TaxTMI 
TaxTMI 
2011 (8) TMI 258
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....3(3) of the Income-tax Act, 1961 (In short the Act). On appeal, the learned Commissioner of Income-tax (A), partly allowed the appeal. 3. Being aggrieved by the order of the learned Commissioner of Income-tax (A), the Revenue and assessee both are in appeal before us. ITA No. 5828/Mum/2008 (By Revenue) 4. The grounds No. 1 and 2 in the Revenue's appeal are against the deletion of addition of Rs. 10,00,000 made by he Assessing Officer under section 41(1) of the Act. 5. The brief facts of the above issue are that during the course of assessment proceedings the assessee was asked to give details of sundry creditors of Rs. 25,60,09,090. In response, the assessee submitted branch-wise list of the creditors. The Assessing Officer observed that there are certain creditors in the list which remained unpaid for more than 5 years. The assessee was asked to produce the list along with reasons. The assessee submitted details of liabilities pending for more than 5 years and stated that : "due to heavy losses in past and to conserves the working capital, the federation has adopted the methodology of releasing payment to suppliers/creditor only against receipt of money from the respective cu....
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....ing the addition be upheld. 8. Having carefully heard the submissions of the rival parties and perusing the material available on record, we find that there is no dispute that the assessee has shown the sundry creditors in its balance-sheet amounting to Rs. 25,60,09,090 including the liability of Apex body pending for more than 5 years Rs. 10,85,531 supported by the relevant details thereof. Out of it, the Assessing Officer has added Rs. 10,85,531 on the ground that the said liability is pending for more than 5 years, therefore, the same is ceased to exists and hence chargeable to tax under section 41(1) of the Act. However, the learned Commissioner of Income-tax (A) deleted the same on the ground that the same is not barred by Limitation Act and there is no proof that the appellant obtained any benefit in respect of these creditors, the liability has not been written back by the appellant, there is no remission of liability, therefore, following the decision of the Hon'ble Supreme Court in Sugauli Sugar Works (P.) Ltd. (supra), he deleted the addition of Rs. 10,00,000. In the absence of any contrary materials placed on record by the Revenue to show that no such liability exists i....
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....not of usual wear and tear or current repairs and hence he treated Rs. 2,01,500 is capital in nature not allowable under section 37(1) of the Act. On appeal, the learned Commissioner of Income-tax (A) while observing that it is a case of complete renovation of the office space and not a case of normal repair of office space, following the decision of the Hon'ble Supreme Court in the case of Ballimal Naval Kishore v. CIT [1997] 224 ITR 414/90 Taxman 402 confirmed the disallowance made by the Assessing Officer. 12. At the time of hearing, the learned counsel for the assessee submits that the assessee has incurred routine repair expenses for the office premises on the tenanted building which is more than 60 years old. As per the bill of these expenses all these expenses are in the nature of current repairs, therefore, the same are allowable as business expenditure under section 37(1) of the Act. The learned counsel for the assessee while distinguishing the decision in the case of Ballimal Naval Kishore (supra) placed reliance in the case of Gulamhussein Ebrahim Matcheswalla v. CIT [1974] 97 ITR 24 (Bom.) and the decision of the Hon'ble Bombay High Court in Addl. CIT v. India United M....
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....irs and laid down following tests : "Held, reversing the decision of the High Court, (i) that the manufacturing process in the textile mill was not one continuous integrated process ; (ii) that to decide the applicability of section 31(i) the test was not whether the expenditure was revenue or capital in nature, but whether the expenditure was "current repairs". The basic test was to find out whether expenditure was incurred to "preserve and maintain" an already existing asset, and the expenditure must not be to bring a new asset into existence or to obtain new advantage; (iii) that each machine including the ring frame was an independent and separate machine capable of independent and specific function and, therefore, the expenditure incurred for replacement thereof would not come within the meaning of "current repairs". The replacement of the ring frame constituted substitution of an old asset by a new asset, and, therefore, the expenditure incurred by the assessee did not fall within the meaning of "current repairs" in section 31(i). Under section 31(i) the deduction admissible is only for current repairs. Therefore, the question as to whether....