2018 (6) TMI 399 - AT - Income Tax

Additions on account of capitalizing the expenses claimed as revenue expenses - shifting of boiler and cylinder - Held that - The above issue has already been decided by the coordinate bench in case of the assessee for assessment year 2008- 2009 wherein held mere shifting of boiler from one place to another in the case on hand did not result in creation of any additional and the benefit of the assessee. We, therefore, hold that the expenditure in question is revenue in nature Allowability of repairs expenditure - revenue or capital - Held that - The revenue could not show us any reason to deviate from the decision of the Hon ble Punjab and Haryana High Court in assessee s own case 2011 (2) TMI 143 - PUNJAB AND HARYANA HIGH COURT wherein the expenses on repair waterproofing groups and renovation outside the main shed building were allowed as revenue expenditure. Therefore respectfully following the decision of the coordinate bench following the decision of the Hon ble Punjab and Haryana High Court in assessee s own case we find no infirmity in the order of the Ld. CIT (A) in allowing the claim of the assessee holding that repairs and renovation expenditure with respect to the shed is revenue in nature Addition on account of technical know-how is fees paid to the parent company - revenue or capital - Held that - CIT (A) has considered the various clauses of the agreement and held that the know-how was to remain the sole and exclusive property of the provider and the appellant company is required to fully exploit the same. Further the technical know-how was also to be paid in relation to the sales affected by the assessee company. It is also required to be noted that assessee is engaged in the same business for which technical know-how is by the assessee and it is not at its an altogether a new line of business which is developed. The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT (A). - Decided against revenue

Summary

Issues:
1. Capitalization of expenses claimed as revenue expenses for construction of building.
2. Treatment of Technical Know How Fees as capital expenditure.
3. Disallowance of shifting expenses, leave compensation, and warranty claims.
4. Disallowance of repair expenditure as capital in nature.

Analysis:
1. The revenue challenged the deletion of additions on account of capitalizing expenses for building construction. The Assessing Officer treated expenses as capital expenditure due to enduring benefits. The CIT (A) deleted the additions based on a previous High Court decision. The tribunal upheld the CIT (A)'s decision, stating the expenses were revenue in nature as per the agreement's terms and business operations.

2. The assessee contested the disallowance of shifting expenses, leave compensation, and warranty claims. The tribunal allowed the shifting expenses, citing no creation of additional assets. The leave compensation and warranty claims were to be verified by the Assessing Officer. The appeal was partly allowed based on previous decisions and factual considerations.

3. The revenue challenged the deletion of Technical Know How Fees as capital expenditure. The Assessing Officer deemed it capital, while the CIT (A) considered it revenue based on the agreement's terms and business operations. The tribunal upheld the CIT (A)'s decision, emphasizing the revenue nature of the expenditure.

4. The dispute over repair expenditure arose as the Assessing Officer treated it as capital expenditure. The CIT (A) allowed the claim, considering it revenue expenditure. The tribunal dismissed the revenue's appeal, following previous decisions and the revenue nature of the repair expenditure.

In conclusion, the tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal, emphasizing the revenue nature of expenses based on agreements, business operations, and previous legal precedents.