2018 (6) TMI 1459 - AT - Income Tax

Expenditure for repairs of existing factory building at Vapi to strengthen the beam of the existing building - Held that - The assessee has carried repair to the existing factory building at Vapi and to strengthen the beam of the existing building. The assessee also carried out repair of boundary walls of factory at Nasik. Once this is repair, the expenditure is Revenue in nature, hence, we agree with the findings of CIT (A) and confirmed the same. This issue of Revenue s appeal is dismissed. Foreign travel expenses - Held that - We find the assessee had furnished all the details, including the purpose of foreign visits of the Directors, that in the earlier years details were not furnished, that because of non availability of the details disallowance was made under the head foreign travel, that facts for the year under consideration are different from the facts of the earlier year. Therefore, we hold that the order of the FAA does not suffer from any legal or factual infirmity. Decided against revenue

Summary

Issues:
1. Treatment of expenditure as revenue expenditure.
2. Deletion of addition for work in progress.
3. Deletion of addition for foreign travel expenses.

Issue 1: Treatment of Expenditure as Revenue Expenditure:
The appeal challenged the order of the CIT(A)-8 regarding the treatment of expenditure as revenue expenditure. The AO considered the repair and maintenance expenses as capital in nature, disallowing the entire expense. However, the CIT(A) held the expenditure as revenue in nature based on the repairs conducted to strengthen existing structures, not creating new capital assets. The Tribunal agreed with the CIT(A) and dismissed the Revenue's appeal, citing similar facts in previous years and relevant legal precedents supporting the decision. The issue was decided against the AO based on the similarity of facts for both years.

Issue 2: Deletion of Addition for Work in Progress:
The second ground of appeal focused on the deletion of the addition for work in progress. The AO estimated work in progress based on raw material consumption, which the CIT(A) deleted, stating that the company's manufacturing process did not involve work in progress. The Tribunal upheld the CIT(A)'s decision, noting the absence of evidence supporting the AO's adhoc disallowance. The issue was decided against the AO, confirming the deletion of the addition.

Issue 3: Deletion of Addition for Foreign Travel Expenses:
The final ground of appeal concerned the deletion of the addition for foreign travel expenses. The company justified the expenses incurred for business purposes related to import activities and meetings with suppliers and customers. The Tribunal found that the details provided by the company, along with justifications for each trip, supported the business nature of the expenses. The Tribunal upheld the CIT(A)'s decision, stating that the order did not have any legal or factual flaws. Consequently, the last effective ground was decided against the AO, resulting in the dismissal of the appeal.

In conclusion, the ITAT Mumbai upheld the CIT(A)'s decisions regarding the treatment of expenditure as revenue, deletion of addition for work in progress, and deletion of addition for foreign travel expenses. The Tribunal considered the specific circumstances of each issue, supported by evidence and legal reasoning, leading to the dismissal of the AO's appeal.