TaxTMI 
TaxTMI 
2012 (5) TMI 43
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.... 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 loss account as deferred revenue expenditure. The assessee was accordingly asked to justify why for the taxation purpose the assessee had treated the entire amount as revenue expenditure. The assessee gave their explanation, which was not accepted by the Assessing Officer, who held that the expenditure incurred had given enduring benefit to the assessee for a period of 10 years i.e. the period of lease. Accordingly, the Assessing Officer disallowed the claim by treating the entire expense as incurred on capital account. Even depreciation was not allowed. 5. The CIT (Appeals) affirmed the aforesaid findings given by the Assessing Officer. 6. In the second appeal before the tribunal, it has been held that the expenditure incurred was a revenue expense and should be allowed. 7. It is an undisputed fact that the respondent-assessee ....
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....ssessee and the Central Coalfield Limited. 10. The tribunal after referring to the nature and character of the expenses, which have been incurred and after examining the terms of the lease, came to the conclusion that the lease in question required the assessee to incur expenses relating to current repair and maintenance to make the plant operational and start running. It has been recorded by the tribunal that replacement and other parts, purchased and installed by the assessee were relating to normal wear and tear and the same did not have a long life. The findings recorded by the tribunal, in this regard are:- "8. Right from the 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 ....
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....ns and alterations of the building, station or additional machinery that may be brought by the lessor at the station and on such determination the schedule station shall rest in and be the absolute property of the lesser. Thus, this clause conveys that what the assessee is entitled is only written down value of the additions and alterations to the building, station or additional machinery. The aforesaid detail will reveal that none of the items represents addition or alteration to the building, station or additional machinery. Therefore, the amount of expenditure incurred by the assessee cannot be said to be giving any enduring benefit to the assessee. It has not created any capital asset for the assessee. Therefore, keeping in view the terms of agreement and facts of the case, it cannot be said that the expenditure incurred by the assessee has given any enduring benefit." 13. Looking at nature of the expenses, which have been incurred by the respondent-assessee and the conditions stipulated and mentioned in the lease agreement, the tribunal has rightly held that the aforesaid expenses were in nature of current repair either for making the plant/factory operational or to replace....
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....ly the expenditure may be revenue expenditure. The legislature intended to stress that under Section 31(i) the permissible deduction admissible is only for current repairs, therefore, the question as to whether the 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 repairs" denotes repairs which are attended to when the need for them arises from the viewpoint of a businessman. The word "repair" involves renewal. However, the words used in Section 31(i) are "current repairs". The object behind ....