The Commissioner Of Income Tax I, Chandigarh v. M/S Torque Pharmaceuticals Pvt. Limited, Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No.201 of 2009(O&M)Date of decision: 15.10.2009 The Commissioner of Income Tax I, Chandigarh Vs. M/s Torque Pharmaceuticals Pvt. Limited, Chandigarh -----Appellant ----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'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 revenueunder section 260A of the Income Tax Act, 1961 (in short,‘the Act’) against the order of the Income Tax AppellateTribunal, Chandigarh, Bench ‘B’, passed in ITANo.101/Chd/2008 dated 23.9.2008 for the assessment year 2004-05, proposing to raise following substantial questionof law:- “Whether, on the facts and in thecircumstances of the case and in law, theAppellate Tribunal was legally justified inholding that the expenditure of only Rs.17,15,031/- made on repair andmaintenance of building constituted capitalexpenditure and thus deleting theenhancement of Rs.17,15,031/- made by theCIT(A)?” 2.The assessee is a manufacturer of pharmaceuticals and made a claim for repair andmaintenance of buildings which was partly disallowed bythe Assessing Officer on the ground that the same gaveenduring benefit to the assessee. The disallowance by theAssessing Officer was upheld by the CIT(A) but exercisingpower under section 251 (1) (a) of the Act, disallowancewasenhanced. The expenditure which was allowed by theAssessing Officer was disallowed by holding that the samewould confer advantage and would bring into existencenew asset and such expenditure was beyond the concept of‘current repairs’ under section 31 of the Act. The Tribunalrestored the order of the Assessing Officer and set aside theenhancement, holding:- “If the totality of circumstances are analysed wehave found that the learned Assessing Officerhas disallowed only the expenses which were of enduring nature, like which were incurred onbrick work, cement, steel and sanitary items etc.We are of the view that otherwise it was the dutyof the assessee to construct a building bykeeping in view the hygienic conditions since theassessee is a manufacturer of drugs. The learnedAssessing Officer has already considered theexpenses, which were incurred for themaintenance of existing building and werenecessary for upkeeping the building. However,the expenses which were incurred on majorrepair, are certainly is of the benefit of enduringnature. The learned Assessing Officer has onlydisallowed the expenses which apparently doesnot fit into the circumference of currentrepairs/minor repairs by adopting a practicalapproach therefore, we upheld the assessmentorder.” 3.We have heard learned counsel for the appellant.4.Learned counsel for the appellant submitted thatthe Tribunal has not applied the parameters laid down bythe Hon’ble Supreme Court inCIT v. Saravana SpinningMills P.Limited, (2007) 293 ITR 201 and also the testsapplied in Silver Screen Enterprises v. CIT, Patiala, (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 We are unable to accept the submission. The test laid down for determining whether particular expenditurewas covered by the concept of ‘current repairs’ is wellknown and though it may, to some extent, over-lap withthe parameters applied for determining whetherexpenditure was revenue or capital with reference toSection 37 of the Act, there may be difference to the extentthat even capital expenditure may be covered by ‘currentrepairs’ in certain situations. 6. Question whether particular expenditure was 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 We are unable to accept the submission. The test laid down for determining whether particular expenditurewas covered by the concept of ‘current repairs’ is wellknown and though it may, to some extent, over-lap withthe parameters applied for determining whetherexpenditure was revenue or capital with reference toSection 37 of the Act, there may be difference to the extentthat even capital expenditure may be covered by ‘currentrepairs’ in certain situations. 6. Question whether particular expenditure was covered by the ‘current repairs’ or not, is primarily aquestion of fact, depending upon correct test being applied.Only discussion which has been pointed out in the order ofthe CIT(A) with regard to the major amount involved is asunder:- “9…Therefore, the entire expenditure ofRs.34,30,062/- is treated as capitalexpenditure and the assessment is enhancedby an amount of Rs.17,15,031/-. The assesseewould be entitled to depreciation @ 10%.” 7.As against above, the Assessing Officer also afterdiscussing well known judgments, concluded as under:- “In view of above judgments, the entire expensesclaimed by the assessee on account of repair andmaintenance of building amounting toRs.34,30,062/- cannot be treated as revenueexpenditure. Accordingly, 50% of theseexpenses which comes to Rs.17,15,031/- aretreated as capital expenditure. Since the expenseswere incurred on building, depreciation @ 10%is allowed on this expenditure. Accordingly, adisallowance of Rs.15,43,528/- (Rs.17,15,031/- -Rs.1,71,503/-) is made and added to the returnedincome.” 8.Thus, inspite of application of well known tests by the Assessing officer as well as by the CIT(A), thedifference is of perception and the CIT(A) has not beenable to record any finding that the view taken by theAssessing Officer was perverse or correct test was not applied. The Tribunal accordingly upheld the view of theAssessing Officer. 9. After perusing the impugned order and hearing learned counsel for the appellant, we are of the view that inthe facts found and tests applied, the question raised is nota substantial question of law but of application of thesettled law to a fact situation. 10.Since no substantial question of law arises, theappeal is dismissed. (Adarsh Kumar Goel)Judge October 15, 2009‘gs’ (Gurdev Singh)Judge