SOURCE. ONCE THE PAYMENT HAS BEEN MADE THROUGH BANKING CHANNEL WHICH HAS BEEN DISCLOSED IN THE BOOKS OF ACCOUNT THEN HO W THIS CAN BE ALLEGED THAT THE PAYMENT WAS MADE FROM UNDISCLOSED SOURCE. THERE WAS NO DEFECT IN THE AUDITED BOOKS OF ACCOUNT OF ASSESSEE AND NO FLAW HAS BEEN REPORTE D BY AO. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS AND THE SUBMI SSIONS OF THE APPELLANT. THE APPELLANT HAS CATEGORICALLY DENIED TO HAVE ISSUED T HE THREE CHEQUES IN QUESTION FROM ITS BANK ACCOUNT MAINTAINED WITH HDFC BANK. TH EREFORE THE CONCLUSION REACHED BY THE ASSESSING OFFICER THAT THE AMOUNT OF RS.4 55 144/- REPRESENTED ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 5 BY THE THREE CHEQUES FOUND CREDITED IN THE THIRD PA RTY ACCOUNT IS UNDISCLOSED INCOME OF THE APPELLANT WITHOUT BRINGING ANY MATERI AL ON RECORD EITHER IN THE FORM OF CORRESPONDING PURCHASE BILLS OF ANY OTHER EVIDENCE DOES NOT APPEAR TO BE JUSTIFIED. IN A CASE OF ITO VS. MAYUR AGARWAL (2 010) 133 TTJ 1: (2010) 43 DTR 116 (TRIBUNAL-AGRA) WHERE AO ALLEGED THAT ASSE SSEE PURCHASED GOODS FROM ONE NFP THROUGH BANK DRAFT WHICH WAS NOT FOUND RECORDED IN BOOKS OF ACCOUNT OF ASSESSEE-ASSESSEE DENIED THE TRANSACT ION WITH NFP BUT ASSESSING OFFICER MADE ADDITION U/S. 69 WHICH WAS DELETED BY CIT(A) HOLDING THAT MERELY RELYING OR AVERMENTS OF NFP ADDITION COULD NOT BE MADE THE HON'BLE AGRA BENCH OF THE ITAT HELD THAT NO ADDITIO N COULD BE MADE MERELY ON BASIS OF EVIDENCE PROCURED FROM THIRD PARTY UNLESS OPPORTUNITY OF CROSS- EXAMINATION WAS ALLOWED TO ASSESSEE. THE ADDITION S O MADE WAS DELETED BY THE ITAT. THE FACTS OF THE CASE ARE MORE OR LESS SIMILAR TO T HOSE OF THE REPORTED CASE. I AM OF THE VIEW THAT THE INGREDIENTS OF SECTION 69 ARE NOT SATISFIED IN THIS CASE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISION OF THE HON'BLE AGRA BENCH OF THE ITAT I AM OF THE VIEW TH AT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION. THE ADDITION OF RS.4 55 154/- MADE BY HIM ON ACCOUNT OF UNDISCLOSE D INCOME IS DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. BOTH THE PARTIES BEFORE US RELIED IN THE ORDER OF LOWER AUTH ORITIES AS FAVOURABLE TO THEM. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT AO HAS MADE THE ADDITION ON ACCOUNT OF DIFFERENCE IN THE TRANSACTIO NS ON PURCHASE BETWEEN BOOKS OF ASSESSEE AND BOOKS OF THE PARTY. THE ADDITION OF 1 21 629/- BEING THE DIFFERENCE BETWEEN ASSESSEE AND AVM SALES CORPORATION LTD. WE FIND THAT THE ASSESSEE HAS SHOWN LESS PURCHASE IN ITS BOOKS OF ACCOUNT AND THI S IS NOT A CASE WHERE ASSESSEE IS CLAIMING MORE EXPENSE IN THE FORM OF