TaxTMI 
TaxTMI 
2013 (9) TMI 1064
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....ation of space and not to create a new asset or avail a new advantage. It is further submitted that the Income Tax Appellate Tribunal has erred in placing reliance upon a judgment of the Hon'ble Supreme Court in CITU v. Sarvana Spining Mills P. Ltd., 293 ITR 201(SC), as the dispute before the Hon'ble Supreme Court related to the meaning of the expression "current repairs" and whether replacement of a motor leads to creation of a new asset. The facts in the present case are entirely different. The appellant has not created any new asset but while carrying out repair and maintenance has ensured optimum utilisation of the rented premises. It is further submitted that the Tribunal has ignored judgments of the Hon'ble Supreme Court in Padmasundara Rao (decd.) and others v. State of Tamil Nadu and others (2002) 255 ITR 147(SC), the Gujrat High Court in Indian Ginning & Pressing Co. Ltd. v. Commissioner of Income 125 Taxman 546 (Guj) and judgment of this Court in Allied Metal Products v. Commissioner of Income Tax, Patiala-II, 137 ITR 689 (P&H). The principles set out in these judgments when applied to the present case, would leave no ambiguity that the appellant has not creat....
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....ns, repaired toilets and changed electrical fittings, as follows:- "Teak/ply wood Rs.154564 Glass Rs. 37613 Paints Rs. 81017 Elect. Fittings Rs. 76529 Sanitary Fittings Rs. 43902 Aluminium sections Rs. 55985 Handles/knobs,locks chitkhani etc. Rs. 21180 Cement Rs. 32928 Granite/tiles Rs. 25660 POP Rs. 9262 Iron sheets Rs. 29830 Saria/Ingots/Jali Rs. 12906 Flooring Rs. 15354 Labour Rs. 74662 Misc. petty repairs Rs.100342 Total Rs.731734 The Assessing Officer, vide letter dated 13.08.1998, confronted the assessee with his prima-facie finding that, though, expenses for sanitary fittings in old bathrooms and painting of the premises is a revenue expenditure, the amount spent on other items is capital expenditure for which, 100% depreciation is allowable. The assessee filed a reply that as the structures are purely temporary and in the nature of repairs, the expenditure is revenue in nature and, therefore, falls under Section 30(a)(i) of the Act. After considering the matter in its entirety, the Assessing Officer, held as follows:- "The assessee's reply has been c....
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....gs Rs. 43902 Aluminium sections Rs. 55985 Handles/knobs,locks chitkhani etc. Rs. 21180 Cement Rs. 32928 Granite/tiles Rs. 25660 POP Rs. 9262 Iron sheets Rs. 29830 Saria/Ingots/Jali Rs. 12906 Flooring Rs. 15354 Labour Rs. 74662 Misc. petty repairs Rs.100342 Total Rs.731734 1.11 From the above details of expenses claimed under the head 'building repairs', it is noted that cement was purchased for Rs. 32,928/-. The year under consideration is A.Y. 1996-97 i.e. Previous year 1995-96. The cement in that year was about Rs. 100/- per bag and as such, more than 300 bags of cements would have been purchased by the appellant. It is difficult to appreciate that so much cement would be used for repairs specifically in view of the nature of repair stated to be carried out by the assessee. Moreover looking into the other expenses claimed such as iron sheets, saria/ingots/jali, aluminium sections, teak/plywood, glass, sanitary fittings, elect. Fittings, pop, granite/tiles and paints etc., the only inference which can be drawn is that some construction were carried out and as such, the e....
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.... capital in nature is not relevant for deciding the question whether such expenditure comes, within the etymological meaning of the expression "current repairs". In other words, even if the expenditure is revenue in nature, it may not fall in the connotation of "current repairs". Further the assessee's reliance on Madras High Court decision in the case of CIT v. Haridas Bhatath (P) Ltd., cited supra, is also of not of any help. Explanation I to Section 32 of Income Tax Act has not been considered in this case. The erection of the sheds and other structures on leased premises were essentially in the nature of capital. The details of expenditure incurred shows that a major expenditure has been made on the teak/plywood, glass, electrical fittings, sanitary fittings, aluminium sections, handles/knobs, locks, chitkhani, cement, granite/tiles, pop, iron sheets, saria/ingot, jali, flooring and labour. All these facts shows that the structure which came into existence was having enduring benefits, hence such expenditure cannot be termed expenditure on current repairs. In view of the decision of Hon'ble Supreme Court in the case of CIT v. Saravana Spinning Mills P. Ltd., cited su....
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....xisting asset. The word "repair" came up for consideration before the Bombay High Court in New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (1956) 30 ITR 338 (Bom). A simple test was prescribed for determining whether expenditure is revenue or capital in nature, in the following terms:- "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 it 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 expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the Legislature has permitted under section 10(2)(v) is a deduction where the expenditure is a revenue expenditure....
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....disregard this judgment or ignore the ratio laid down in New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (supra) as approved in Ballimal Naval kishore & Another v. Commissioner of Income Tax (supra) merely because the controversy relates to "current repairs" or replacement of part of a machine. A considered appraisal of the statutory provisions and perusal of the above judgments leaves no ambiguity as to the meaning and scope of the word "repair" used in Section 30(a)(i) which has to be read with the explanation appended thereto. The word "repair" denotes expenditure incurred to "preserve" and "maintain" an already existing asset, excluding expenditure incurred, to add to or subtract from the already existing asset in such a manner as to bring into existence a new asset or "obtain a new advantage". Thus, where the expenditure incurred, brings into existence a new asset or a new advantage to the assessee, the expenditure would not fall within meaning of the word "repair". At this stage, it would be appropriate to sound a note of caution. The nature of the expense incurred would depend upon the nature of the premises, the nature and extent of the preservation and maintenan....