THE INDIAN HOME PIPE PIPE CO. LTD, MUMBAI v. DY CIT CEN CIR-22, MUMBAI

ITA 5173/MUM/2008 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 517319914 RSA 2008
Assessee PAN AAACT4063D
Bench Mumbai
Appeal Number ITA 5173/MUM/2008
Duration Of Justice 2 year(s) 11 month(s) 15 day(s)
Appellant THE INDIAN HOME PIPE PIPE CO. LTD, MUMBAI
Respondent DY CIT CEN CIR-22, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 29-07-2011
Date Of Final Hearing 30-05-2011
Next Hearing Date 30-05-2011
Assessment Year 2005-2006
Appeal Filed On 14-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 THE INDIAN HUME PIPE CO. LTD. .. APPELLANT CONSTRUCTION HOUSE 2 ND FLOOR 5 WALACHAND HIRACHAND MARG BALLARD ESTATE MUMBAI-01. PA NO.AAACT 4063D VS DY. CIT CENT. CIRCLE-22 . RESPONDEN T AAYAKAR BHAVAN M.K. ROAD MUMBAI. APPEARANCES: H.P.MAHAJANI FOR THE APPELLANT SANJEEV DUTT FOR THE RESPONDENT DATE OF HEARING : 30-05-2011 DATE OF PRONOUNCEMENT: 29 -07-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CHALLENG ED CORRECTNESS OF CIT(A)S ORDER DATED 9 TH JULY 2008 IN THE MATTER OF ASSESSMENT UNDER SECT ION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2005 -06. 2. IN THE FIRST GROUND OF APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 2 1.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE VIEW OF THE LD AO TH AT THE APPELLANT WAS NOT ENTITLED TO DEDUCTION U/S.80-IA OF THE INCOME T AX ACT 1961. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN CONFIRMING THE VIEW OF THE LD AO TH AT THE APPELLANT WAS A WORKS CONTRACTOR AND NOT A DEVELOPER OF INFRASTRU CTURE PROJECTS CLAIMED BY IT. B. THE LD CIT(A) ERRED IN DECIDING THE ABOVE ISSUE DE HORS THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT IN PARTICULAR ON THE SCOPE OF THE RETROSPECTIVE AMENDMENT TO SECTION 80-IA AND ON THE SUBJECT OF INVESTMENTS MADE AND RISKS ASSUMED BY TH E APPELLANT WHILE DEVELOPING THE ELIGIBLE INFRASTRUCTURE PROJECTS; C. THE LD AO BE DIRECTED TO ACCEPT THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S.80IA AS RETROSPECTIVELY AMENDED. 3. VIDE OUR ORDER OF EVEN DATE AND ON THE SAME SET OF FACTS FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.5172/M/2008 WE HAVE REJECTED THE GRIEVANCE RAISED BY THE ASSESSEE. WHILE DOING SO WE HAVE INTER ALIA OBSERVED AS FOLLOWS: 3.BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF HUME PIPE S AND EXECUTION OF CIVIL PROJECTS. DURING THE RELEVANT PREVIOUS YEAR THE A SSESSEE HAD BUSINESS INCOME EARNED FROM EXECUTION OF PROJECTS RELEVANT TO DEVEL OPMENT OF INFRASTRUCTURE FACILITY SUCH AS WATER SUPPLY AND SEWERAGE PROJECTS COMPOSITE AND PART OF COMPOSITE PROJECTS. THE CLAIM OF THE ASSESSEE WAS THAT COMPOSITE WATER SUPPLY PROJECTS MEAN UNDERTAKING WATER SUPPLY PROJE CTS FROM SOURCE TO DISTRIBUTION SYSTEM WHICH INCLUDES MANUFACTURING SUPPLYING LAYING JOINING OF PIPELINE AND INCLUDES CONSTRUCTION OF PUMP HOUSE DELIVERY COMMISSIONING OF TURBINE PUMP SETS INSTALLATION OF BOOSTER MAINS BRANCH MAINS AND ELEVATOR RESERVOIRS ETC. WITH THIS EXPLANATION OF ACTIVITY IT WAS CONTENDED THAT THE ASSESSEE WAS ENGAGED IN DEVELOPMENT OF INFRASTRUCTU RE FACILITY AS DEFINED IN EXPLANATION (C) TO SECTION 80IA(4). THE ASSESSEE O N THESE FACTS AND RELYING UPON TRIBUNALS DECISION IN THE CASE OF PATEL ENGIN EERING LTD (84 TTJ 646) CLAIMED A DEDUCTION OF ` .11 39 42 000 U/S. 80IA OF THE ACT. