2014 (8) TMI 1085 - AT - Income Tax

Disallowance of expenditure on repairs and maintenance of building, plant and machinery - Held that - As observed that the Tribunal in the assessee s own case for the A.Y. 2008-09, has decided a similar expenditure on account of renovation of godown floor as revenue in nature. Following the said order, we are of the considered opinion that the expenditure on account of replacement and maintenance on building has to be treated as revenue expenditure and the assessee is entitled for the claim of deduction. As regards the other expenditure claimed by the assessee on account of repairs and maintenance to plant and machinery, after considering the nature of the expenditure incurred by the assessee as aforementioned in the table, we are of the considered view that the said expenditure do not result in any enduring benefit to the assessee as the expenses are periodically necessary for running the business of the asseseee. Therefore, the authorities below are not justified in treating the same to be capital in nature. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of expenditure claimed on repairs and maintenance of building, plant, and machinery.

Analysis:
The appeal was filed against the order of the Ld.CIT(A) confirming the AO's decision to disallow the expenditure claimed by the assessee on repairs and maintenance. The AO treated the expenditure as capital in nature, citing enduring benefits to the assessee. The Ld.CIT(A) upheld the disallowance, leading to the appeal. The Tribunal noted a similar case in the assessee's favor for the A.Y. 2008-09, where a comparable expenditure was treated as revenue in nature. Consequently, the Tribunal ruled that the expenditure on the renovation of the godown floor should be considered as revenue expenditure, entitling the assessee to deduction.

On the disallowance of repairs and maintenance expenditure on plant machinery, specific details of the disallowed amounts were presented. The Tribunal reviewed each item of expenditure and concluded that the expenses did not confer enduring benefits but were periodically necessary for running the business. Therefore, the authorities were unjustified in treating them as capital in nature. The Tribunal directed the AO to allow the expenditure claimed by the assessee as revenue expenditure, leading to the deletion of the additions sustained/made by the Ld.CIT(A)/AO.

In conclusion, the Tribunal allowed the appeal filed by the Assessee, overturning the disallowance of the expenditure claimed on repairs and maintenance of building, plant, and machinery. The order was pronounced in the open court on August 28, 2014.