2017 (11) TMI 363 - AT - Income Tax

Disallowance made on repairs and maintenance expenses - Held that - We find that the Tribunal in assessee s own case for the assessment year 2007-08 and 2006-07 considered a similar addition and adjudicated the same in favour of the assessee. As the revenue has not brought anything on record to demonstrate its point of view that the expenditure in question was incurred in the capital field, we uphold the order of the first appellate authority and dismiss this ground of appeal.- Decided against revenue Disallowance made on account of claim for bad debt - Held that - The advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a loss while computing the prof it and gains of business. See CIT vs. - Sumangal Overseas Limited 2011 (11) TMI 45 - DELHI HIGH COURT - Decided against revenue

Summary

Issues:
1. Disallowance of repair and maintenance expenses.
2. Disallowance of bad debt claim.

Analysis:

Issue 1: Disallowance of repair and maintenance expenses
The appeal by the Revenue challenged the deletion of disallowance on repair and maintenance expenses amounting to ?52,72,402. The Assessing Officer contended that the expenditure for repairs should have been capitalized and added to the value of assets. However, the first appellate authority allowed the expenses after considering the nature of expenses incurred for repairs and maintenance, citing a Supreme Court decision. The Tribunal upheld the first appellate authority's decision, noting that the Revenue failed to prove that the expenditure was capital in nature. Therefore, the disallowance was deleted.

Issue 2: Disallowance of bad debt claim
The second ground of appeal contested the deletion of a disallowance on bad debt claim of ?82,34,907. The Assessing Officer disallowed the claim stating lack of evidence on legal efforts to recover debts and failure to establish the debts were included in earlier income. The assessee argued that these were trade advances to tea companies, later settled and written off as irrecoverable. The first appellate authority agreed with the assessee, allowing the claim based on business loss provisions. Citing relevant case laws, the Tribunal upheld the decision, emphasizing that a trading loss need not always be a bad debt and losses incurred in the course of business are eligible for deduction. Consequently, the bad debt claim was allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal upheld the decisions of the first appellate authority in both issues, dismissing the Revenue's appeal in its entirety.