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE SAID CLAIM. HE WAS OF THE VIEW THAT THE ASSESSEE WAS A CONTRACTOR AND NOT DEVELOPER. RELYIN G UPON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. N.C.BUDHIRA JA & CO. (204 ITR 412) THE I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 3 ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE CANNO T BE TERMED AS DEVELOPER OF A PROJECT MERELY BECAUSE ASSESSEE HAS EXECUTED T HE PROJECT FOR ACTUAL DEVELOPER OF INFRASTRUCTURE FACILITY I.E. GOVERNME NT OR SEMI-GOVERNMENT BODY CONCERNED AND THAT THE ASSESSEE COMPANY CANNOT BE CONSTRUED AS AN ENTERPRISE CARRYING ON BUSINESS OF DEVELOPING OPER ATING AND MAINTAINING OF ANY INFRASTRUCTURE FACILITY. AS REGARDS DECISION O F A COORDINATE BENCH IN THE CASE OF PATEL ENGINEERING (SUPRA) THE ASSESSING OF FICER OBSERVED THAT THE DECISION HAS BEEN CHALLENGED BEFORE HONBLE BOMBAY HIGH COURT AND DOES NOT THUS GIVE FINALITY TO THE DISPUTE. THE ASSESSING O FFICER THUS DECLINED THE DEDUCTION U/S. 80IA AMOUNTING TO ` .11 39 42 000 TO THE ASSESSEE. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT A NY SUCCESS. LEARNED CIT(A) UPHELD THE STAND OF THE ASSESSING OFFICER AN D INTER ALIA OBSERVED AS FOLLOWS: 9. I HAVE CONSIDERED THE SUBMISSIONS PUT FORTH ON BE HALF OF THE APPELLANT BY THE LEARNED AR. THE FILTERS AND PARAME TERS OF VIEWING THE ELIGIBILITY OF AN ASSESSEE FOR A CLAIM UNDER SECTION 80IA(4) OF THE ACT HAVE BEEN MATERIALLY ALTERED BY VIRTUE OF AN AMENDME NT INSERTED BY WAY OF AN EXPLANATION IN SECTION 80IA BY THE FINAN CE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000; A MATTER WHICH HAS BEEN IGNORED BY THE APPELLANT IN ITS DETAILED SUBMISSIONS . THE OMISSION OF THE APPELLANT TO DISCUSS THE ELIGIBILITY OF ITS CLAIM FR OM THE PERSPECTIVES OF THE SAID AMENDMENT IS INDEED CONSPICUOUS BY THE AB SENCE. THE SAID EXPLANATION WHICH HAS AN OVERRIDING IMPACT IN THE MATTER OF THE APPELLANTS ELIGIBILITY OF ITS CLAIM FOR A DEDUCTION U/S.80IA(4) OF THE ACT IS REPRODUCED BELOW:- EXPLANATION-FOR REMOVAL OF DOUBTS IT IS HEREBY DEC LARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON W HO EXECUTES A WORK CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTE RPRISE AS THE CASE MAY BE. 10. THIS AMENDMENT IS OF RECENT VINTAGE. IN THE ME MORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2007 ITS PURPOSE AND AMBIT HAS BEEN DISCUSSED AS UNDER:- CLARIFICATION REGARDING DEVELOPER WITH REFERENCE T O INFRASTRUCTURE FACILITY INDUSTRIAL PARK ETC. FOR THE PURPOSES OF SECTION 80IA INTERALIA PROVIDES FOR A TEN YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A MASSIVE EXPANSION OF AND Q UALITATIVE IMPROVEMENT IN INFRASTRUCTURE (VIZ. EXPRESSWAYS HI GHWAYS AIRPORTS PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALON