2020 (10) TMI 363 - AT - Income Tax

Disallowing repairs and maintenance expense - Whether expenses are incurred for the business, fully supported and paid by the Appellant? - HELD THAT - The assessee has deducted due tax at source from the aforesaid payment. These facts would rebut revenue s allegations that the payments were not made by the assessee. The assessee s explanation that the invoice was inadvertently issued by the vendor in the name of group concern was to be accepted. Regarding the nature of the expenditure, the complete details of the same was placed before lower authorities and the expenditure was in the nature of designing work of certain premises from where the assessee s business was being carried on. By expanding this amount, no new asset could be said to have come into existence and therefore, the expenditure was to be treated as revenue in nature. Finally, impugned disallowance as made by Ld. AO could not be sustained in the eyes of law - Decided in favour of assessee. Deferred Revenue Expenditure - Disallowance of non-revenue expenditure - HELD THAT - Assessee vide submissions to Ld.AO had provided complete details as well as supporting documents of the expenditure so claimed u/s 37(1). The payment has been made to Maharashtra State Electricity Distribution Co. Ltd. towards electricity bill and the same is clearly revenue in nature. The payment to APCPDCL is towards service line charges and development charges, which is also revenue in nature. The stamp duty is towards registration of lease deed in assessee s favor which is also revenue in nature. The expenses reimbursed by the assessee have been paid through bank account and routine expenditure in nature. Therefore, none of the expenditure could be said to be capital in nature and hence, allowable expenditure u/s 37(1) - The impugned disallowance so made stands deleted - Decided in favour of assessee.

Summary

Issues: Disallowance of repairs & maintenance expenses, Disallowance of deferred revenue expenditure, Interest charged u/s 234B.

Disallowance of Repairs & Maintenance Expenditure:
The appeal contested the disallowance of repairs and maintenance expenses. The Assessing Officer disallowed an amount paid to an entity for designing work, as the invoices were issued in another entity's name. The assessee argued that the expenditure was for maintaining business premises and should be allowed. The Tribunal found that the actual payment made by the assessee was significantly less than the disallowed amount, and the expenditure was towards general wear and tear of business assets. The Tribunal accepted the explanation that the invoices were issued mistakenly and that the expenditure was revenue in nature. Consequently, the disallowance was deleted.

Disallowance of Deferred Revenue Expenditure:
The second disallowance related to deferred revenue expenditure claimed in the income computation. The Assessing Officer disallowed specific expenditures as non-revenue in nature. The Tribunal examined the details provided by the assessee and found that the expenses were indeed revenue in nature. The payments were for electricity charges, service line charges, stamp duty, and reimbursements, all of which were routine and revenue-related expenses. As a result, the Tribunal allowed these expenditures under section 37(1) and deleted the disallowance made by the Assessing Officer.

Interest charged u/s 234B:
Regarding the interest charged under section 234B, the Tribunal noted that it was consequential and did not require specific adjudication. The assessee had paid the tax liability before the end of the relevant year through advance tax and tax deducted at source. The Tribunal ordered the deletion of the interest charged under section 234B and granted the refund claimed by the assessee in the return of income.

In conclusion, the Tribunal partly allowed the appeal based on the above findings. The order was pronounced on 7th October 2020 by the Appellate Tribunal ITAT Mumbai, with detailed analysis and reasoning provided for each issue raised in the appeal.