PURCHASE WHICH IS HAVING EFFECT IN THE REDUCTION OF PROFIT. WE FURTHER FIND THAT THE ASSESSEE BY SHO WING LESS AMOUNT OF PURCHASE IS SHOWING MORE TAXABLE PROFIT IN THE BOOKS OF ACCOUNT . AS SUCH WE AGREE WITH THE VIEW OF LD. AR THAT FURTHER ADDITION OF 1 21 629/- WILL AMOUNT TO DOUBLE TAXATION. IN CASE THIS TRANSACTION HAS BEEN BOOKED OUTSIDE THE BOOKS OF ACCOUNT THEN ALSO THE ENTIRE AMOUNT CANNOT BE ADDED TO THE TOTAL INCOME OF THE A SSESSEE. IN THAT CASE ONLY AMOUNT OF PROFIT INVOLVED IN UNDISCLOSED TRANSACTIONS AND CAPITAL EMPLOYED IN THAT TRANSACTION CAN BE BROUGHT TO THE NET OF TAX. IN THIS REGARD L D. DR HAS NOT BROUGHT ANYTHING TO ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 6 PROVE THAT SUCH TRANSACTION WAS BOOKED OUTSIDE THE BOOKS OF ACCOUNTS ACCOUNT. THE ORDER OF AO IS ALSO SILENT WITH REGARD TO CLAIM OF ASSESSEE THAT THE DIFFERENCE ARISING ON ACCOUNT OF DEBIT NOTE ISSUED BY THE ASSESSEE. IN THE ABSENCE OF COMPLETE INFORMATION ABOUT THE DIFFERENCE FOUND BY AO WE AR E INCLINED NOT TO INTERFERE IN THE ORDER OF LD. CIT(A). WE UPHOLD ACCORDINGLY. HENCE THE ADDITION OF 1 21 629/- DESERVES TO BE DELETED. SIMILARLY FOR THE ADDITION OF 4 55 144/- WE FIND THAT AO HAS MADE THE ADDITION ON THE GROUND THAT SUCH TRANSACTI ON WAS MADE FROM THE UNDISCLOSED BANK ACCOUNT. FROM THE FACTS OF THE CASE WE FIND THAT NO DETAIL OF SUCH UNDISCLOSED BANK ACCOUNT HAS BEEN FURNISHED BY AO. ON THE OTHER HAND AS PER THE SUBMISSION OF ASSESSEE THE TRANSACTION WAS MADE FROM THE DISCLOS ED BANK ACCOUNT AND THEREFORE THE ADDITION CANNOT BE SUSTAINED ON THE GROUND THAT THE TRANSACTION WAS MADE FROM THE UNDISCLOSED SOURCE. IN THIS CASE ALSO WE CONCUR WIT H THE VIEW OF LD. AR AND IN REJOINDER LD. DR HAS NOT BROUGHT ANYTHING CONTRARY TO THE FINDING OF LD. CIT(A) AS WELL AS ARGUMENT MADE BY LD. AR. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). WE UPHOLD ACC ORDINGLY. THIS GROUND OF REVENUE IS DISMISSED. 6. NEXT ISSUE RAISED BY REVENUE IN GROUND NO. 3 AND 4 ARE THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS.2424 763 /- ON ACCOUNT OF REPAIRING EXPENSES WHICH WAS TREATED BY AO AS CAPITAL IN NATU RE. 7. THE ASSESSEE HAS CLAIMED EXPENSE FOR REPAIRS TO BUILDING AND REPAIRS FOR THE PLANTS OF RS. 6 57 662.00 AND OF 17 67 101/- RESPECTIVELY WHICH WAS DISALLOWED BY AO BY HOLDING THE SAME AS CAPITAL IN NATURE. 8. