2014 (6) TMI 117 - HC - Income Tax

Current repairs Claim of WDV of cost of construction as current repairs Revenue expenses or not Held that - The Tribunal was rightly of the view that the assessee continuing in possession of the property after expiry of the lease period has to be construed as holding over of the property after expiry of the lease period thus, there is no question of allowing the written down value and the cost of construction as current repairs - current repairs is an expenditure incurred by the assessee for the purpose of maintaining machinery, building, etc., used for the purpose of business, it cannot be the written down value of the cost of construction thus, the assessee cannot claim the benefit of written down value of the cost of construction which he had incurred under the head Current repairs - no question of law arises for consideration Decided against Assessee.

Summary

Issues:
1. Claim of written down value of construction as revenue expenditure under "current repairs".
2. Interpretation of "current repairs" in relation to maintenance of property.
3. Applicability of case law in determining the claim.

Issue 1: Claim of written down value of construction as revenue expenditure under "current repairs"

The appeal was filed against the order of the Income-tax Appellate Tribunal regarding the assessment year 2007-08. The assessee had taken land on lease from the Government of Kerala and constructed a building for business purposes. However, after the lease expired and was not extended, the assessee continued in possession under a stay order from the court. The assessee claimed the written down value of construction as revenue expenditure under "current repairs", which was disallowed by the Assessing Officer and upheld in appeal. The Tribunal concluded that the assessee holding over the property after the lease period did not entitle them to claim the written down value as "current repairs".

Issue 2: Interpretation of "current repairs" in relation to maintenance of property

The Tribunal determined that "current repairs" refer to expenditures incurred by the assessee for maintaining machinery, buildings, etc., used for business purposes. It clarified that the written down value of construction cannot be equated to "current repairs" as it does not fall under the same category of expenditure for maintaining assets used in business operations. The Tribunal's decision was based on the understanding that the written down value of construction was not a permissible claim under the head of "current repairs".

Issue 3: Applicability of case law in determining the claim

The Tribunal rejected the applicability of the case law cited by the assessee, CIT v. TVS Lean Logistics Ltd. [2007] 293 ITR 432 (Mad), stating that it did not align with the facts of the present case. The Tribunal's decision emphasized that the judgment referenced by the assessee was not relevant in establishing the legitimacy of claiming the written down value of construction as revenue expenditure under the category of "current repairs". Consequently, the Tribunal dismissed the appeal, concluding that no legal question warranted consideration in the matter.

In conclusion, the High Court upheld the decision of the Tribunal, emphasizing that the assessee could not avail the benefit of claiming the written down value of construction as revenue expenditure under "current repairs". The judgment clarified the distinction between maintenance expenses and the cost of construction, highlighting that the former is eligible for deduction under the specified category, while the latter does not qualify for the same treatment.