Delhi High Court
Cit vs Ts Tech Sun India Ltd on 3 July, 2012
Author: R.V. Easwar
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 3rd July, 2012.
+ ITA 335/2012
CIT ..... Appellant
Through : Mr. Sanjeev Sabharwal, sr. standing counsel
versus
TS TECH SUN INDIA LTD ..... Respondent
Through : None
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V. EASWAR
R.V. EASWAR,J: (ORAL)
This appeal by the Revenue is directed against the order of the Tribunal dated
28.10.2011 by which the Tribunal confirmed the order of the CIT(Appeals) deleting
the disallowance of Rs.52,71,300/- made by the Assessing Officer on the ground that
the repair and maintenance expenses claimed to the above extent were capital in
nature.
2. The assessee is a public limited company engaged in the manufacture,
assembly and selling of automobile parts. In respect of the assessment year 2006-07
the assessee claimed repairs and maintenance expenditure to the extent of Rs.58.57
lakhs. The expenses were incurred on the repairs and maintenance of a building and
they were incurred on three different dates as follows :
"Date Amounts (Rs. In lakh)
28.02.2006 48.05
ITA 335/2012 Page 1 of 4
16.03.2006 05.94
16.03.2006 04.58
Total 58.57"
In the course of the assessment proceedings, the explanation of the assessee regarding
the justification for the above expenditure was sought by the Assessing Officer. The
assessee submitted a detailed written explanation vide letters dated 30.11.2009 and
7.12.2009 which are reproduced in the assessment order. The gist of the explanation
was that the factory building was constructed in the year 1997, that the floor was badly
damaged due to installation and continuous working and movement of heavy
machines, that the asbestos roof of the factory had gone into disrepair and was badly
damaged over a period of 10 years resulting in leakage of rain water, that the roof was
in a precarious condition and posed safety hazard and therefore, the assessee had to
incur expenses of Rs.48.05 lakhs on the building. It was submitted that the
expenditure merely restored the factory building to its original shape and condition
and that there was no addition thereto resulting in any capital advantage. As regards
the expenses of Rs.5.94 lakhs incurred on 16.3.2006, it was submitted that it
represented expenditure on replacement of the old steel glazing structure fixed along
with the asbestos shields to ensure proper lighting of the factory, that the old glass
sheet was replaced along with metal beading, that proper lighting of the factory was an
essential requirement, that in order to enable the aforesaid repair the existing
machinery and equipment including the pipe fittings had to be removed and be
reinstalled after the work was done and the expenditure of Rs.4.58 lakhs was incurred
only on such dismantling and re-fixing of the equipment which did not result in any
material or enduring benefit nor did the expenditure bring into existence any asset. It
was also represented that neither the floor of the factory nor the roof had been replaced
in the last 10 years. In sum and substance the claim was that the expenditure merely
restored the building to the original shape and condition.
ITA 335/2012 Page 2 of 4
3. The Assessing Officer did not accept the claim. According to him the
expenditure brought into existence new floor and roof, which resulted in a capital
advantage or enduring benefit. He therefore, treated the entire expenditure of
Rs.58.57 lakhs as capital in nature. He allowed 10% depreciation amounting to
Rs.5,85,700/- and the balance of Rs.52,71,300/- was disallowed.
4. On appeal the CIT(Appeals) examined the matter in great detail and eventually
held that the expenditure was in the nature of repairs incurred in order to preserve and
maintain the existing asset namely, the factory building and therefore was allowable as
revenue expenditure.
5. Aggrieved, the revenue filed an appeal before the Tribunal. The Tribunal after
examining the facts in detail noted that no new asset or extra space was created by
incurring the expenditure. It noted that the purpose of the roof is to protect the plant
and machinery, the workers and the products from weather conditions and
replacement of or the repairs to the roof or adding a glass sheet to ensure proper
lighting will not in any way increase the capacity of the factory, even admitting that
the asbestos roof was replaced by shield glass sheets. The Tribunal further found that
the floor of the factory was redone due to constant damage for the past 10 years. The
roof and the floor were integral parts of the factory and they were merely restored to
their original condition and strengthened by incurring the expenditure. The Tribunal
recorded a finding that no extra space or extra capacity was obtained by incurring the
expenditure. In this view of the matter it affirmed the decision of the CIT(Appeals)
and dismissed the appeal filed by the revenue.
6. The narration of the facts and the findings recorded by the income tax
authorities and the Tribunal as above would clearly show that it has been factually
found by the Tribunal that no new asset or enduring advantage was obtained by the
assessee by incurring the expenditure. No extra capacity or space was created in the
ITA 335/2012 Page 3 of 4
factory by repairing the roof and the floor. These are findings of fact recorded on the
basis of the material on record and those findings have not been challenged or shown
to be perverse or based on no material. Having regard to the well settled position that
unimpeached findings of facts do not give rise to any substantial question of law, we
find no merit in the appeal filed by the revenue which is dismissed with no order as to
costs.
R.V.EASWAR, J.
S. RAVINDRA BHAT, J.
JULY 03, 2012
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