TaxTMI 
TaxTMI 
2012 (4) TMI 765
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.... CIT(A) erred in confirming the Assessing Officer's finding that the expenditure of Rs. 16,40,187/- in respect of building repairs was in the nature of capital expenditure. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the I.T. Act, 1961 dated 26.12.2008 were that the assessee-company is engaged in the business of manufacturing of worsted suiting, felt and filter fabric, etc. 3. It was noted that under the head "building repair", the assessee has claimed expenditure of Rs. 11,05,552/- towards repair of soak-pit system and a sum of Rs. 7,16,878/- under the head "water proofing". The work was carried out at the residential colony attached to the manufacturing unit at Ankleshwar. It was explain....
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....r clarified by way of an explanation introduced w.e.f. 1-4-2004. Therefore, the long overdue repairs of both soak pit systems and water proofing cannot fall under the category of current repairs. These are no doubt repairs but cannot be termed as current repairs. Apart from the decision relied upon by the Assessing Officer, in a recent decision, Apex Court in the case of CIT vs. Saravana Spinning Mills (P) Ltd, 293 ITR 201 held that replacement of existing parts is not current repairs. Major repairs done by the appellant on soak pit system and water proofing of roof are replacement of existing asset and hence not current repairs. Since expenses are incurred for major repairs and not for current repairs, the same is treated as capital correc....
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....ospitality (P.) Ltd. vs. ITO 35 SOT 421 (Delhi) 4. CIT vs. Saravana Spinning Mills (P) Ltd. 293 ITR 201 (SC) 6. We have heard both the sides at some length. We have perused the evidences placed in the compilation. The details have revealed that one M/s.Jaiswal & Sons, Baroda has carried out the work on an old soak-pit system, meant for handling water discharge from the residential colony attached to the manufacturing unit. It was informed that the soak-pit got chocked and it had become mandatory to discharge manufacturing to discharge units effluent to Bharuch Eco Aqua Ltd., a common effluent facility. As per the details, the said contractor has carried out excavation, laying out pipe-lines, construction of break-wall a....
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....re. Likewise, an Explanation was introduced to section 31 through which it was declared that the amount paid on account of current repairs shall not include any expenditure in the nature of capital expenditure. These provisions have therefore drawn a distinction as to the capacity in which an assessee incurs the expenditure, whether as a tenant or otherwise than as a tenant. If expenditure is incurred otherwise than a tenant, then the provisions of section 30(a)(ii) allow the deduction of the expenditure incurred by an assessee on account of "current repairs" to the premises. In the background of this legal aspect, we have examined Asian Hotels Ltd.(supra) cited by the ld.DR and have noticed that the assessee is a Five Star Hotel and incurr....