M/s. Shilp Gravures Ltd.,, Ahmedabad v. The ACIT., Range-8,, Ahmedabad

ITA 791/AHD/2008 | 2005-2006
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 79120514 RSA 2008
Assessee PAN AADCS0868G
Bench Ahmedabad
Appeal Number ITA 791/AHD/2008
Duration Of Justice 2 year(s) 5 month(s) 25 day(s)
Appellant M/s. Shilp Gravures Ltd.,, Ahmedabad
Respondent The ACIT., Range-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 27-08-2010
Date Of Final Hearing 18-08-2010
Next Hearing Date 18-08-2010
Assessment Year 2005-2006
Appeal Filed On 03-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER DATE OF HEARING :18/08/2010 DRAFTED ON: 19/ 08/2010 ITA NO.791/AHD/2008 ASSESSMENT YEAR : 2005-06 SHILP GRAVURES LTD. 101 KASHI PAREKH COMPLEX B/H.BHAGWATI CHAMBERS C.G.ROAD AHMEDABAD VS. THE ADDL.CIT RANGE-8 AHMEDABAD PAN/GIR NO. : AADCS 0868G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI R.T.SHAH RESPONDENT BY: SHRI K.M.MAHESH SR.D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV AHMEDAB AD DATED 01/02/2008 AND THE SOLITARY SUBSTANTIAL GROUND REA DS AS UNDER:- DISALLOWANCE OF REPAIRS MAINTENANCE AND RENOVATION EXPENSES OF RS.1565383/- OUT OF FACTORY BUILDING REPAIRS EXPENS ES OF RS.2045829/- RETAINED BY CIT(A) XIV AHMEDABAD BE D ELETED. NONE OF THE EXPENSES ARE FOR CREATION OF ANY NEW AS SET. THE EXPENSES ARE ALLOWABLE U/S.30 READ WITH SEC. 37 OF IT ACT 1961 AND BE ALLOWED. 2. THE SHORT ISSUE IS WHETHER THE REPAIRS IN QUEST ION WERE CURRENT REPAIRS OR EXPENDITURE OF CAPITAL NATURE AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 ITA NO .791/AHD/2008 SHILP GRAVURES LTD. VS. ADDL.CIT ASST.YEAR 2005-06 - 2 - DATED 07/12/2007. THE ASSESSING OFFICER HAS NOTIC ED THAT THE ASSESSEE- COMPANY IS IN THE BUSINESS OF MANUFACTURING OF ELEC TRONICALLY ENGRAVED COPPER ROLLERS HAS INCURRED AN EXPENDITURE OF BUILD ING REPAIRS OF RS.20 45 829/-. IT WAS EXPLAINED THAT THE NATURE O F EXPENDITURE WAS CURRENT REPAIRS. IT WAS ALSO EXPLAINED THAT THE FACTORY BUILDING WAS CONSTRUCTED WAY BACK IN THE YEAR 1993-94 HENCE S UBSTANTIAL REPAIRS WERE REQUIRED. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCED AND HELD THAT OUT OF THE TOTAL CLAIM A SUM OF RS.18 7 0 666/- CAPITAL IN NATURE HOWEVER DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION . WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY I N A CRYPTIC MANNER THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED IN PA RT. TO ASCERTAIN THE NATURE OF EXPENDITURE IT IS WORTH TO REPRODUCE THE FINDINGS CONTAINED IN PARAGRAPH NO.2.2 FROM THE ORDER OF THE LEARNED CIT( APPEALS) AS FOLLOWS:- 2.2. THE APPELLANT HAS SUBMITTED THAT THE BUILDI NG HAS BECOME OLD AND IT REQUIRED REPAIRS AND ALL THE EXPENSES AR E REVENUE IN NATURE AND IT SHOULD BE ALLOWED. THE APPELLANT FIL ED ALL THE DETAILS OF REPAIR EXPENSES. I HAVE CONSIDERED THE FACTS O F THE CASE AND THE SUBMISSIONS. I FIND THAT CERTAIN EXPENSES INCURRE D WERE IN FACT NOT FOR CURRENT REPAIRS BUT IT WAS FOR THE RENOVATION WORK AND SUCH EXPENSES ARE TO BE CAPITALIZED. HOWEVER THE AO IS NOT JUSTIFIED IN TREATING THE WHOLE REPAIR EXPENSES AS CAPITAL EX PENDITURE. THE OLD BUILDING NEEDS SOME REPAIRS. FROM THE DETAILS SUBMITTED BY THE APPELLANT I FIND THAT THE FOLLOWING EXPENSES A RE IN THE NATURE OF CAPITAL EXPENDITURE AS THESE WERE FOR RENOVATIO N AND CREATION OF CAPITAL ASSET. THE HON.SUPREME COURT IN THE CAS E OF M/S.SARAVANA