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TMI Blog2015 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... s concluded under Section 143(3) of the Act vide order dt.30.11.2011 wherein the income of the assessee was determined at Rs. 6,20,04,609 in view of various additions/disallowances made. 2.2 Aggrieved by the order of assessment for Assessment Year 2009-10 dt.30.11.2011, the assessee preferred an appeal before the CIT (Appeals) - II, Bangalore. The learned CIT(A) disposed off the appeal vide order dt.6.12.2013 granting the assessee partial relief by deleting some of the additions/disallowances made by the Assessing Officer. 3.0 Aggrieved by the order of the CIT (Appeals) - II, Bangalore, dt.6.12.2013 for Assessment Year 2009-10, Revenue is in appeal before us raising the following grounds :- "1. The order of the learned CIT (Appeals) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in law in holding that the bata expenses of Rs. 46,44,254 is to be allowed as expenditure without appreciating the fact that the assessee could not substantiate the same before the Assessing Officer despite being afforded opportunity for the same. 3. On the facts and in the circumstances of the case the learned CIT (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut forth before the learned CIT(A). The assessee, in the case on hand, is in the business of cold chain services, which include the running of refrigerated warehouses as well as refrigerated transportation. The assessee is required to maintain transport lorries, which are required to be plied to various places. Such trips involve travel for both vehicle and drivers for several days at a stretch. As rightly observed by the learned CIT(A), the drivers cannot be expected to meet the expenditure incurred on such outstation trips from their monthly salaries and are paid daily allowances to meet such expenses, which is similar to daily allowances paid to employees who go on tour. 5.3.2 We have perused the documents placed in the assessee's paper book, which were submitted before the learned CIT(A) and find that these payments are governed by a proper internal policy which also includes a proper verification process. In the sample vouchers submitted, we find that the details of the trips like the name of the driver, vehicle number, days of travel, etc. are furnished and the batta are paid as per the trip sheet. The details of the date of travel are corroborated by the final expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems. The tyres of these trucks are required to be replaced after it completes travel of a certain distance and such replacement does not result in the creation of a new asset or increasing of capacity and therefore such expenditure is revenue in nature. As regards pallets, it was contended that wooden pallets used to store material inside the frozen warehouses need to be replaced regularly after the completion of the normal useful life and this does not result in the creation of a new asset or increase of capacity and therefore the expenditure incurred in this regard are revenue in nature. In support of its contentions, the assessee placed reliance on the decision of the Hon'ble Apex Court in the case of CIT V Gupta Global Exim P. Ltd. (305 ITR 132) (SC). 6.5.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions relied upon. It is not in dispute that the expenditure claimed has been incurred towards replacement of tyres and pallets and that these expenses therefore do not result in the creation of new assets or increase in capacity. 6.5.2 In this factual background, we examine the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the legislature has permitted under s. 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 s. 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 expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and as such qualify for deduction as revenue expenditure. Consequently, Ground No.3 raised by Revenue is dismissed. 7. Ground No.4 - Prior Period Expenses - Rs. 6,81,338. 7.1 In the course of assessment proceedings, the Assessing Officer observed that the assessee had debited an amount of Rs. 63,85,645 towards loss on consignment business. On verification of the records, the Assessing Officer found that the above expenses are debited towards loss on consignment business, in which the assessee is an agent of M/s. Baskin Robins for managing inventory, warehousing, transportation and distribution services. The Assessing Officer asked the assessee to furnish evidence to show that the amounts debited towards variation of stock in the consignment business pertains to the year under consideration only and not to the earlier years. As the assessee failed to furnish the evidence sought, the Assessing Officer disallowed an amount of Rs. 6,81,338. 7.2 On appeal, the learned CIT (Appeals) examined and verified the documents produced and came to the view that the expenditure in question does not relate to the prior period/earlier years, but pertained to the current year only. The learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) that the assessee's claim under this head is reasonable and agree with her decision to delete the disallowance made by the Assessing Officer. Consequently, Ground No.4 of Revenue's appeal is dismissed. 8. Ground No.5 : Depreciation - Rs. 16,70,201. 8.1 During assessment proceedings, the Assessing Officer observed that the assessee had claimed an amount of Rs. 33,40,402 towards depreciation on motor vehicles @ 30%. On examination of the assessee's claim, the Assessing Officer found that the amount claimed was towards depreciation on motor vehicles used in the business of export of marine products and not on motor vehicles used in the business of hire and therefore restricted the assessee's claim of depreciation to 15% and disallowed the balance depreciation of 15%, amounting to Rs. 16,70,201. 8.2 On appeal, the learned CIT (Appeals) held that the assessee is also into the business of refrigerated transportation and is therefore eligible for depreciation @ 30% by relying on the provisions as per the New Appendix I to the IT Rules relating to depreciation admissible on assets, vide serial number III(3)(ii) relating to motor lorries. 8.3.1 We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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