G BEEN FOR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FO R THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY O THER WORKS CONTRACT. I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 4 ACCORDINGLY IT IS PROPOSED TO CLARIFY THAT THE PROV ISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CO NTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN T HE SAID SECTION. THUS IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND H IMSELF CARRIES OUT THE DEVELOPMENT WORK I.E. CARRIES OUT THE CIVIL CON STRUCTION WORK HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80-IA. IN CO NTRAST TO THIS A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERS ON [I.E. UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA] FOR EXE CUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMEN T YEAR 2000-2001 AND SUBSEQUENT YEARS. 11. IT IS CLEAR FRO THE ABOVE AMENDMENT THAT AN ASSE SSEE CAN CLAIM A DEDUCTION UNDER SECTION 80IA(4) ONLY IF IT MAKES T HE INVESTMENT IN THE ELIGIBLE PROJECT AND ITSELF EXECUTES THE DEVELOPMENT WORK. AN ASSESSEE WILL BE DENIED A DEDUCTION U/S.80IA(4) IF IT ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING A WORKS CONTRACT. WHI LE THOSE WHO PARTICIPATE IN AN ELIGIBLE PROJECT AS PER THE IMPUGN ED SECTION BY WAY OF INVESTMENT ARE ENTITLED TO SEEK A DEDUCTION U/S.80I A(4) ON THE OTHER HAND THOSE ASSESSES WHO MERELY EXECUTE A CIVIL CONS TRUCTION WORK OR OTHER WORKS CONTRACT ARE NOT ENTITLED TO CLAIM SUCH A DEDUCTION. IT IS PERTINENT HERE TO DISCUSS THE MEANING OF A WORKS CO NTRACT FOR THIS PURPOSE. A WORKS CONTRACT HAS NOT BEEN DEFINED IN SE CTION 80IA OF THE ACT. A WORKS CONTRACT IS A CONTRACT FOR LABOUR WORK OR SERVICE AND NOT FOR SALE OF GOODS THOUGH GOODS ARE USED IN EXECUTI NG THE CONTRACT FOR LABOUR WORK OR SERVICE E.G. WHEN A CONTRACTOR CONST RUCTS A BUILDING THE DEVELOPER PAYS FOR THE CAST WHICH INCLUDES THE COS T OF BUILDING MATERIAL LABOUR AND OTHER SERVICES OFFERED BY THE CONTRACTOR. THE SUPREME COURT WHILE LAYING DOWN THE JUDICIAL RATIO IN THE CASE OF HAL LTD. V. STATE OF ORISSA 55 STC 327 OBSERVED THAT IN A CONTRACT FOR WORK THE PERSON PRODUCING HAS NO PROPERTY IN THE THING PRODUCED A S A WHOLE EVEN IF PART OR EVEN WHOLE OF MATERIAL USED BY HIM MAY HAVE BEEN HIS PROPERTY EARLIER. THE APEX COURT FURTHER STATED IN THE CASE OF STATE OF TAMILNADU V. ANANDAM VISHWANATHAN (1989) 1 SCC 613 THAT THE N ATURE OF CONTRACT CAN BE FOUND ONLY WHEN THE INTENTIONS OF THE PARTIE S ARE FOUND OUT. THE FACT THAT IN THE EXECUTION OF WORKS CONTRACT SOME M ATERIALS ARE USED AND THE PROPERTY IN THE GOODS SO USED PASSES TO THE O THER PARTY THE CONTRACTOR UNDERTAKING THE WORK WILL NOT NECESSARIL Y BE DEEMED ON THAT ACCOUNT TO SELL THE MATERIALS. PRIMARY DIFFERENCE BE TWEEN A CONTRACT OF WORK OR SERVICE AND A CONTRACT OF SALE IS THAT IN T HE FORMER THERE IS THE PERSON PERFORMING OR RENDERING SERVICE NO PROPERTY IN THE THING PRODUCED AS A WHOLE NOTWITHSTANDING THAT A PART OR EVEN THE WHOLE OF THE MATERIAL USED BY HIM MAY HAVE BEEN HIS PROPERTY. WHEN