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE DETAILS OF REP AIR TO THE BUILDING AND PLANT ALONG WITH ITEM OF WORK / MATERIAL USED WERE FURNISHED AT THE TIME OF ASSESSMENT AND ALL THE REPAIRING WORKS ARE CURRENT REPAIR AND THEREFORE EL IGIBLE FOR DEDUCTION U/S 30/31 & 37 OF THE ACT. EVEN THE EXPENDITURE IS ENDURING IN NAT URE BUT IT HAS IMPACT ON THE REVENUE OF THE BUSINESS IT SHALL BE TREATED AS REVENUE IN NATURE TREATING THE YEAR UNDER DISPUTE IS THE 4 TH YEAR OF THE BUSINESS OF THE ASSESSEE AND IT IS A C OMMON PRACTICE TO YEARLY SHUT ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 7 DOWN THE FACTORY FOR ITS MAINTENANCE OF MACHINE AND BUILDING. NO SUCH DISALLOWANCE WAS MADE IN EARLIER AY EVEN THOUGH SUCH EXPENSES W ERE CLAIMED BY THE ASSESSEE AND IN SPITE OF THE FACT THAT THE FACTORY WAS COMPARATI VELY NEW THEN NOW ACCORDINGLY LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVIN G AS UNDER:- 5.4.3 DECISION: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS PUT FORTH ON BEHALF OF THE APPELLANT. I HAVE ALSO GONE THROUGH DETAILS EXPENSES INCURRED BY THE APP UNDER THE HEADS REPAIR TO BUILDING AND REPAIRS TO PLANT & MACHINERY. IT MAY BE NOTED FROM THE DETAILS OF EXPENDITURE INCURRED O N MAINTENANCE OF PLANT AND MACHINERY AT RS.17 67 101/- INCLUDED THE ITEMS SUC H AS (I) PURCHASE OF STORES & SPARES (LOCAL); PURCHASE OF SPARES & SPARE PARTS (IMPORTED) OTHER CHARGES OF IMPORT OF STORES & SPARES; CUSTOM DUTY FOR STORE S & SPARES IMPORTED (RS.105 055); AND REPAIRS TO PLANT AT RS.3 75 894/- . FROM THE DETAILS IT IS ABUNDANTLY CLEAR THAT THE EXPENDITURE HAS BEEN INCU RRED FOR CURRENT REPAIRS AND REPLACEMENT OF PLANT AND MACHINERY AND PURCHASE OF NEW PARTS & STORES WHICH BY NO STRETCH OF IMAGINATION COULD BE TREATED AS EXPENDITURE OF CAPITAL IN NATURE. SIMILAR IS THE EXPENDITURE INCURRED FOR REP AIRS AND MAINTENANCE OF BUILDING. IN THE CASE OF INDIAN GINNING AND PRESSING CO. LT D. V. CIT [2011] 252 ITR 577 (GUJ) WHERE THE ASSESSEE INCURRED EXPENDITURE ON REPAIRS TO A GODOWN USED FOR BUSINESS PURPOSE SO AS TO CONVERT IT INTO N ADMINISTRATIVE OFFICE THE HON'BLE GUJARAT HIGH COURT HELD THAT THE EXPENDITUR E WAS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE BUSINESS ASSET HAD R ETAINED ITS CHARACTER AND ONLY ITS USE HAD CHANGED AND THE USE AT BOTH POINT S OF LIME I.E. BEFORE AND AFTER THE EXPENDITURE WAS INCURRED RELATED TO THE BUSINESS OF THE ASSESSEE WITHOUT THERE BEING ANY ADDITION TO OR EXPANSION OF THE PROFIT MAKING APPARATUS OF THE ASSESSEE. IN C.R. CORERA & BROS. V . CIT [1963] 49 ITR 188 (MAD.) IT HAS BEEN HELD THAT IT CANNOT BE TAKEN AS A MATTER OF ASSUMPTION THAT MERELY BECAUSE A LARGE SUM IS EXPENDED ON REPA IRS TO MACHINERY IT MUST NECESSARILY AMOUNT TO RECONSTRUCTION MAKING TH E EXPENDITURE CAPITAL IN NATURE. IN THE CASE OF CIT V TEA ESTATE (P) LTD. [1972] 19 8 ITR 535 (CAL) THE JURISDICTIONAL HIGH COURT HELD THAT WHERE A REP LACEMENT IS MADE OF A PHYSICALLY COMMERCIALLY AND FUNCTIONALLY INSEPARAB LE PART OF AN ENTIRE ASSET THE EXPENSE INCURRED IN RELATION TO SUCH TRA NSACTION MUST BE TREATED AS AN ADMISSIBLE REVENUE EXPENDITURE. IN ANOTHER CASE OF CULTURAL ENTERPRISES CORPORATION V. CIT [1992] 196 ITR 488 ( CAL) EVEN WHERE A SUM OF MONEY IS SPENT FOR REPAIRS IN A PARTICULAR YEAR BEC AUSE OF THE FACT THAT REGULAR REPAIRS ARE ALLOWED TO FALL INTO ARREARS AND REPAIR S ON EXTENSIVE SCALE HAVE TO BE UNDERTAKEN TO REMEDY THE EFFECT OF SEVERAL YEARS N EGLIGENCE THE JURISDICTIONAL HIGH COURT HELD THAT THE EXPENSES FOR SUCH ARREARS REPAIRS ARE ALLOWABLE THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND I S THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EXPENDITURE FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY EXISTIN G ASSET. THE OBJECT OF THE ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 8 EXPENDITURE IS NOT TO BRING A NEW ASSET INTO EXISTE NCE NOR IS ITS OBJECT THE OBTAINING OF A NEW OR FRESH ADVANTAGE NEW SHORROC K SPG. & MFG. CO. LT. V. CIT [1956] 30 ITR 338(BOM.)/R.B. BANSILAL ABIRCHAND SPG. & WVG. MILLS V. CIT [1957] 31 ITR 427 (NAG)/N.N. KOTAK V. CIT [1952 ] 21 ITR 18 (BOM). IN CIT V. CHOWGULE & CO. (P) LTD. [1995] 214 ITR 523(B OM) THE HON'BLE BOMBAY HIGH COURT HELD THAT THE WORDS CURRENT REPAIRS DO NOT MEAN PETTY REPAIRS OR REPAIRS NECESSITATED BY WEAR AND TEAR DURING T HE PARTICULAR YEAR. PAYMENT ON ACCOUNT OF CURRENT REPAIRS MUST BE UNDERSTOOD IN CONTRADISTINCTION TO PAYMENTS FOR ADDITIONS OR IMPROVEMENT . THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND IS THAT AS A RESULTED OF THE EXPENDITURE WHICH IS CLAIMED AS N EXPENDITURE FOR R EPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAIN AND ALREADY EXISTING A SSET. THE OBJECT OF THE EXPENDITURE SHOULD NOT BE TO BRING A NEW ASSET INTO EXISTENCE NOR TO OBTAIN A NEW OR DIFFERENT ADVANTAGE. CONSIDERING THE FACTS IF THE CASE AND THE SETTLED P RINCIPLES OF LAW THE OBJECT OF THE EXPENDITURE INCURRED BY THE APPELLANT IS NOT TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW OR DIFFERENT ADVANTAGE BUT TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET. THEREFORE THE EXPENDITURE CLAIMED UNDER BOTH THE HEADS VIZ. REPAIRS TO BUILDING AND REPAIRS TO PLANT AND MACHINERY ARE ALLOWABLE AS REVENUE EXPENDITURE. THE CONSEQU ENT ADDITIONS MADE BY THE ASSESSING OFFICER ARE DELETED. THE APPE AL OF THE APPELLANT ON THIS GROUND IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS APPEAL BEFORE US. 9. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER O F AUTHORITIES BELOW AS FAVOURABLE TO THEM. LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT IT IS A WELL SETTLED LAW THAT ADVANTAGE OF ENDURING BENEFIT IS NOT DECIS IVE TO DISTINGUISH BETWEEN REVENUE AND CAPITAL EXPENSE. ENDURING BENEFIT OR ADVANTAGE MIGHT ENDURE TO ASSESSEES BUSINESS EITHER IN CAPITAL FIELD OR IN A NON-CAPITA L FIELD. THEREFORE IN EVERY CASE ENQUIRY MUST BE DIRECTED AS SUCH TO THE CHARACTER O F THE EXPENDITURE AS TO THE NATURE OF ADVANTAGE DERIVED THEREFROM. WHEN EXPENDITURE ALTHO UGH ENDURING IN CHARACTER HAS ITS IMPACT ON THE RUNNING OF THE BUSINESS IT IS REVENU E IN NATURE. 10. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT THE REPAIR EXPENSE INCURRED BY ASSESSEE FOR ITS MACHINE AND BUILDING W ERE TREATED AS CAPITAL IN NATURE. THEREFORE AO HAS DISALLOWED. THE SAME HOWEVER WER E DELETED BY LD. CIT(A) BY OBSERVING THESE EXPENSE AS REVENUE IN NATURE. FROM THE FACTS OF THE CASE WE FIND THAT ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 9 BY INCURRING EXPENSE ON THE REPAIR OF MACHINES AND BUILDING IN SUCH FIXED ASSET NO FIXED ASSETS IS COMING INTO EXISTENCE ALTHOUGH THE BENEFIT WAS ENDURING IN NATURE. THEREFORE THERE WAS NO CAPITAL ASSET COMING INTO E XISTENCE. WE AGREE WITH THE ARGUMENT PLACED BY LD. AR OF ASSESSEE. IN SIMILAR C IRCUMSTANCES HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHOWGULE & CO. PVT. LTD . (1995) 214 ITR 523 (BOM) HAS CONSIDERED THE EXPRESSION CURRENT PRECEDING REPAIRS AS UNDER: THE PROPOSITIONS THAT EMERGE FOR GRANT OF DEDUCTION UNDER S. 31 MAY BE SUMMED UP THUS : (I) THE AMOUNT SHOULD BE PAID ON A CCOUNT OF CURRENT REPAIRS. (II) 'CURRENT REPAIRS' MEANS REPAIRS UNDERTAKEN IN THE NORMAL COURSE OF USER FOR THE PURPOSE OF PRESERVATION MAINTENANCE OR PRO PER UTILISATION OR FOR RESTORING IT TO ITS ORIGINAL CONDITION. (III) 'CURR ENT REPAIRS' DO NOT MEAN ONLY PETTY REPAIRS OR REPAIRS NECESSITATED BY WEAR AND T EAR DURING THE PARTICULAR YEAR. (IV) SUCH REPAIRS SHOULD NOT BRING INTO EXIST ENCE NOR OBTAIN A NEW OR DIFFERENT ADVANTAGE. (V) THE QUANTUM OF EXPENDITURE NOR THE FACT THAT ON THE PROCESS OF REPAIRS THERE WAS SUBSTANTIAL REPLACEME NT OF THE PARTS OF MACHINE OR SHIP IS DECISIVE OF THE TRUE NATURE OF THE EXPE NDITURE. (VI) THE ORIGINAL COST OF THE ASSET IS NOT AT ALL RELEVANT FOR ASCERTAINME NT OF THE TRUE NATURE OF THE EXPENDITURE ON REPAIRS. (VII) THE REPLACEMENT COST OF THE ASSET MAY HOWEVER AT TIMES BE USED AS INDICATOR OF THE TRUE CHARACTER OF THE EXPENDITURE. IF THE EXPENDITURE ON REPAIRS ADDED TO THE WRITTEN DOWN VA LUE OR DISPOSAL