TaxTMI 
TaxTMI 
2012 (5) TMI 43
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....law:- "Whether the Income Tax Appellate Tribunal was right in holding that the expenditure of Rs.31,54,844/- was a revenue expenditure and not a capital expenditure?" 3. As we have heard learned counsel for the parties, we proceed to dictate our decision. 4. The respondent-assessee is a company and for the assessment year in question it had filed its return of income on 8th December, 2006 declaring loss of Rs.19,84,799/- under the normal provisions and book profit of Rs.7,36,458/- under Section 115JB of the Act. The Assessing Officer in the assessment order has recorded that the assessee had debited a sum of Rs.31,54,844/- in the computation of income as deferred revenue expense and 10% of the said amount was debited to the profit and lo....
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.... Rajouri Garden, New Delhi-110027 06.08.05 001 T.R. Oil For Lubrication of parts of plant for its running 443,906 2. Balaji Industrial Products Ltd., 117 & 119, Industrial Area, Jothwara, Jaipur-302012 23.09.05 014 Steel Hammer (Coal Crusher) Replacement 227,908 3. Savita Chemicals Ltd., Plot No.10/2, Kharapada, P.O. Naroli, Silvasa 396230 17.10.05 4722 Turbine Fluid For movement of Turbine 633,764 4. Exsol Energy Systems, The Cranium, 24, Top Floor, Adhchini, New Delhi-110017 13.12.05 345 Lead Acid Stationery Cell Batteries Replacement 530,000 5. Eagle Poonawala Industries, 212/2, Hadapsar, Off s\Soil Poonawal Road, Pune-411028 10.03.06 8408 Mechanical Parts Replacement 143,899.60 6. Advant Automation Sol....
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.... beginning it has been the claim of the assessee that the nature of expenditure incurred by the assessee is revenue. From the details it can be seen that none of the expenditure has created any item of capital asset. It is in the nature of lubricating oil, replace of steel hammer, turbine fluid for movement of turbine, lead acid stationery cell batteries which have been replaced, mechanical parts which have been replaced and other items of replacement like hot well level, valves bearings oil seals, conveyor belt and electrical meter. If assessee has to bring the plant in working order and to run it, these expenditure are necessary in regular course and they represents day to day expenditure either in the nature of current repair or in respe....
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....ing of all these clauses will show that assessee was to operate the plant of generation of electricity and part of the generation of electricity was to be supplied to the lessor at prescribed rates. The assessee was to incur expenses on repairs and maintenance of the plant was to generate electricity and generate revenue in the year under consideration but the payment of lease rent was to start from 14th April, 2006 which date falls in the next financial year. The term of lease is 20 years. As per clause 17.3, upon expiration of lease, the assessee was to handover the plant in good running condition except liability of lessor to pay to the assessee the written down value of the additions and alterations of the building, station or additiona....
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.... or operationalize/operate the already existing asset or bring into existence a new asset. Also, the amount/quantum of money alone cannot be factor to determine whether the expenditure falls under current repair or revenue expenditure. The Supreme Court in Commissioner of Income Tax v. Saravana Spg. Mills (P) Ltd., (2007) 7 SCC 298, has held : "5. This Court in Ballimal Naval Kishore v. CIT approved the test formulated by Chagla, C.J. in New Shorrock Spg. and Mfg. Co. Ltd. v. CIT as to when the expenditure can be said to have been incurred on current repairs. In that case it was observed as follows: (New Shorrock case, ITR pp. 343-44) "The simple test that must be constantly borne in mind is that as a result of the expenditure which is cla....
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.... expenditure incurred by the assessee conceptually is revenue or capital in nature is not relevant for deciding the question as to whether such an expenditure comes within the etymological meaning of the expression "current repairs". In other words, even if the expenditure is revenue, it may not fall in the connotation of "current repairs" in Section 31(i). The test formulated above applies to cases where the assessee claims allowance under Section 31(i). xxx 11. An allowance is granted by Clause (i) of Section 31 in respect of amount expended on current repairs to machinery, plant or furniture used for the purposes of business, irrespective of whether the assessee is the owner of the assets or has only used them. The expression "current r....