2014 (6) TMI 319 - AT - Income Tax

Nature of expenses Revenue or not - Amount of repairs and maintenance expenses and furniture and fixtures Held that - Following Deputy Commissioner of Income Tax Versus M/s. Satguru Infocorp Services Pvt. Ltd. 2014 (6) TMI 170 - ITAT MUMBAI - CIT(A) has rightly stated that considering the total block of furniture and fixtures, the repairs and maintenance expenditure could not be stated to be unreasonable, particularly when the furniture and fixtures were being used for business centre - furniture and fixtures at business centre require inherent higher maintenance expenditure as business centre are used by a large number of people for commercial purposes resulting in higher wear-and-tear of the furniture etc. Relying upon CIT v/s A.M. Sanghvi 2007 (8) TMI 265 - RAJASTHAN HIGH COURT - even if the substantial amount is spent on repairs and renovation of office premises taken on rent, it is to be allowed as revenue expenditure because no capital asset is acquired by the assessee thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues: Revenue challenges order on repairs and maintenance expenses and furniture and fixture as revenue expenditure.

The judgment by the Appellate Tribunal ITAT Mumbai, delivered by Shri Amit Shukla, J.M., pertains to an appeal by the Revenue against an order dated 11th December 2012 by the Commissioner (Appeals) for the assessment year 2009-10. The key grounds raised by the Revenue were related to the treatment of amounts under "repairs and maintenance expenses" and "furniture and fixture" as revenue expenditure. The Tribunal noted that the issue had been a consistent dispute over the years, with the Revenue arguing that the expenditure was capital in nature, while the assessee contended it was revenue expenditure for their business center. The Tribunal referred to its earlier decision in favor of the assessee for the assessment year 2007-08, where it was held that the expenditure on repairs and maintenance, considering the total block of furniture and fixtures, was not unreasonable given the commercial usage and wear-and-tear. The Tribunal also cited a decision by the Rajasthan High Court emphasizing that substantial expenditure on repairs and renovation of rented premises should be allowed as revenue expenditure. Consequently, the Tribunal upheld the Commissioner (Appeals)'s order, dismissing the Revenue's appeal based on the consistent view taken in previous years.

The learned Counsel for the assessee highlighted that the Commissioner (Appeals) had followed earlier appellate orders for preceding assessment years and Tribunal decisions favoring the assessee. The Departmental Representative acknowledged that the issue was covered by the Tribunal's decision in the assessee's own case. After considering the relevant findings and previous orders, the Tribunal found that the expenditure in question should be treated as revenue expenditure, in line with its previous decisions and the principles established by the Rajasthan High Court. The Tribunal emphasized that the nature of the expenditure was justified by the business center's operations and the need for maintenance due to commercial usage. As a result, the Tribunal dismissed the Revenue's appeal, affirming the treatment of the expenses as revenue expenditure.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s order, rejecting the Revenue's grounds of appeal and dismissing the Revenue's appeal. The judgment was pronounced in open court on 22nd May 2014.