COMMISSIONER OF INCOME TAX Vs. SANCO TRANS LTD

JUDGEMENT

(1.) THESE appeals have been filed by formulating the following questions of law for our consideration : Tax Cases (Appeal) No. 1378 of 2005 : (i) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the deferred revenue expenditure claimed by the assessee on account of certain repair/renovation works is deductible as revenue expenditure in asst. yr. 1995 -96, when the work was undertaken in the year 1993 -94 ? (ii) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the deferred revenue expenditure claimed by the assessee on account of certain repair/renovation works is deductible as revenue expenditure on the ground that since the premises was leased, there could not be any enduring benefit ? and (iii) Whether, on the facts and circumstances of the case, the Tribunal was right in dismissing the Department's appeal without taking cognisance of two vital grounds : (a) Validity of revised return in which the expenditure was claimed (b) Claim in respect of expenditure incurred in an earlier year ? Tax Cases (Appeal) No. 1379 of 2005 : Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the penalty imposed under Section 271(1)(c) when the AO had produced evidence to show that false claims had been made by the assessee in order to claim depreciation, additional depreciation and investment allowance that was not due to it, purposely reduce the income and evade tax ?

(2.) THE assessment years are 1995 -96 and 1984 -85. The assessee claimed a deduction of deferred revenue expenditure incurred at their leased premises at the container freight station. They contended that the expenditure had been incurred for the purpose of black topping on the ground, repairs and levelling of platforms, godown, roads, etc. during the financial year 1993 -94. The AO, while finding that the expenses had been incurred by the subsidiary company M/s Sanco Warehousing Ltd. and were transferred to the assessee's account by way of debit note, disallowed the expenditure on account of not having been incurred in the relevant previous year, as it was not claimed in the original return. With respect to asphalting work of black topping, the AO was of the view that it was the capital expenditure, as it would give enduring benefit to the container freight station.

(3.) IN respect of the claim of the Department that the expenditure incurred were capital in nature, the CIT(A) has given a reason that the payment made in the course and for the purpose of carrying on business or trading activity would be a revenue expenditure, even though the payment is of a large amount and has not been made periodically. The CIT(A) further found that the expenditure did not bring any capital asset into existence, but was necessary for renovating the existing assets for making the production more competitive and profitable and though the premises is a leased out premises, the work done is only for the purpose of smooth functioning of the business of the assessee. The findings of the CIT(A) have been confirmed by the Tribunal on appeal.