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TMI Blog2012 (5) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel. For Respondent: Mr. Sandeep Sapra, Advocate. O R D E R Revenue in this appeal under Section 260A of the Income Tax Act, 1961 (Act) impugns the order dated 17th June, 2011 passed by the Income Tax Appellate Tribunal (tribunal) in the case of Imperial Fasteners Pvt. Ltd., the respondent-assessee. The appeal pertains to the assessment year 2006-07. 2. Having heard learned counsel for the parties, we frame the following substantial question of law:- "Whether the Income Tax Appellate Tribunal was right in holding that the expenditure of Rs.31,54,844/- was a revenue expenditure and not a capital expenditure?" 3. As we have heard learned counsel for the parties, we proceed to dictate our decision. 4. The respondent-assessee is a company and for the assessment year in question it had filed its return of income on 8th December, 2006 declaring loss of Rs.19,84,799/- under the normal provisions and book profit of Rs.7,36,458/- under Section 115JB of the Act. The Assessing Officer in the assessment order has recorded that the assessee had debited a sum of Rs.31,54,844/- in the computation of income as deferred revenue expense and 10% of the said amount was debited to the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (P) Ltd. 2620/3, Hamilton Road, Kashmere Gate, Delhi-6. 16.03.06 1245 Valves Bearings Oil Seals etc. Replacement 208,000 8. Anil Rubber Mills (P) Ltd. Plot no.30, Sector-6, Faridabad 121006 25.03.06 146 Conveyor Belt Replacement 750,031 9. Dhanbad Electro Power Meters, 28, Binod Market, (Near Court More), Hirapur, Dhanbad 860002 31.01.06 06 Electric Meter Replacement 109,695 TOTAL 3,154,843.60 9. We may note that the two expenses i.e. expense of Rs.4,43,906/- on T.R. Oil meant for lubrication of the equipment and Rs.2,27,908/- on replacement of Steel Hammer (Coal Crusher) were incurred before the lease agreement dated 14th October, 2005 was executed between the respondent-assessee and the Central Coalfield Limited. 10. The tribunal after referring to the nature and character of the expenses, which have been incurred and after examining the terms of the lease, came to the conclusion that the lease in question required the assessee to incur expenses relating to current repair and maintenance to make the plant operational and start running. It has been recorded by the tribunal that replacement and other parts, purchased and installed by the assessee were relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all these clauses will show that assessee was to operate the plant of generation of electricity and part of the generation of electricity was to be supplied to the lessor at prescribed rates. The assessee was to incur expenses on repairs and maintenance of the plant was to generate electricity and generate revenue in the year under consideration but the payment of lease rent was to start from 14th April, 2006 which date falls in the next financial year. The term of lease is 20 years. As per clause 17.3, upon expiration of lease, the assessee was to handover the plant in good running condition except liability of lessor to pay to the assessee the written down value of the additions and alterations of the building, station or additional machinery that may be brought by the lessor at the station and on such determination the schedule station shall rest in and be the absolute property of the lesser. Thus, this clause conveys that what the assessee is entitled is only written down value of the additions and alterations to the building, station or additional machinery. The aforesaid detail will reveal that none of the items represents addition or alteration to the building, station or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it would be a capital expenditure, and it is clear that the deduction which the legislature has permitted under Section 10(2)(v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure." In the said judgment, it has been further observed by Chagla, C.J. that the definition of the word "repair" does not create much difficulty, but the difficulty is created by the word "current" which qualifies the expression "repair". This adjective, namely, "current" is put in by the legislature. It indicates that the legislature did not intend that the assessee should be permitted to claim allowance for all kinds of repairs, even though conceptually the expenditure may be revenue expenditure. The legislature intended to stress that under Section 31(i) the permissible deduction admissible is only for current repairs, therefore, the question as to whether the expenditure incurred by the assessee conceptually is revenue or capital in nature is not relevant for deciding the question as to whether such an expenditure comes within the etymological meaning of the expression "current repairs". In other words, even if the expenditure is revenue, it may not fall in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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