IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
ITA No.201 of 2009(O&M)
Date of decision: 15.10.2009
The Commissioner of Income Tax I, Chandigarh
-----Appellant
Vs.
M/s Torque Pharmaceuticals Pvt. Limited, Chandigarh
----Respondents
CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE GURDEV SINGH
Present:- Ms. Urvashi Dhugga, Advocate for the appellant.
Adarsh Kumar Goel,J.
1. This appeal has been preferred by the revenue
under section 260A of the Income Tax Act, 1961 (in short,
‘the Act’) against the order of the Income Tax Appellate
Tribunal, Chandigarh, Bench ‘B’, passed in ITA
No.101/Chd/2008 dated 23.9.2008 for the assessment year
2004-05, proposing to raise following substantial question
of law:-
“Whether, on the facts and in the
circumstances of the case and in law, the
Appellate Tribunal was legally justified in
holding that the expenditure of only
ITA No.201 of 2009(O&M) 2
Rs.17,15,031/- made on repair and
maintenance of building constituted capital
expenditure and thus deleting the
enhancement of Rs.17,15,031/- made by the
CIT(A)?”
2. The assessee is a manufacturer of
pharmaceuticals and made a claim for repair and
maintenance of buildings which was partly disallowed by
the Assessing Officer on the ground that the same gave
enduring benefit to the assessee. The disallowance by the
Assessing Officer was upheld by the CIT(A) but exercising
power under section 251 (1) (a) of the Act, disallowance
was enhanced. The expenditure which was allowed by the
Assessing Officer was disallowed by holding that the same
would confer advantage and would bring into existence
new asset and such expenditure was beyond the concept of
‘current repairs’ under section 31 of the Act. The Tribunal
restored the order of the Assessing Officer and set aside the
enhancement, holding:-
“If the totality of circumstances are analysed we
have found that the learned Assessing Officer
has disallowed only the expenses which were of
ITA No.201 of 2009(O&M) 3enduring nature, like which were incurred on
brick work, cement, steel and sanitary items etc.
We are of the view that otherwise it was the duty
of the assessee to construct a building by
keeping in view the hygienic conditions since the
assessee is a manufacturer of drugs. The learned
Assessing Officer has already considered the
expenses, which were incurred for the
maintenance of existing building and were
necessary for upkeeping the building. However,
the expenses which were incurred on major
repair, are certainly is of the benefit of enduring
nature. The learned Assessing Officer has only
disallowed the expenses which apparently does
not fit into the circumference of current
repairs/minor repairs by adopting a practical
approach therefore, we upheld the assessment
order.”
3. We have heard learned counsel for the appellant.
4. Learned counsel for the appellant submitted that
the Tribunal has not applied the parameters laid down by
the Hon’ble Supreme Court in CIT v. Saravana Spinning
Mills P.Limited, (2007) 293 ITR 201 and also the tests
applied in Silver Screen Enterprises v. CIT, Patiala,
ITA No.201 of 2009(O&M) 4
(1972) 85 ITR 578 (P&H), Modi Spinning & Weaving
Mills Co.Limited v. CIT, (1993) 200 ITR 544 (Del.)
Senapathy Synams Insulations (P) Limited v. CIT,
(2001) 248 ITR 656 (Knt.) and CIT, West Bengal v.
North Dhemo Coal Company Limited, 106 ITR 592
(Cal.).
5. We are unable to accept the submission. The test
laid down for determining whether particular expenditure
was covered by the concept of ‘current repairs’ is well
known and though it may, to some extent, over-lap with
the parameters applied for determining whether
expenditure was revenue or capital with reference to
Section 37 of the Act, there may be difference to the extent
that even capital expenditure may be covered by ‘current
repairs’ in certain situations.
6. Question whether particular expenditure was
covered by the ‘current repairs’ or not, is primarily a
question of fact, depending upon correct test being applied.
Only discussion which has been pointed out in the order of
the CIT(A) with regard to the major amount involved is as
under:-
ITA No.201 of 2009(O&M) 5
“9…Therefore, the entire expenditure of
Rs.34,30,062/- is treated as capital
expenditure and the assessment is enhanced
by an amount of Rs.17,15,031/-. The assessee
would be entitled to depreciation @ 10%.”
7. As against above, the Assessing Officer also after
discussing well known judgments, concluded as under:-
“In view of above judgments, the entire expenses
claimed by the assessee on account of repair and
maintenance of building amounting to
Rs.34,30,062/- cannot be treated as revenue
expenditure. Accordingly, 50% of these
expenses which comes to Rs.17,15,031/- are
treated as capital expenditure. Since the expenses
were incurred on building, depreciation @ 10%
is allowed on this expenditure. Accordingly, a
disallowance of Rs.15,43,528/- (Rs.17,15,031/- –
Rs.1,71,503/-) is made and added to the returned
income.”
8. Thus, inspite of application of well known tests
by the Assessing officer as well as by the CIT(A), the
difference is of perception and the CIT(A) has not been
able to record any finding that the view taken by the
Assessing Officer was perverse or correct test was not
ITA No.201 of 2009(O&M) 6
applied. The Tribunal accordingly upheld the view of the
Assessing Officer.
9. After perusing the impugned order and hearing
learned counsel for the appellant, we are of the view that in
the facts found and tests applied, the question raised is not
a substantial question of law but of application of the
settled law to a fact situation.
10. Since no substantial question of law arises, the
appeal is dismissed.
(Adarsh Kumar Goel)
Judge
October 15, 2009 (Gurdev Singh)
'gs' Judge
ITA No.201 of 2009(O&M) 7