2013 (6) TMI 354 - AT - Income Tax

Repairs and maintenance expenditure incurred on leasehold property disallowed - Held that - Finding of the CIT(A) cannot be faulted with as being satisfied with the reasoning and the finding qua the issue agitated in the Revenue s appeal, no good reason in the absence of any specific argument on facts on behalf of the department to interfere with the finding arrived at. The expenses for maintenance and upkeep of leased premises and make them useable as assessee s office premises and similarly the leased premises for assessee s expatriate employees as rent-free accommodation perquisite value of which has admittedly been offered for tax, similarly expenses for pest control, AMC for electrical fittings are correctly considered Revenue expenditure in the peculiar facts of the case. No fault in referring to vouchers and documentation has been pointed out by the department. Accordingly the same is dismissed. Considering the assessee s ground, it is seen as per the narrations given by the assessee some of the expenses of repair, maintenance etc. appear to be Revenue in nature however the specific vouchers relatable the expenses need to be considered, AR contended that the Tribunal could itself decide the issue after considering the bills and vouchers. Thus agreeing with the said prayer of the assessee restore the issue to the AO for verification. Advances and deposits written off - Disallowance considering the same to be not laid or expended for the purpose of business - Held that - The arguments advanced on behalf of the assessee namely that making of samples is expensive business and the assessee has entered into an arrangement that incase the sample keeping the brand image of the assessee is not as per mark the same does not receive any further orders and the amount advanced is forfeited and the party entrusted for providing the sample can utilize it as the cost incurred for creating the sample. The possibility and the feasibility of the argument of entering into such an arrangement cannot be faulted with as it appears to be a prudent arrangement. However documentation qua the said arrangement has not been addressed. The relevance of discussing case law will arise only after facts are addressed. Arguments dehors facts cannot be accepted. Ld. AR in the course of the arguments was required to demonstrate and support his arguments which he was not able to. Accordingly, it is considered appropriate that the issue should be is restored to the AO for consideration de-novo.

Summary

Issues Involved:
1. Disallowance of repairs and maintenance expenditure.
2. Disallowance of advances and deposits written off.
3. Levy of interest under sections 234B and 234D.

Detailed Analysis:

1. Disallowance of Repairs and Maintenance Expenditure:

The primary issue involves the disallowance of Rs. 1,929,021 on account of repairs and maintenance expenditure. The CIT(A) treated this expenditure as capital in nature, arguing that it was incurred on items having a longer life. The assessee contested this, asserting that the expenditure was for maintaining leased properties and should be considered revenue in nature. The CIT(A) allowed part of the expenditure as revenue but upheld the disallowance of Rs. 1,929,021, citing that certain expenses were for items with longer life. The Tribunal found that the CIT(A)'s decision was not entirely justified and restored the issue to the AO for verification of specific bills and vouchers to determine if the expenses were indeed capital in nature.

2. Disallowance of Advances and Deposits Written Off:

The second issue pertains to the disallowance of Rs. 1,730,067 out of the total advances and deposits written off amounting to Rs. 34,09,568. The AO disallowed the amount, stating that the advances were not expended wholly and exclusively for business purposes. The CIT(A) granted partial relief, deleting the disallowance of Rs. 16,79,500 based on confirmations from two suppliers but upheld the disallowance of Rs. 17,30,067 due to lack of sufficient evidence. The Tribunal found the arguments of the assessee plausible but noted the lack of documentation supporting the business arrangement. Consequently, the issue was restored to the AO for a de-novo consideration, allowing the assessee to produce relevant evidence.

3. Levy of Interest under Sections 234B and 234D:

The third issue involves the levy of interest under sections 234B and 234D. This issue was considered consequential and dependent on the outcome of the primary issues. Since the Tribunal restored the primary issues to the AO, the matter of interest levy was also deemed consequential and subject to the AO's final determination.

Conclusion:

The Tribunal partially allowed the appeals of both the assessee and the revenue for statistical purposes. The issue of repairs and maintenance expenditure was restored to the AO for verification of specific bills and vouchers. Similarly, the issue of advances and deposits written off was also restored to the AO for a fresh consideration based on relevant evidence. The matter of interest levy under sections 234B and 234D was considered consequential and dependent on the final determination of the primary issues. The order was pronounced in the open court on June 7, 2013.