THE FINISHED PRODUCT SUPPLIED TO A PARTICULAR CUSTOMER IS NOT CO MMERCIAL COMMODITY I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 5 IN THE SENSE THAT IT CANNOT BE SOLD IN THE MARKET TO ANY OTHER PERSON (OTHER THAN WHO COMMISSIONED THE CONTRACTOR) THE T RANSACTION IS ONLY A WORKS CONTRACT. IT WAS HELD BY THE SC IN THE CASE OF STATE OF GUJARAT V. VARIETY BODY BUILDERS AIR 1976 SC 2108 THAT WHERE T HE MAIN OBJECT OF WORK UNDERTAKEN BY THE PAYEE OF THE PRICE IS NOT TH E TRANSFER OF A CHATTEL QUA CHATTEL THE CONTRACT IS ONE FOR LABOUR AND WORK . 12. THIS HAS BEEN REAFFIRMED AND REITERATED BY THE S UPREME COURT IN A RECENT JUDGMENT PRONOUNCED IN THE CASE OF STATE O F ANDHRA PRADESH V. KONE ELEVATORS (INDIA) LTD. 3 SCC 389 (2005) WHER E IT WAS STATED AS UNDER :- IT CAN BE TREATED AS WELL SETTLED THAT THERE IS NO STANDARD FORMULA BY WHICH OE CAN DISTINGUISH A CONTRACT FOR SALE FROM A WORK CONTRACT. THE QUESTION IS LARGELY ONE OF FACT DEPENDING UPON THE TERMS OF THE CONTRACT INCLUDING THE NATURE OF THE OBLIGATIONS TO BE DISCHARGED THERE UNDER AND THE SURROUNDING CIRCUMSTANCES. IF THE INT ENTION TO TRANSFER FOR A PRICE A CHATTEL IN WHICH THE TRANSFEREE HAD N O PREVIOUS PROPERTY THEN THE CONTRACT IS A CONTRACT FOR SALE. ULTIMATEL Y THE TRUE EFFECT OF AN ACCRETION MADE PURSUANT TO A CONTRACT HAS TO BE JUDG ED NOT BY ARTIFICIAL RULES BUT FROM THE INTENTION OF THE PARTIES TO THE C ONTRACT. IN A CONTRACT OF SALE THE MAIN OBJECT IS THE TRANSFER OF PROPER TY AND DELIVERY OF POSSESSION OF THE PROPERTY WHEREAS THE MAIN OBJECT IN A CONTRACT FOR WORK IS NOT THE TRANSFER OF THE PROPERTY BUT IT IS ONE FOR WORK AND LABOUR. ANOTHER TEST OFTEN TO BE APPLIED IS: WHEN AND HOW THE PROPERTY OF THE DEALER IN SUCH A TRANSACTION PASSES TO THE C USTOMER IS IT BY TRANSFER AT THE TIME OF DELIVERY OF THE FINISHED AR TICLE AS A CHATTEL OR BY ACCESSION DURING THE PROCESSION OF WORK ON FUSION T O THE MOVABLE PROPERTY OF THE CUSTOMER? IF IT IS THE FORMER IT I S A SALE IF IT IS THE LATTER IT IS A WORKS CONTRACTS. THEREFORE IN JU DGING WHETHER THE CONTRACT IS FOR A SALE OR FOR WORK AND LABOUR T HE ESSENCE OF THE CONTRACT OR THE REALITY OF THE TRANSACTION AS A WHO LE HAS TO BE TAKEN INTO CONSIDERATION. THE PREDOMINANT OBJECT OF THE CONTRA CT THE CIRCUMSTANCES OF THE CASE AND THE CUSTOM OF THE TRA DE PROVIDE A GUIDE IN DECIDING WHETHER TRANSACTION IS A SALE OR A WORK CONTRACT. ESSENTIALLY THE QUESTION IS OF INTERPRETATION OF T HE CONTRACT. IT IS SETTLED LAW THAT THE SUBSTANCE AND NOT THE FORM OF THE CONTRACT IS MATERIAL IN DETERMINING THE NATURE OF TRANSACTION. NO DEFINITE RULE CAN BE FORMULATED TO DETERMINE THE QUESTION AS TO WHETHE R A PARTICULAR GIVEN CONTRACT IS A CONTRACT FOR SALE OF GOODS OR I S A WORKS CONTRACTS. ULTIMATELY THE TERMS OF A GIVEN CONTRACT WOULD BE D ETERMINATIVE OF THE NATURE OF THE TRANSACTION WHETHER IT IS A SALE O F A WORK CONTRACT. THEREFORE THIS QUESTION HAS TO BE ASCERTAINED ON FA CTS OF EACH CASE ON PROPER CONSTRUCTION OF TERMS AND CONDITIONS OF THE CONTRACT BETWEEN THE