Income Tax Appellate Tribunal - Mumbai
Balkrishna Paper Mills Ltd, Mumbai vs Assessee on 27 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH 'B' BENCH
BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND
SHRI RAJENDRA (ACCOUNTANT MEMBER)
ITA No.7176/Mum/2011
Assessment Year: 2008-09
Balkrishna Paper Mills ltd., ACIT, Circle 6(1),
BKT House, c/14, Trade World, Mumbai.
Kamla Mills compound, S.B.Marg,
Lower Parel(W), Vs.
Mumbai
PA No.AADCB 0910 G
(Appellant) (Respondent)
Appellant by : Shri Dilip J Thakkar
Respondent by: Shri Manoj Kumar
Date of hearing: 27 .9.2012
Date of pronouncement: 10.10.2012
ORDER
Per B.R.Mittal, JM:
The assessee has filed this appeal for assessment year 2008-09 against order dated 20.9.2011 of ld CIT(A) on the following ground:
"On the facts and under the circumstances of the case and in law, ld CIT(A) erred in confirming the addition of Rs.1,70,000(2,00,000 - 30,000)(15%) out of repair and maintenance to plant & machinery on adhoc basis without appreciating that company had already capitalized the amount which were capital in nature and no further disallowance is called for."
2. The asssessee claimed a sum of Rs.77,34,504/- under the head "repairs and maintenance of plant and machinery". The AO treated the said expenditure as capital expenditure and after allowing depreciation @ 15% under section 32 of the Act, disallowed balance amount of Rs.65,74,328. Being aggrieved, assessee filed appeal before the first appellate authority.
2 ITA No.7176/Mum/2011Assessment Year: 2008-09
3. On behalf of assessee, it was contended that expenditure incurred by the assessee was purely for repair and maintenance of plant and machinery and no new assets have been acquired, neither any enduring benefit is derived. It was contended that assessee company is in existence from last several decades, almost 20 years and above. That the wear and tear is common and company has to incur the expenditure for repairs on continuous basis. Relying on the decision of Hon'ble Delhi High Court in the case of CIT vs. DLF commercial Developers Limited, 323 ITR 321(Del), it was contended that the action of the AO is unwarranted. Ld CIT(A) after considering the submissions of assessee, considered the amount of Rs.2 lakhs for disallowance as capital expenditure and after allowing 15% depreciation thereon, confirmed the net disallowance of Rs.1,70,000 vide paras 6.3 & 6.4 of the impugned order, which are as under:
"I have considered the above submission of the appellant and the facts of the case, I have also seen the details of expenses as furnished by the appellant. From the details it is seen that most of the expenses are in the nature of repair and no new assets have been acquired or else any enduring benefit has been derived. Therefore, the Assessing Officer's action is not in conformity with the facts. However, it is seen that some of the items of expenditure are certainly in the nature of capital expenditure. For example there are number of expenses debited for transport of machinery which should be capitalized with the cost of machinery. Some others are as under:
6.4 Therefore, since a small portion of the above expenses is in the nature of capital expenditure and is required to be capitalized with the asset for which the same has been incurred, in the interests of Justice, I consider that an amount of Rs.2 lakhs would be appropriate for disallowance. However depreciation at the of 15% shall be granted on this amount which means that the net disallowance would be Rs. 1,70,000/-. Hence, the disallowance to this extent is sustained and the balance amount of Rs.64,04,328/- is deleted."
4. Hence, this appeal by the assessee.
3 ITA No.7176/Mum/2011Assessment Year: 2008-09
5. During the course of hearing, ld A.R. reiterated the submissions as made before the authorities below. He further referred pages 5 to 21 of PB and submitted that details of expenditure could reveal that the expenses are revenue in nature and no new assets have been acquired. Ld A.R. referred to the decision of ITAT in the case of ACIT vs. Arthur Anderson & Co., 5 SOT 393(Mum) besides relying on the decision of Hon'ble Delhi High Court in the case of DLF commercial Developers Limited(supra). Ld A.R. submitted that adhoc disallowance of Rs.2 lakhs by ld CIT(A) considering as capital expenditure out of total expenditure of Rs.77,34,504 is arbitrary and said disallowance should be deleted.
6. On the other hand, ld D.R. relied on order of ld CIT(A). Further in reply to a query by the Bench, ld D.R. confirmed that department is not in appeal against the order of ld CIT(A).
7. We have considered submissions of ld representatives of parties as also details of expenditures placed at pages 5 to 21 of PB. On perusal of said details, it is evident that the said expenditure has been incurred by the assessee for repairs and maintenance of plant and machinery and no new assets have been acquired. We also observe that three expenses given by ld CIT(A) in para 6.3 of the impugned order, details mentioned hereinabove, also do not establish that the said expenditure is capital in nature. Moreover, even if the said amount as mentioned by ld CIT(A) is considered as capital in nature, the total amount comes to Rs.33,500 only. On consideration of the facts of the case, we are of the considered view that the action of ld CIT(A) to treat adhoc disallowance of Rs.2 lakhs as capital expenditure and to confirm the said disallowance is not based on cogent material on record. Further, ITAT Mumbai in the case of Arthur Anderson & Co(supra) has held that where disallowance is made on surmises and conjectures, the same is devoid of any legally sustainable foundation. In view of above, we hold that the disallowance made by ld CIT(A) by considering on adhoc basis of Rs.2 lakhs as capital expenditure is not justifiable in law and, accordingly, we delete the same by directing the entire expenditure of 77,34,504 is to be considered as revenue expenditure. Hence, ground of appeal taken by assessee is allowed.
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8. In the result, appeal filed by assessee is allowed.
Pronounced in the open court on 10th October, 2012
Sd/- Sd/-
(RAJENDRA) (B.R. MITTAL)
Accountant Member Judicial Member
Mumbai, Dated 10th October, 2012
Parida
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),14, Mumbai
4. Commissioner of Income Tax, VI , Mumbai
5. Departmental Representative, Bench 'B' Mumbai //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI