TaxTMI 
TaxTMI 
2022 (12) TMI 575
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....with that of the old one. Thus, the assessee claimed under repair and maintenance of building expenses account, Rs. 11,29,19,528/-. The Assessing Officer issued a show-cause notice why the renovation expenses of four showrooms should not be treated as capital expenditure and allow appropriate depreciation. In response the assessee replied that it has not brought a new asset in the place of existing asset and there is no structural change to the building. As per the requirements of the Skoda Company, all these renovations are being made for which the Skoda Company offer incentive discount on sale of cars and the above expenses is compensated in due course of its business. The above explanation was not accepted by the Assessing Officer and allowed depreciation of Rs. 81,08,525/- and added balance amount of RS. 10,48,11,003/- as the income of the assessee and also initiated penalty proceedings under Section 271(1)(c) of the Act. 4. Aggrieved against the same, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)-8, Ahmedabad. The Ld. CIT(A) held that the expenses were incurred for efficiently using the existing space in a better manner and also to suit the pr....
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....s regards the expenses of Rs.24,25,216/- considered entirely as capital expenditure, the same is broadly classified as under:- 1. Expenses on flooring by replacing with marble, tiles & wood. 13,17,318/- 2. Consultancy fees to Architect, Engineers, Designers 6,10,750/- 3. PCC work in workshop 1,46,228/- 4. SS Railing in the stairs. 1,37,709/- 5. Sanitary & Hardware fittings 25,193/- 6. Venetian Blinds 51,857/- 7. Fiber sheet shade and M.S.grill 39,865/- 8. Misc. 96,296/- Total 24,25,216/- Since the appellant has only changed the existing floor or re-laid the existing workshop floor, the expenses are purely revenue in nature. The AO after summarizing the expenses of Rs.24,25,216/, on Page 10 of his order observed that "the assessee is spending amounts in the purchase of tiles, blinds, sanitary fittings, electrical fittings, partition of floor. All these expenses cannot be claimed as revenue expenses" However, the AO lost sight of the fact that all these expenses are incurred by way of replacing the existing floor/fittings. What is disallowable is expenses being capital in nature but not w....
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....al varieties but must needs be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an enduring nature' was evolved to emphasize the element of a sufficient degree of durability appropriate to the context. There is also no single definite criterion which by itself, is determinative whether a particular outlay is capital or revenue. The 'once for all' payment test is also inconclusive. What is relevant is the purpose of the outlay and its intended object and effect, considered in a common-sense way having regard to the business realities. In a given case, the test of 'enduring benefit' might break down. In CIT v. Associated Cement Co. Ltd. JT 282 (2) 287 this Court said: ...... As observed by the Supreme Court in the decision in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) that there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles la....
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....e of the assessee supported the order of the CIT(A). 10. We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, we find that no material was brought on record to show that any new asset was acquired by the assessee. We find that the Hon'ble Gujarat High Court the case of ACIT vs. Desai Bros., (1977) 108 ITR 14 (Guj.), held that even replacement of the petrol engine by a diesel engine would not bring into existence a new asset and was allowable as current repairs. Further, the Hon'ble Calcutta High Court in the case of CIT vs. Rameshwar Prasad Kejriwal & Sons (P.) Ltd., (1994) 74 taxman 124 (Cal.), held that replacement of parts of a machine, even if such replacement was more than cost of the machine itself, would qualify for deduction as revenue expenditure as no new asset or advantage of enduring benefit was brought into existence by any such expenditure. 11. We agree with the finding of the CIT(A) that after treating 55% of the expenditure of Rs.71,86,752/- as revenue, there was no justifiable basis for the Assessing Officer to arbitrarily treat 45% of the same expenditure as cap....