PARTIES. I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 6 13. THE CONTRACTS EXECUTED BY THE APPELLANT PURSUA NT TO WHICH IT HAS CLAIMED A DEDUCTION U/S.80IA(4) MUST THEREFORE BE MEASURED FROM THE ABOVE METRICS LAID DOWN BY THE SUPREME COURT IN THE MATTER OF WORKS CONTRACT. I HAVE PERUSED THE COPIES OF THE AG REEMENTS WITH VARIOUS UNDERTAKINGS WHICH WERE EXECUTED BY THE APP ELLANT FOR EXECUTING THE IMPUGNED CONTRACTS WHICH ARE CLAIMED TO FALL WITHIN THE DOMAIN OF SECTION 80IA(4). IT IS CLEAR FROM THEM TH AT THE UNDERLYING STATUES OF THE APPELLANT IN EACH OF THEM IS THAT OF A CONTRACTOR WHO HAS BEEN ENGAGED IN A WORKS CONTRACT. 14. IT IS CLEAR FROM THE ABOVE THAT THE APPELLANT H AD EXECUTED A WORKS CONTRACT IN RESPECT OF EACH OF THE PROJECTS F OR WHICH IT HAS CLAIMED A DEDUCTION U/S.80IA(4) OF THE ACT. THE APPELLANT H AS ALSO BEEN UNABLE TO ESTABLISH AS TO HOW DID IT MAKE AN INVESTMENT IN THE PROJECT PART FROM NOT BEING ABLE TO PROVE THAT IT HAD NOT EXECUTED A WO RKS CONTRACT AS IS EVIDENT ABOVE. IN VIEW OF THE FOREGOING I FIND NO M ERIT IN THE CLAIM OF THE APPELLANT FOR A DEDUCTION U/S.80IA OF THE ACT AND T HUS REJECT THIS GROUND OF APPEAL. 4. THE ASSESSEE IS NOT SATISFIED BY STAND SO TAKEN BY THE CIT(A) AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT T HAT AS THE LAW STANDS NOW IN THE LIGHT OF RETROSPECTIVE INSERTION OF EXPLANAT ION BELOW TO SECTION 80IA(13) THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA (4). THIS EXPLANATION INTRODUCED BY FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000 PROVIDES THAT (F)OR THE REMOVAL OF DOUBTS IT IS H EREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION (I.E. 80-IA) SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION(4) WHICH IS IN THE NATURE OF WORK S CONTRACT AWARDED BY ANY PERSON (INCLUDING CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1). SUCH BEING THE LEGAL POSITION AND THE ASSESSEE HAVING MERELY EXECUTED THE WORKS CONTRACT FOR INFRASTRUCTURE DEVELOPMENT AS AWARDED TO HIM WE ARE OF THE CONSID ERED VIEW THAT AUTHORITIES BELOW RIGHTLY DECLINED THE DEDUCTION U/S. 80IA TO TH E ASSESSEE. WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. WE MAY MENTION THAT WHILE LEARNED COUNSEL DOES N OT DISPUTE THAT ISSUE STANDS CONCLUDED AGAINST THE ASSESSEE BY EXPLANATIO N INSERTED BY FINANCE ACT 2009 HE SUBMITS THAT THE DECISION OF A LARGER BENCH OF THIS TRIBUNAL . IN THE CASE OF I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 7 BT PATIL & SONS BELGAUN CONSTRUCTIONS PVT LTD. VS A CIT [35 SOT 171] WHICH HOLDS THAT EVEN WITHOUT THE BENEFIT OF THE AFORESAID AMEN DMENT IS NO LONGER GOOD IN LAW IN THE LIGHT OF HONBLE BOMBAY HIGH COURTS JUDG MENT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD [322 ITR 323]. HE TAKES U S THROUGH THE OBSERVATIONS MADE BY HONBLE BOMBAY HIGH COURT WHICH ACCORDING T O HIM IMPLIEDLY OVERRULE TO THE STAND TAKEN BY LARGER BENCH IN BT PATILS CAS E (SUPRA). LEARNED COUNSEL FURTHER SUBMITS THAT THIS ASPECT OF THE MATTER IS VE RY IMPORTANT SINCE RETROSPECTIVELY OF AMENDMENT BY FINANCE ACT 2009 I S UNDER