TaxTMI 
TaxTMI 
2011 (6) TMI 761
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.... ld. AO to not allow Rs. 3,15,484/- claimed as expenditure being the amount spent on current repair of the power plant taken on lease during the year. The action of ld. AO not allowing the same is totally unlawful, unjustified and unreasonable. The CIT(A) has also erred in law and on facts in stating that the said expenditure is not allowable u/s 35D of the Act when it was at no stage claimed that the amount spent is covered u/s 35D of the Act. The same deserves to be allowed." 2. The business of the assessee is manufacturing of steel fasteners, nuts and bolts. It filed its return of income on 8.12.2006 showing a loss of Rs. 19,84,792/- and book profit u/s 115JB at Rs. 7,36,458/-. During the course of hearing the AO observed that assessee had debited a sum of Rs. 31,54,844/- in the computation of income as deferred revenue expenditure. 10% of the said amount was debited to Profit & Loss account on the ground that those are deferred revenue expenditure. The assessee was required to explain the allowability of the said expenditure in its entirety. It was submitted that the amount spent is of revenue in nature as the same has been incurred on repair of plant taken on lease and not ....
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....se facts are found mentioned in the para 3 of order of ld. CIT(A). Alternatively it is the case of the assessee that depreciation of 10% should be allowed on it, in case main ground of the assessee is not accepted. Ld. CIT(A) has upheld the treatment given by the AO by holding that the expenditure incurred by the assessee are capital in nature. 4. The submissions made before AO and CIT(A) were reiterated before us by the ld. AR who has also filed before us synopsis of his arguments. In the synopsis apart from reiterating the submissions made before AO and CIT(A), it is the case of ld. AR that the case law relied upon by ld. CIT(A) to hold that the expenditure are capital in nature has no application to the facts of the case of the assessee. In addition he has submitted that in all subsequent years the expenditure incurred have been allowed by the revenue and he has produced before us a chart thereof which is annexed to synopsis as Annexure 1 and read as under: - IMPERIAL FASTNERS PRIVATE LIMITED, DELHI COMPARATIVE CHART OF EXPENSES FOR THREE YEARS ON REPAIRS & MAINTENANCE OF KATHARA PLANT FOR THREE YEARS Assessment Year Repairs & Maintenance (Rs.Lakhs) 2....
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....Dhanbad 860002 31.01.06 06 Electric Meter Replacement 109,695 TOTAL 3,154,843.60 7. Alongwith the above details the assessee has placed bills and vouchers from pages 18 to 26A. The copy of the reply dated 31st July, 2008 filed by the assessee before AO explaining the allowability of such expenditure is as under: - 3. "A statement giving detail on amount spent on various items debited to deferred revenue expenditure along with photocopy of related bills in submitted herewith. The amount so debited is expenditure on repairs to power generation plant at Kathara, Jharkhand taken on lease. The amount spent is revenue expenditure as the same has been incurred on repairs to plant taken on lease which is not owned by the assessee company, the lease agreement does not give any ownership rights to the company over the set plant, even otherwise the items which have purchased and fitted in the plant are of normal wear and tear and do not have long life and are subject to replacement from time to time during the running of plant. The company has not created any asset for itself by incurring the said expenditure. There is no benefit of enduring nature t....
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....the case of the assessee that it was under negotiations to run that plant and, therefore, these purchases have been made in advance and it is not in dispute that assessee had run the said plant during the year under consideration and has also generated the electricity. We have perused the agreement on the basis of which the assessee has operated the said plant. The term of lease in clause 1.1 has been described as twenty years commencing from 14th October, 2005 subject to payment to the lessor, the monthly rent of Rs. 32 lakh (stated in clause 4.1 of the agreement) starting from 14th April, 2006 before 15th day of every month. Clause 1.4 under the head "scope of work" casts an obligation on the assessee to maintain the plant and equipments and to carry out all the repairs including capital repair and statutory inspection/overhauling/repair of boilers. Procurement of spares, consumables, oils, lubricants and chemicals required for operation and maintenance of power plant. Under clause 5, the lassee is under an obligation to make available the electricity supply to the lessor at the rates described therein. Under clause 17.3 the termination clause is described as under: - 17.3 "At....