TaxTMI 
TaxTMI 
2014 (6) TMI 611
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed by the assessee while setting aside the order passed by the Commissioner of Income Tax (Appeals)-I, Bangalore (hereinafter referred to as 'the First Appellate Authority') as well as the Assessing Authority, for the assessment year 1997-98. 2. The respondent-assessee is a Company incorporated under the Companies Act, 1956 and is a State Public Sector Undertaking whose main activity is to provide transport facilities to the travelling public and to provide passengers amenities such as construction of the bus stations, rural way-side shelters, City pick-up shelters and operating services in the rural and suburban routes. The assessee-company filed the return of income on 28-11-1997 for the assessment year 1997- 98 declaring a net loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed on payment of interest is concerned, the Assessing Authority held that the interest should have been accounted for the assessment year 1996-97. The IDBI Bank informed the assessee-Corporation that they have to pay the differential interest in the month of February - March 1996 itself. Hence the said amount cannot be deducted for the assessment year 1996-97 accordingly disallowed the same by its assessment order dated 29-02-2000. 4. The assessee being aggrieved by the assessment order passed by the Assessing Authority preferred an appeal before the First Appellate Authority challenging the same on various grounds contending that the order passed by the Assessing Authority is contrary to law and also contended that the expenditure was i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ning the buses does not amount to capital expenditure, it is only revenue expenditure. With regard to payment of interest is concerned, the assessee-Corporation has to pay the interest even though it was paid during assessment year 1997-98, they are entitled for deduction and allowed the appeal by setting aside the orders passed by the authorities below by its order dated 19-09-2007. Being aggrieved by the order passed by the Appellate Tribunal, the revenue has preferred this appeal. 6. The instant appeal was admitted on 23-03-2009 for considering the following substantial questions of law: (i) Whether the Tribunal was correct in holding that the expenditure incurred by the assessee for reconditioning of over aged b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n nature or enduring benefit. These are all current repairs to the already existing assets and making such assets again to be roadworthy will not bring any new assets or fresh advantage to the assessee. These expenditures are routine in nature and it is a revenue expenditure. The order passed by the Assessing Authority as well as the First Appellate Authority holding that the reconditioning of over-aged buses resulting in extending the productivity life of buses by few more years, minimizing the breakdown for few more years and also negating the necessity of purchase of new assets which is of enduring benefit to the assessee, it is only a capital expenditure which cannot be acceptable. Thousands of buses had to be repaired now and then due ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the question when a building, machinery, etc., requires repairs and when the need arises must be decided not by any academic or theoretical test but by the test of commercial expediency. The learned Chief Justice observed : "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of 'repairs' because it is only by reason of this definition of repairs that the expenditure is a revenue expend....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... capital expenditure. In the instant case also the assessee-Corporation owns more than 10,000 buses, it is has to take out the routine repair work of the buses and recondition the buses to make them roadworthy otherwise there will be breakdown of the buses every now and then. The expenditure incurred on reconditioning and overhauling of the buses is a routine work and the expenditure is revenue in nature and cannot be treated as capital expenditure in view of text laid down in BALLIMAL NAVAL KISHORE case and subsequent judgment referred to above. Hence, the first substantial question of law is held in favour of the assessee and against the Revenue. 11. With regard to the second substantial question of law is concerned, the respondent-Cor....