CHALLENGE BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF PATEL ENGIN EERING (SUPRA) AND IN CASE CHALLENGE TO RETROSPECTIVELY IS UPHELD THE ASSESSE ES CLAIM TO DEDUCTION WILL HAVE TO BE UPHELD TOO. LEARNED DEPARTMENTAL REPRESENTATI VE ON THE OTHER HAND OPPOSE THESE CONTENTIONS AND SUBMITS THAT AS HELD B Y LARGER BENCH IN BT PATILS CASE (SUPRA) EVEN WITHOUT THE BENEFIT 2009 AMENDMEN T ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA. IN OUR CONSIDERED VIEW H OWEVER THIS ASPECT OF THE MATTER IS WHOLLY ACADEMIC AT THIS STAGE AND IT DOES NOT REALLY CALL FOR ANY ADJUDICATION BY US. ONCE IT IS AN ADMITTED POSIT ION THAT IN VIEW OF THE LAW AS IT IS STAND NOW THE ASSESSEE IS NOT ENTITLED TO DEDUCTIO N U/S. 80IA IT IS WHOLLY ACADEMIC AS TO WHAT WILL BE THE STATUS OF THE CLAIM IF EXPLAN ATION INSERTED BELOW SECTION 80IA(13) IS HELD TO BE APPLICABLE ONLY WITH PROSPECTI VE EFFECT AND NOT RETROSPECTIVE EFFECT AS HAS BEEN EXPRESSLY DONE BY T HE LEGISLATURE. WE NEED NOT ADDRESS OURSELVES TO SUCH HYPOTHETICAL ARGUMENTS. AS REGARDS THE CONTENTIONS THAT CERTAIN OBSERVATIONS MADE IN BT PATILS CASE ( SUPRA) DO NOT HOLD GOOD LAW ANY LONGER BECAUSE OF THE LAW LAID DOWN BY HONBLE BO MBAY HIGH COURT IN ABG HEAVY INDUSTRIES LTD (SUPRA) IT IS ONLY ELEMENTARY THAT ONCE THEIR LORDSHIPS OF HIGH COURTS EXPRESSED VIEW OF ANY SUBJECT CONTRARY VIEWS OF THE COURTS BELOW CEASES TO HOLD GOOD IN LAW BUT THEN IN THE PRESENT C ASE IT IS NOT REALLY NECESSARY TO ADDRESS OURSELVES TO THIS ASPECT OF THE MATTER BECAU SE THAT ASPECT OF THE MATTER IS AT PRESENT WHOLLY ACADEMIC. WE THEREFORE SEE NO NEED TO ADJUDICATE UPON THE ARGUMENTS WHICH DEAL WITH CERTAIN HYPOTHETICAL SITU ATION AND NOT THE PRESENT LEGAL SITUATION. THIS ASPECT OF THE MATTER IS WHOL LY ACADEMIC AND INFRUCTUOUS. 8. GROUND NO.1 IS THUS DISMISSED. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2004-05. FOLLOWING THE VIEW SO TAKEN US WE REJECT THE GRIEVANCE RAISED BY THE ASS ESSEE AND DECLINE IN THE MATTER. 5. GROUND NO.1 IS THUS DISMISSED. 5.. IN GROUND NO.2 THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE VIEW OF THE LD AO TH AT EXPENDITURE OF I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 8 ` .2 13 771 (WRONGLY REFERRED TO AS ` .2 68 475 ALSO BY THE LD AO CONTRARY TO THE FIGURE OF ` .1 92 394 ARRIVED AT BY THE AO VIDE PARA 7.2 OF THE ASSESSMENT ORDER) WAS CAPITAL IN NATURE REJE CTING THE CONTENTION OF THE APPELLANT THAT IT WAS REVENUE IN NATURE. 6. VIDE OUR ORDER OF EVEN DATE AND ON THE SAME SET OF FACTS FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.5172/M/2008 WE HAVE ALLOWED THE GRIEVANCE RAISED BY THE ASSESSEE. WHILE DOING SO WE HAVE INTER ALIA OBS ERVED AS FOLLOWS: 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF ` .64.96 LAKHS UNDER THE HEAD REPAIRS AND OUT OF THE REPAIRS EXPENSES SO CLAIME D THE ASSESSEE HAS SPENT THE AMOUNT TOWARDS COST OF CERAMIC TILES CIVIL WORK F URNITURE FURNISHED AND ELECTRIC INSTALLATIONS WHICH ARE NOT DEDUCTIBLE AS CURRENT RE PAIRS. THE EXPENDITURE SO INCURRED WHICH ACCORDING TO THE ASSESSING