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TAXAP/1785/2009 4/ 4 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 1785 of 2009
=========================================================
COMMISSIONER
OF INCOME TAX-I - Appellant(s)
Versus
M/S
MODI HOSPITAL - Opponent(s)
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Appearance
:
MRS
MAUNA M BHATT
for
Appellant
None for
Opponent
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI 23rd March 2011
ORAL
ORDER (Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
Revenue challenges the
judgment and order of the Tribunal dated 27th May 2008,
raising following questions for our consideration :-
[A] “Whether on the
facts and circumstances of the case, the Appellate Tribunal is right
in law in upholding the decision of the Cit (A) to treat repairs on
building as revenue expenditure, ignoring the facts that the said
structure had already completed its life span as the building was 40
years old therefore renewal was long over due and also the building
had suffered extensive damage as a result of earthquake and therefore
the assessee had to make extensive renovation which effectively
brought into existence a new asset with enduring benefit ?”
[B] “Whether on the
facts and circumstances of the case, the Appellate Tribunal is right
in law in upholding the decision of the CIT [A] to treat repairs on
building as revenue expenditure overlooking the decision relied upon
by the Assessing Officer in the case of Arvind Mills Limited 197 ITR
422(SC) and in the case of Modi Spinning & Weaving Mills &
Company Limited [200 ITR 544] of the Delhi High Court ?”
We have perused the
orders on record with the assistance of learned counsel for the
revenue. From the record, it emerges that the assessee runs a
hospital. Such hospital building received damage in the earthquake of
2001, requiring renovation. Assessee thereupon incurred expended Rs.
13,39,060/= for such repairs. The Assessing Officer disallowed
deduction of such expenditure treating it as capital in nature.
The issue was carried in
appeal by the assessee before the CIT [A]. CIT [A] reversed the order
of the Assessing Officer holding that the expenditure was only for
repairs and not for renovation of the building and allowed the
deduction, making following observations :-
“6. I
have carefully considered the submission of the AR and the
contentions of the Assessing Officer. It appears that the AO has
largely been carried away by the amount of the expenses which is Rs.
13,39,060/=. He has apparently failed to appreciate that the nature
of the expenses has to be compared with the size and the nature of
the asset in question. His contention that an entirely new building
came into existence is contrary to the nature of the expenses
incurred. No new concrete super structure can come into existence
without substantial expenses being incurred in steel and cement. In
the appellant’s case the bulk of the expenditure is incurred on
changing of tiles, paints, plumbing, etc. The Hon’ble Gujarat High
Court in the case of India Ginning & Pressing Co. Limited v/s
CIT [252 ITR 577] held – ” In determining whether an
expenditure is of capital or revenue nature, what is material is to
consider the nature of the advantage in a commercial sense and it is
only where the advantage is in the capital field that the
expenditure would be dis allowable. If the advantage consists merely
in facilitating the assessee’s trading operations or enabling the
management and conduct of the assessee’s business to be carried on
more efficiently or more profitably while leaving the fixed capital
untouched, the expenditure would be on revenue account even though
the advantage may endure for an indefinite future…”
Applying the above ratio to the facts of the case it is amply clear
that the expenditure incurred by the appellant has not resulted in
creation of any new asset or any expanation of the profit earning
apparatus. Merely because the quantum of expenditure appears to be
high, it cannot be held capital. In my opinion, the said expenditure
is clearly revenue in nature and allowable as deduction. Hence, the
disallowance made by the AO is deleted.”
Revenue carried the
issue in further appeal before the Tribunal. The Tribunal relying on
several decisions of this Court as well as other Courts, and in
particular in the case of India Ginning & Pressing Company
Limited v/s. CIT [252 ITR 577], rejected the Revenue’s
appeal, making following observations :-
“From the above
decision of the Hon’ble Gujarat High Court has considered the
decision of the Hon’ble Supreme Court relied upon by the Assessing
Officer and held that whether the expenditure on repairs is capital
or revenue in nature is to be decided by the nature of repairs. We
find, in the present case, the facts on record shows tha the assessee
was having a building, in which hospital was running. The said
hospital building was repaired and no new construction of enduring
nature has been made. The assessee is a hospital situated on a plot
of nearly 8000 sqft. In the areas of Moti Tanki, Rajkot and the
expenditure was incurred by the assessee was only on account of
repairs only. Therefore, we are of the view that CIT [A] are
justified in his action. Therefore, we do not interfere in the order
of the CIT [A]. ”
When
we find that the CIT [A] as well as the Tribunal both have
concurrently found that the expenses were incurred by the assessee
not for renovation but for repairs, and when it was found that such
repairs were not so extensive enduring benefits to the assessee, the
authorities treating such expenditure as revenue in nature, calls for
no interference. We find that the issue has been dealt with by the
Tribunal, based on the law laid down by this Court in similar cases.
No question of law arises, the Tax Appeal is dismissed.
{Akil
Kureshi, J.}
{Ms.
Sonia Gokani, J.}
Prakash*
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