2015 (11) TMI 489 - AT - Income Tax

Expenses of building repair - revenue v/a capital expenditure - Held that - By applying the ratio of judgement in the case of Kaira Distt. Cooperative Milk Producers Union Ltd. 1991 (6) TMI 63 - GUJARAT High Court and Delhi Press Samachar Patra (P.) Ltd. (2010 (2) TMI 43 - DELHI HIGH COURT) the expenditure incurred by the assessee for water proofing work, fall in the category of current repairs and not the luxury repairs, hence, allowable as deduction u/s 30A(ii) of the Act. - Decided against revenue. Disallowance of depreciation - Held that - Depreciation on land which was used for installation of WEG at 80% as claimed by the assessee is concerned, no material whatsoever has been brought on record by the assessee to make out as to how the land on which WEG functions, got depreciated. Even no deterioration is proved to be caused to land because of installation of plant and machinery on the same. Rather, it is a matter of common knowledge that the land, on which some industry is running, gets appreciated in terms of its value. So, no ground is made out to interfere into the order of Ld. CIT(A) in disallowance of depreciation on WEG land to the tune - Decided against assessee.

Summary

Issues:
1. Classification of building repair expenses as capital expenditure.
2. Disallowance of depreciation on WEG land.

Analysis:
1. The appellant, a company engaged in power generation and consultancy services, challenged the order passed by Ld. CIT(A) regarding the classification of building repair expenses. The company claimed the expenses of Rs. 7,96,187 as revenue in nature, while the CIT(A) added it back to the income as capital expenditure. The Tribunal noted that the CIT(A) based the decision on conjectures and wrongly relied on a judgment categorizing luxury repairs as capital expenditure. However, referring to legal precedents like CIT Vs Kaira Distt. Co-operative Milk Producers Union Ltd., it was established that the expenditure on water proofing work falls under current repairs and is allowable as a deduction under the Act. The Tribunal allowed the appeal partly, setting aside the addition of Rs. 7,96,187 as capital expenditure.

2. Regarding the disallowance of depreciation on WEG land amounting to Rs. 9,216, the company failed to provide evidence supporting the depreciation claim. The Tribunal observed that no material was presented to prove any deterioration or depreciation of the land due to the installation of plant and machinery. Citing common knowledge that land with industrial use appreciates in value, the Tribunal upheld the CIT(A)'s decision to disallow the depreciation claim. Consequently, the appeal was partly allowed only in relation to the building repair expenses, while the disallowance of depreciation on WEG land was upheld.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal precedents cited, and the final decision rendered by the Tribunal, providing a comprehensive overview of the case.