VALUE EXCEEDS THE REPLACEMENT COST OF THE ASSET A PRESUM PTION IS POSSIBLE THAT IT IS NOT A REVENUE EXPENDITURE BUT EXPENDITURE OF CAPITA L NATURE. SUCH PRESUMPTION OF COURSE WOULD BE REBUTTABLE. (VIII) THE EXPRESSI ON ' CURRENT ' PRECEDING ` REPAIRS ' APPEARS TO HAVE BEEN USED BY THE LEGISLATURE WITH A VIEW TO RESTRICTING THE ALLOWANCE TO EXPENDITURE INCURRED FOR PRESERVAT ION AND MAINTENANCE THEREOF IN ITS CURRENT STATE IN CONTRADICTION TO TH AT INCURRED ON ANY IMPROVEMENT OR ON ADDITION THERETO. IN THE PRESENT CASE THE TRIBUNAL ON INVESTIGATION OF THE NATURE OF THE REPAIRS UNDERTAKEN BY THE ASSESSEE RECORDED A CATEGORICAL FINDING OF FACT THAT IT DID NOT RESULT IN EMERGENCE OF A NEW SHIP BUT AMOUNTED IN SUBSTANCE TO CURRENT REPAIRS TO THE EXISTING SHIP. THESE FINDINGS HAVE N OT BEEN CHALLENGED BY THE REVENUE. THE FACT THAT OLD PARTS OF THE SHIP WERE R EPLACED BY NEW PARTS IS NOT RELEVANT FOR DETERMINING WHETHER THE EXPENDITURE WA S ON ' CURRENT REPAIRS ' OR NOT. THE REPLACEMENT OF THE OLD PARTS BY NEW PARTS DOES NOT MEAN THAT A NEW ASSET WAS BROUGHT INTO EXISTENCE IN RELATION TO THE SHIP IN QUESTION. THE REPLACEMENT OF THE PARTS WAS ONLY IN THE PROCESS OF CURRENT REPAIRS OF THE SHIP. THE EXPENDITURE CLAIMED IN THIS CASE THEREFORE AM OUNTS TO `CURRENT REPAIRS' WHICH IS ALLOWABLE AS A DEDUCTION UNDER S. 31. NEW SHORROCK SPG. & MFG. CO. LTD. VS. CIT (1936) 30 ITR 338 (BOM) CIT VS. SHEIKHPURA TRANSPORT CO. LTD. (1961) 41 ITR 336 (P&H) CIT VS. COIMBATORE MOTOR TRANSPORT CO-OPERATIVE SOCIETY (1968) 70 ITR 165 (MAD) CIT VS. KHALSA NIRBHAI TRANSPORT CO. (P) ITA NO.310/KOL/2014 A. Y. 2006-07 ITO WD-11(1) KOL. VS. M/S STOLL BE RG INDIA PVT. LTD. PAGE 10 LTD. (1971) 82 ITR 741 (P&H) C.R. CORERA VS. CIT (1963) 49 ITR 188 (MAD) AND ADDL. CIT VS. DESAI BROS. (1977) 108 ITR 14 (GUJ) RELIED ON THE FACT THAT WRITTEN DOWN VALUE TOGETHER WITH EXPE NDITURE INCURRED ON REPAIRS EXCLUDED THE ORIGINAL COST OF ASSET IS NOT VALID GR OUND FOR DISALLOWANCE OF EXPENDITURE AS CURRENT REPAIRS. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROU ND OF REVENUE IS DISMISSED. 11. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 19/10/2016 SD/- SD/- (K.NARSIMHA CHARY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP SR.P.S ! - 19/10/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD 11(1) P7 CHOWRINGHEE SQUARE 6 TH FL KOL-69 2. /RESPONDENT-M/S STOLL BERG INDIA PVT. LTD. 2 ST. G EORGES GATE ROAD 6 TH FLOOR HASTINGS KOLKATA-22 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# '# / DR ITAT KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ /TRUE COPY/ / '#