OFFICER AMOUNTED TO ` .2 98 305 WAS DISALLOWED THOUGH DEPRECIATION @10% WAS GRANTED ON THE SAME. THE ASSESSING OFFICER RELIED UPON THE JUDGMENT OF HONBLE DELHI HI GH COURT IN THE CASE OF MODI SPINNING & WEAVING MILLS CO. LTD VS. CIT(1993) 200 ITR 544 AND HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF BALIMAL NAV ALKISHOR VS CIT[224 ITR 414). AGGRIEVED BY THE STAND SO TAKEN BY THE ASSES SING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCESS . THE CIT(A) HELD THAT THE EXPENSES IN QUESTION WERE INCURRED OF RENOVATED LOBB Y AND BOARD ROOM IS LONG LASTING AND ENDURING IN NATURE. SHE HOWEVER REST RICTED THE DISALLOWANCE TO ` .2 38 648 AS AGAINST ` .2 68 475 MADE BY THE ASSESSING OFFICER. 16. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 17. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 18. WE FIND THAT THE COPIES OF THE RELATED BILLS ARE PLACED BEFORE US AT PAGES 109 TO 112 OF THE COMPILATION OF PAPERS AND THAT A PERUSAL OF THESE PAPERS SHOW THAT EXPENSES HAVE BEEN INCURRED MAINLY ON REPAIRS A ND MAINTENANCE SUCH AS REPAIRING OF CHAIRS CHANGING UPHOLSTERY REPLACING CASTORS AND POLISHING/PAINTING REMOVING EXISTING POP SHEETS FR OM FALSE CEILING CARTING AWAY DEBRIS AND REDOING THE SAME REPLACING REXENE O F THE FURNITURE IN THE RECEPTION AREA GRANITE SHELF IN PANTRY REPAIRING/ ALTERING EXISTING STORAGE IN PANTRY WITH REPLACING DECAYED PLY FIXING NEW LAMIN ATE ON SHELF TOP BOTTOM ETC. ALL THESE EXPENSES ARE CLEARLY IN THE NATURE OF CUR RENT REPAIRS INASMUCH AS EVEN THOUGH SOME REPLACEMENTS ARE NEEDED BUT REPLACEMENTS ARE OF THE CONSUMABLE WHICH HAVE LIMITED SPAN OF LIFE. IN OUR CONSIDERED VIEW THE CLAIM OF THE ASSESSEE I.T.A NO.5173/ MUM/2008 ASSESSMENT YEAR: 2005-06 9 DESERVES TO BE ALLOWED AS IN THE NATURE OF CURRENT R EPAIRS. WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CAS E OF COMMISSIONER OF INCOME-TAX V. HEDE CONSULTANCY PVT. LTD.(258 ITR 32 0) WHEREIN IT HAS BEEN HELD THAT SINCE THE ASSETS CREATED BY SPENDING TH E SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSESSEE GOT THE BUSINESS ADV ANTAGE OF USING MODERN BUSINESS PREMISES AT A LOW RENT THUS SAVING CONSIDE RABLE REVENUE EXPENDITURE FOR A CONSIDERABLY LONG PERIOD THE EXPENDITURE SHOU LD BE LOOKED UPON AS REVENUE EXPENDITURE. WE ALSO FIND THAT IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY A COORDINATE BENCH OF THIS TRIBUNAL. WE THEREFORE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO ALLOW THE DEDUCTI ON. 19. GROUND NO.3 IS THUS ALLOWED.. 7. FOLLOWING THE VIEW SO TAKEN BY US IN ASSESSMENT YEAR 2004-05 WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO ALLOW THE DEDUCTION. 8. GROUND NO.2 IS THUS ALLOWED. 9. IN THE RESULT APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011 SD/- (R.V.EASWAR) PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI DATED 29 TH JULY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) IV MUMBAI 4. COMMISSIONER OF INCOME TAX C-II MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH I MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI