1985 (2) TMI 74 - AT - Income Tax

Summary

Issues:
1. Disallowance of expenditure claimed as repairs by the ITO.
2. Claim for weighted deduction under section 35B for the assessment year 1978-79.

Analysis:

Issue 1: Disallowance of Expenditure Claimed as Repairs
The appeals before the ITAT Bombay-D involved the disallowance of certain expenditure claimed as repairs by the assessee for the assessment years 1978-79, 1979-80, and 1980-81. The ITO disallowed a portion of the claimed expenditure in each year, considering the amounts spent to be large and resulting in an asset of enduring benefit. The CIT(A) upheld the ITO's decision, noting structural changes made to the building and the enduring nature of the repairs. The assessee contended that the repairs were essential to retain the building in its existing condition for business purposes, arguing that the expenditure was revenue in nature. The Departmental Representative argued that the RCC work done prolonged the life of the building, justifying the disallowance as capital expenditure.

The ITAT analyzed the extent of repair work required as indicated by the Corporation of Bombay's notice, emphasizing the necessity of the repairs. The Tribunal noted that the repairs were extensive, but they were essential to maintain the building in a fit condition for business purposes. The Tribunal observed that no new asset came into existence as a result of the repairs, and the expenditure was incurred to keep the premises in a suitable condition for business operations. Therefore, the ITAT held that the entire expenditure claimed as repairs was revenue in nature, overturning the disallowance made by the ITO in each of the years under appeal.

Issue 2: Claim for Weighted Deduction under Section 35B
For the assessment year 1978-79, an additional ground raised was the claim for weighted deduction under section 35B. The assessee sought a weighted deduction on a specific amount, which the ITO assessed based on a Tribunal decision and allowed a different amount. The CIT(A) concurred with the ITO's decision, following the precedent set by the Tribunal. The assessee argued for the allowance of the weighted deduction on the full claimed amount, but the ITAT disagreed, stating that the allowance made by the ITO was consistent with the Tribunal's earlier decision. Consequently, the ITAT ruled that the assessee was not entitled to any relief regarding the claim for weighted deduction under section 35B.

In conclusion, the ITAT allowed the appeal in part for the assessment year 1978-79 and fully allowed the appeals for the assessment years 1979-80 and 1980-81.