2018 (2) TMI 348 - AT - Income Tax

Disallowance out of repairs and maintenance - Held that - Assessee has incurred a small expenditure of ₹ 9,50,772/- at Santacruz and ₹ 5,30,232/- at Dadar premises. These are rented premises. As evident from the submission hereinabove, the expenditure incurred is totally of revenue in nature being renovation and refurbishing at rented premises. In the backdrop of aforesaid submission and on the facts and circumstances of the case the treatment of these expenditure as capital expenditure is not at all justified. Hence, set aside the orders of authorities below and decide the issue in favour of the assessee. Denial of expenditure claimed being bad debt written off - Held that - Ground raised by the assessee in this regard is misplaced. CIT(A) has not dismissed the assessee s ground in this regard but has remitted the matter to the file of the Assessing Officer to examine the veracity of assessee s claim and thereafter decide accordingly. There is no infirmity in the direction by the learned CIT(A). Hence, this ground raised by the assessee stands dismissed.

Summary

Issues:
1. Disallowance of expenses on repairs and maintenance treated as capital expenditure.
2. Disallowance of car expenses.
3. Disallowance of sundry balance written off as bad debt.

Issue 1: Disallowance of expenses on repairs and maintenance treated as capital expenditure:
The appellant contested the disallowance of ?14,81,003 out of repairs and maintenance expenses, claiming it was arbitrary and without appreciating the correct nature of expenses. The Assessing Officer disallowed the claim, treating it as capital expenditure due to renovation work carried out on rented premises. The CIT(A) upheld the disallowance, stating that the expenses were capital in nature and allowed depreciation on the amount. However, the ITAT set aside the orders, ruling that the expenses were revenue in nature as they were for renovation and refurbishing at rented premises, not justifying the treatment as capital expenditure.

Issue 2: Disallowance of car expenses:
The appellant did not press this ground, leading to its dismissal as not pressed. Therefore, no further analysis or decision was provided regarding the disallowance of car expenses.

Issue 3: Disallowance of sundry balance written off as bad debt:
The Assessing Officer denied the expenditure claimed as bad debt written off. The CIT(A) directed the Assessing Officer to verify the claim and allow it if found eligible as per the provisions of the law. The ITAT found no infirmity in the direction by the CIT(A) and dismissed the ground raised by the assessee. Consequently, the appeal by the assessee was partly allowed, with the direction to verify the claim of the assessee regarding the bad debt written off.

In conclusion, the ITAT ruled in favor of the assessee regarding the disallowance of expenses on repairs and maintenance, considering them as revenue in nature. The decision regarding the bad debt written off was remitted to the Assessing Officer for verification, and the car expenses ground was dismissed as not pressed by the appellant.