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2021 (2) TMI 543 - AT - Income TaxNature of expenditure incurred on building taken on lease - expenses of Repairs Maintenance debited to Profit Loss Account - revenue or capital expenditure - HELD THAT - The issue is duly covered by the assessee s own case titled as CIT Vs. Shree Nirmal Commercial Ltd. 1994 (4) TMI 19 - BOMBAY HIGH COURT which speaks that the income of the assessee should be treated as business income. No doubt in the said circumstances, the expenses are liable to be allowed as revenue expense. In the previous and subsequent year, the claim of the assessee has been accepted by the revenue as revenue expenses. The claim of the assessee is liable to be accepted on the basis of consistency also. Moreover, there is no plausible reason given by the AO as well as CIT(A) in which it can be assumed that the nature of the expenses has been changed. Anyhow, in view of the above said facts and circumstances, it is quite clear that the assessee is not the owner of the building he is only lease-holder, hence, expenses are not liable to be capitalized - claim of the assessee has been accepted in the previous and subsequent year also, therefore, in the said circumstances, the finding of the CIT(A) is not justifiable, hence is liable to be set aside. We ordered accordingly and the claim of the assessee is hereby allowed.
Issues Involved:
1. Classification of expenses as capital expenditure versus revenue expenditure. 2. Disallowance of expenses due to non-submission of bills. 3. Consistency in the treatment of expenses in different assessment years. Detailed Analysis: Issue 1: Classification of Expenses as Capital Expenditure vs. Revenue Expenditure The primary issue revolves around whether certain expenses incurred by the assessee for repairs and maintenance should be classified as capital expenditure or revenue expenditure. The assessing officer and the CIT(A) considered the expenses as capital expenditure, arguing that they provided long-lasting benefits and were not related to normal wear and tear. The assessee contended that the expenses were for maintaining the building, similar to how a cooperative society would manage repairs, and should therefore be treated as revenue expenditure. The assessee argued that the nature of repairs inherently involves some improvement or betterment, but this does not necessarily make the expenditure capital in nature. Issue 2: Disallowance of Expenses Due to Non-Submission of Bills The assessing officer disallowed an expense of ?55,775 paid to M/s Bagwe Engineering Ltd. due to the non-submission of bills. The assessee countered that the payment was made through an account payee cheque and TDS was deducted appropriately. The CIT(A) did not adjudicate this ground, which the assessee found unjustified and sought deletion of the addition. Issue 3: Consistency in the Treatment of Expenses in Different Assessment Years The assessee highlighted that in previous assessment years (2008-09 and 2010-11), similar expenses were treated as revenue expenditure. The assessee argued that the inconsistency in the treatment of these expenses by the revenue authorities was unjustified. The case of CIT Vs. Shree Nirmal Commercial Ltd. (1995) 213 ITR 361 was cited, where it was held that such expenses should be treated as revenue expenses. The principle of consistency was emphasized, asserting that there was no change in the nature of expenses that would warrant a different treatment in the current year. Judgment: The Tribunal examined the arguments and evidence presented. It was noted that the assessee was not the owner of the property but a leaseholder, managing the property for the benefit of unit holders. The Tribunal referred to the case of CIT Vs. Shree Nirmal Commercial Ltd. (1995) 213 ITR 361, which supported the classification of such expenses as revenue expenditure. Additionally, the Tribunal observed that the revenue had accepted similar claims as revenue expenses in previous and subsequent years, reinforcing the principle of consistency. The Tribunal concluded that the expenses should be treated as revenue expenditure and not capitalized. The disallowance of ?55,775 for non-submission of bills was also deemed unjustified since the payment was made through proper banking channels and TDS was deducted. The Tribunal set aside the findings of the CIT(A) and allowed the appeal filed by the assessee. Conclusion: The appeal was allowed, and the expenses incurred by the assessee were classified as revenue expenditure. The disallowance of ?55,775 was also deleted, emphasizing the importance of consistency in the treatment of similar expenses across different assessment years. The Tribunal's decision reinforced the principle that the nature of repairs does not change merely because they provide some long-lasting benefits.
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