TaxTMI 
TaxTMI 
2007 (3) TMI 104
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....count of repair and maintenance expenses by the Commissioner of income-tax (Appeals). 2 The facts in brief are that the assessee is running its business at its retail departmental store situated at New Delhi South Extension Part-II The assessee claimed deduction of Rs. 15.15 lakhs on account of repair and maintenance expenditure. In addition, the assessee claimed deduction amounting to Rs. 2.65 lakhs for air-conditioner repair and maintenance. The Assessing Officer noted from the details filed by the assessee that most of the expenses related to supply of building material including timber and plywood of Rs. 2,20,000. The assessee stated before the Assessing Officer that during the year, various new counters were constructed and other bu....
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....revenue deduction. Learned counsel for the assessee in support of his contention cited a decision of the apex court in CIT v. Madras Auto Service P. Ltd. [1998] 233 ITR 468. 6 On the other hand, it has been argued by learned counsel for the Revenue that the assessee has incurred huge expenditure which resulted into long-term benefit to the assessee and such expenditure is not allowable as revenue expenditure and the same cannot be passed on as a repair and maintenance expenditure. 7 In the case Madras Auto Service P. Ltd. [1998] 233 ITR 468 (SC), the assessee spent huge amount in order to construct a new building after demolishing the old building. The new building, however, from inception was to belong to the lessor and not to the as....
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....be considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. The test for distinguishing between capital expenditure and revenue expenditure in our country was laid down by this court in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34. In that case, the appellant-company had acquired from the Government of Assam lease of certain limestone quarries for a period of 20 years for the purpose of manufacture of cement. The lessee had, inter alia, agreed to ....
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....with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade . . . If what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. 3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital'." 9 Further....
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.... admitted that during the year new counters were erected and this fact has been established from the record since huge expenditure on purchase of timber and plywood have been incurred by the assessee. Further, the assessee has altogether built a new shaft and shifted the old shaft to a new site and has spent huge amount on the construction of it. So, there is no doubt that these expenditure incurred by the assessee are for fixed capital assets and, therefore, the expenditure is in nature of capital and we unable to accept this contention of the assessee, that these expenditure are in the nature of current repairs or the same have been incurred in merely renovating the existing old assets. 13 Since considerable amount has spent by the ass....