2021 (2) TMI 319 - AT - Income Tax

Claim of helicopter expenses maintenance expenses - Revenue or capital expenditure - A.O. took the view that the assessee has got enduring benefit by incurring the Repairs Maintenance expenses and hence they are capital in nature - HELD THAT - A.O. was constrained to make ad hoc disallowance since the assessee has failed to furnish details called for by the A.O - assessee did not appear before Ld. CIT(A) also. In effect, the assessee did not furnish details of helicopter expenses as sought by the A.O. even before the Ld. CIT(A) - CIT(A) was not justified in deleting the disallowance - in the interest of natural justice, assessee may be provided with one more opportunity to furnish the details called for by A.O. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O. for examining it afresh. Claim of repairs maintenance expenses - A.O. has made the above said disallowance by entertaining a presumption that the repairs maintenance expenses incurred by the assessee has given enduring benefit to the assessee. A.O. has not examined critically the details of repairs maintenance expenses incurred by the assessee - CIT(A) has deleted the disallowance without examining the details of expenses. In effect, both the tax authorities have not examined the nature of expenses incurred by the assessee under the head 'repairs maintenance' - This issue also requires fresh examination at the end of the A.O. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O. for examining it afresh.

Summary

Issues:
- Disallowance of repairs & maintenance expenses
- Disallowance of helicopter expenses

Analysis:
1. Disallowance of Repairs & Maintenance Expenses:
- The Assessing Officer (A.O.) disallowed repairs expenses claimed by the assessee, considering them as capital in nature due to enduring benefit. This led to disallowance of a net amount after allowing depreciation.
- The Ld. CIT(A) deleted the disallowance, stating lack of evidence to show repairs led to permanent asset creation, as maintenance was routine for the airline business.
- The Tribunal observed that both the A.O. and Ld. CIT(A) failed to critically examine the nature of expenses, necessitating a fresh examination by the A.O. to determine if the expenses were capital or revenue in nature.

2. Disallowance of Helicopter Expenses (A.Y. 2009-10):
- The A.O. disallowed depreciation on helicopters purchased by the assessee, as no revenue was declared from them and details were not provided to prove business expediency.
- Ld. CIT(A) confirmed the depreciation disallowance but deleted an ad hoc expense disallowance of ?10 crores, citing lack of valid basis by the A.O.
- The Tribunal, noting the assessee's failure to provide details, set aside Ld. CIT(A)'s order on helicopter expenses, directing the A.O. to re-examine the issue for natural justice.

3. Outcome:
- Appeals for A.Y. 2010-11 to 2012-13 were dismissed due to low tax effect per CBDT circular.
- For A.Y. 2009-10, the appeal on helicopter expenses was allowed for further examination by the A.O., while the appeal on repairs & maintenance expenses was also remanded to the A.O. for fresh assessment.
- The Tribunal emphasized the need for a detailed examination of expenses to determine their nature accurately, ensuring a just decision based on facts.

This detailed analysis highlights the Tribunal's approach to the issues of repairs & maintenance expenses and helicopter expenses, emphasizing the importance of thorough examination and evidence-based decisions in tax matters.