SPINNING MILLS PVT.LTD. 2293 ITR 201 H AS HELD THAT ITA NO .791/AHD/2008 SHILP GRAVURES LTD. VS. ADDL.CIT ASST.YEAR 2005-06 - 3 - SECTION 31(I) IS FOR CURRENT REPAIRS AND EVEN IF TH E EXPENDITURE IS REVENUE IN NATURE IT CANNOT FALL IN THE CONNOTATIO N OF CURRENT REPAIRS UNLESS IT IS FOR THE CURRENT YEARS REPAIR S. NAME OF THE PARTY NATURE OF WORK AMOUNT SHREE RAM STEEL STORES MS ROUND BARTMT STEEL 9570 GOPI CONSTRUCTION RENOVATION AND REPAIRS INCOMING DEPT 189926 UNIVERSAL AGENCY PVC PIPE 12292 DEV VALVES & BOILER MOUNT MS PLUG GI PIPE TEE NIPPLE 5160 SOLANKI & SONS OXYCHLORIDE FLOORING 65119 GOPI CONSTRUCTION CIVIL WORK RO PLANT & ACID TANKS 49960 -DO- CIVIL WORK 485578 -DO- PLUMBING WORK 79525 -DO- MISC.CIVIL WORKS 30400 MAHSANA STEEL SUPPLIERS OLAIN CONST.STEEL (BARS) 73376 GOPI CONSTRUCTION DEDUCTED FOR SERV.TAX 21729 -DO- RENOVATION IN NICKLE BATH 134534 -DO- RENOVATION AND REPAIRS 171080 -DO- CEMENT BAGS 91294 AESTHETICS MARKETING PLAIN WHITE TILES 145800 TOTAL 1565383 3. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PER USED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS FURNISHED A DET AILED WORKING OF JUSTIFICATION FOR CLAIMING THE EXPENDITURE AS REVEN UE EXPENDITURE. WE ITA NO .791/AHD/2008 SHILP GRAVURES LTD. VS. ADDL.CIT ASST.YEAR 2005-06 - 4 - ARE NOT INCLINED TO LOAD OUR JUDGEMENT BY REITERATI NG THE SAID DETAILED EXPLANATION IN RESPECT OF EACH AND EVERY ITEM OF EX PENDITURE. HOWEVER THE BASIC FACT IS THAT NO INDEPENDENT OR SEPARATE A SSET HAD ALLEGED TO HAVE BEEN CONSTRUCT OR CAME INTO EXISTENCE. THE FIRST APPELLATE AUTHORITY HAS SIMPLY CITED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. M/S.SARAVANA SPINNING MILLS PVT.LTD. REPORTED A S (2007) 293 ITR 201 (SC) AND PARTLY CONFIRMED THE ADDITION. HOWEVER ON CAREFUL EXAMINATION OF THE SAID ORDER IT IS EVIDENT THAT T HE EXPRESSION CURRENT REPAIRS WAS HELD TO BE REPAIRS NEEDED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET. IN THE SAID DECISION THE HON'BLE SUPREME COURT HAS FOLLOWED AN EARLIER LANDMARK DECISION OF BALLIM AL NAVAL KISHORE & ANR. VS. CIT REPORTED AS (1997) 224 ITR 414(SC) AND THEREAFTER OBSERVED THAT IF THE OBJECT OF THE EXPENDITURE IS N OT TO BRING A NEW ASSET INTO EXISTENCE THEN THE EXPENDITURE IS REVENUE IN NATURE. IN THAT DECISION CERTAIN EXPENDITURE WAS FOUND NOT IN THE NATURE OF CURRENT REPAIRS BUT REPLACEMENT OF MACHINERY HENCE IT WA S HELD THAT SUCH AN EXPENDITURE DID NOT CONSTITUTE THE TERM CURRENT RE PAIRS AS DEFINED U/S.31(1) OF THE I.T. ACT 1961. FROM THE SIDE OF THE REVENUE SHRI K.M.MAHESH LEARNED DEPARTMENTAL REPRESENTATIVE HAS TRIED TO ARGUE THAT A NEW DEPARTMENT HAD COME INTO EXISTENCE BUT T HE SAID ARGUMENT HAS NO SUPPORTING EVIDENCE OR COGENT MATERIAL TO SPECIF ICALLY DEMONSTRATE THAT A NEW ASSET HAD COME INTO EXISTENCE. RATHER F ACTS OF THE CASE HAVE DEMONSTRATED THAT THE FACTORY BUILDING BEING AN OLD BUILDING THEREFORE THE EXPENDITURE WAS INCURRED TO PRESERVE AND MAINTA IN AN ALREADY EXISTING ASSET AS IS EVIDENT FROM THE NATURE OF EXPENDITURE LISTED HEREINABOVE. ITA NO .791/AHD/2008 SHILP GRAVURES LTD. VS. ADDL.CIT ASST.YEAR 2005-06 - 5 - WITH THESE REASONING WE HEREBY DIRECT TO ALLOW THE CLAIM AS CURRENT REPAIRS. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 27/ 08 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 27 / 08 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD