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Issues Involved:
1. Nature of expenditure incurred on repairs and maintenance (capital or revenue). 2. Allowability of depreciation on the capital expenditure. Issue-wise Detailed Analysis: 1. Nature of Expenditure Incurred on Repairs and Maintenance: The primary issue in this appeal was whether the expenditure of Rs. 1,07,229 incurred by the assessee on repairs and maintenance of a property purchased from NOIDA Authority should be classified as capital or revenue in nature. The assessee argued that the expenditure was necessary for the running of their ice cream business and should be considered revenue expenditure. The details of the expenditure included Rs. 46,072 on building repair, Rs. 44,655 on electrical fitting and maintenance, and Rs. 16,502 on sanitary fitting and maintenance. The CIT (Appeals) and the ITO had treated these expenditures as capital in nature, allowing depreciation on them. The Tribunal analyzed the nature of the expenditures in detail. It was found that expenses on bricks, stones, earth work, asbestos sheet, steel tube, etc., amounting to Rs. 14,762, were for renovation and thus provided an enduring benefit to the assessee, classifying them as capital expenditure. However, other expenses were considered minor and of a revenue nature. Electrical and mechanical repairs were deemed necessary for business operations and thus classified as revenue expenditure. Similarly, sanitary fittings were largely revenue in nature except for specific items like brass fittings, wash basin, steel tube, etc., amounting to Rs. 6,329.44, which were capital in nature. 2. Allowability of Depreciation on Capital Expenditure: The Tribunal upheld that for the capital expenditure of Rs. 21,092, depreciation was rightly allowed by the ITO. This included Rs. 14,762 on building renovation and Rs. 6,329.44 on specific sanitary fittings. The remaining expenditure was directed to be treated as revenue expenditure, allowing the assessee to claim deductions accordingly. Separate Judgments by the Judges: The Judicial Member and the Accountant Member delivered separate judgments. The Judicial Member concluded that the majority of the expenditure was revenue in nature, except for Rs. 21,092, which was capital. The Accountant Member, however, disagreed, holding that the entire expenditure of Rs. 1,07,229 was capital in nature due to the large-scale improvements and enduring benefits provided to the assessee. Third Member Opinion: The President, acting as the Third Member, sided with the Judicial Member. He emphasized that the nature of the expenditure must be viewed from a practical perspective. The aim and object of the expenditure were to make the building usable as a restaurant, which involved interior decoration, painting, and temporary structures. These were not of a permanent nature and did not provide enduring benefits. The Third Member concluded that the expenditure of Rs. 86,137 was revenue in nature, aligning with the Judicial Member's view. Conclusion: The appeal was partly allowed, with the Tribunal directing the Assessing Officer to allow deductions for revenue expenditure and uphold depreciation for the capital expenditure of Rs. 21,092. The matter was referred back to the regular Bench for disposal in accordance with the majority opinion.
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