2015 (9) TMI 963 - HC - Income Tax

Entitlement to deduction under section 80P(2)(iii) - Held that - Once the claim was never made by the Assessee before the Assessing Officer, the same would not arise for consideration in the present appeal.In view of the above finding, question No.(a) does not arise. Denying deduction on account of interest on stiky loans being the interest doubtful of recovery - Held that - The same is covered against the assessee by the decision rendered by this Court in The Shahabad Cooperative Sugar Mills Limited vs. CIT, Aayakar Bhawan, Sector 13, Karnal(2013 (10) TMI 1350 - PUNJAB & HARYANA HIGH COURT). Amount spent on repair and maintenance of the building and construction of boundary wall thereof was held to be capital expenditure - Held that - The amount spent on repair and maintenance of the building and construction of boundary wall thereof was held to be capital expenditure. It was noticed that the amount had been spent for the purchase of ACC sheets, dryer and construction of boundary wall. Learned counsel for the assessee was unable to substantiate that the said expenditure would qualify as revenue expenditure in the facts and circumstances of the present case

Summary

Issues:
1. Deduction under section 80P(2)(a)(iii) of the Income Tax Act, 1961.
2. Denial of deduction on interest on sticky loans.
3. Classification of expenditure on repair and maintenance as capital expenditure.

Analysis:

1. Deduction under section 80P(2)(a)(iii) of the Income Tax Act, 1961:
The appeal was filed against the order of the Income Tax Appellate Tribunal, Chandigarh Bench denying the deduction under section 80P(2)(a)(iii) for the assessment year 2002-03. The Tribunal did not entertain the claim as it was not made by the assessee before the Assessing Officer. The Tribunal dismissed the ground of appeal related to this issue, stating that the claim was never raised by the assessee. Therefore, the issue of deduction under section 80P(2)(a)(iii) did not arise in the present appeal.

2. Denial of deduction on interest on sticky loans:
The Tribunal confirmed the denial of deduction on interest on sticky loans, citing the decision in The Shahabad Cooperative Sugar Mills Limited vs. CIT. The Tribunal found that the expenditure on repair and maintenance of machinery and construction of the boundary wall was treated as capital expenditure. The Assessing Officer disallowed a portion of the expenditure, which was confirmed by the Commissioner of Income Tax (Appeals). The Tribunal upheld this decision, stating that the expenditure was incurred on the purchase of ACC sheets, dryer, and construction of the boundary wall. The Tribunal found no evidence to rebut the Assessing Officer's findings and dismissed the appeal raised by the assessee. Therefore, the denial of deduction on interest on sticky loans was upheld against the assessee.

3. Classification of expenditure on repair and maintenance as capital expenditure:
Regarding the expenditure on repair and maintenance of the building and construction of the boundary wall, the Tribunal held that it constituted capital expenditure. The Tribunal noted that the expenditure was on the purchase of ACC sheets, dryer, and construction of the boundary wall. The assessee failed to establish that the expenditure qualified as revenue expenditure in the present circumstances. The Tribunal found no justification to interfere with the orders of the revenue authorities and dismissed the appeal raised by the assessee. Consequently, the issue of the classification of expenditure on repair and maintenance as capital expenditure was decided against the assessee in favor of the revenue.

In conclusion, the High Court dismissed the appeal, with substantial questions (a) not arising, and questions (b) and (c) being answered against the assessee and in favor of the revenue.