2017 (10) TMI 1155 - AT - Income Tax

Addition on capital expenditure - allowability as revenue expenditure - Held that - In the present case, it is noticed that the Ld. CIT(A) categorically stated in para 4.4 of the impugned order that the assessee furnished bills in support of the expenditure incurred, he had examined those bills and found that certain items of expenditure were prima facie capital in nature but all other expenses relating to tyres, repair and maintenance etc., were revenue in nature. He, therefore, considered the expenditure of ₹ 13,56,645 in the nature of capital and sustained the disallowance to that extent. We, therefore, do not see any valid ground to interfere with the findings of the Ld. CIT(A) because the findings given by the Ld. CIT(A) were not controverted by bringing any cogent material on record. In that view of the matter, we do not see any merit in this appeal of the department. - Decided against revenue.

Summary

Issues:
Department's appeal against deletion of addition of capital expenditure by CIT(A)

Analysis:
1. The department appealed against the deletion of an addition of capital expenditure by the CIT(A). The factual ground raised in the appeal was the erred deletion of ?35,65,581 out of a total addition of ?49,92,226 made by the Assessing Officer due to lack of documentation to establish the expenditure's allowability as revenue in nature.

2. The case involved the assessee filing a return of income declaring NIL income, which was later selected for scrutiny. The Assessing Officer disallowed various expenses and added them back to the assessee's income, citing them as capital expenditure. The assessee submitted bills to support the expenses, claiming them as revenue expenditures for preventive maintenance of machinery, vehicles, and equipment.

3. The Assessing Officer disallowed ?49,92,226 as capital expenditure, stating that necessary bills were not provided to establish the expenses' revenue nature. However, the CIT(A) observed that the disallowance was made solely based on quantum and non-production of documents without examining the expenditure's nature. The CIT(A) allowed relief of ?35,65,581, considering most bills as repairs & maintenance, spares, batteries, and related items for plant & machinery and vehicles.

4. The department's appeal was dismissed as the CIT(A) had examined the bills, categorized certain expenses as capital in nature, and allowed the rest as revenue expenditure. The Appellate Tribunal found no valid ground to interfere with the CIT(A)'s findings as no new material was presented to challenge the decision. Consequently, the department's appeal was dismissed, upholding the CIT(A)'s order.