Expenses incurred for Repairing Machines for Running Petrol Pump Business are Revenue nature: ITAT deletes Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT) Kolkata Bench held that expenses incurred for repairing machines for the running of petrol pump business are revenue in nature.

Akram Hossain Mullick, the taxpayer is engaged in retailing of petroleum and diesel under the proprietary concern as M/s. M.H. Filling Centre operating petrol pump.Assessee filed his return of income on 17.10.2016. Thereafter, the assessee case was selected for scrutiny and the  assessment was completed under Section  143(3) Income Tax Act, 1961.

In the course of assessment proceedings, the AO observed that the assessee has claimed expenses under the head repairs to machinery for Rs.6,540/- and repairs to buildings of Rs.14,49,473/- which according to AO are capital in nature. After seeking explanation AO concluded that Assesee provides inaccurate particulars of income.

Thus, the AO levied penalty under Section 271(1)(c) Income Tax Act.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) {CIT(A)}, who upheld the order of the CPC. Accordingly, against the order the assessee filed an appeal before the tribunal.

During the proceedings, S. P. Datta, the  counsel for the assessee submitted that expenses are revenue in nature which have been duly reported in the audited financial statements. According to the assessee, the repairs to machinery is an essential.

Further stated that the repairs to machinery is an essential incidental expense for running his petrol pump business which includes fuel dispensing machine, water pump and air compressor machines.

Furthermore, the Share profit  from partnership firms is taxable in the hands of the partnership firm and not in the hands of the partners.

P. P. Barman, Counsel for Revenue,  considering the quantum of expenses claimed by the assessee submitted that expenses incurred for repair machines for running  petrol pump business are in the nature of capital.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Girish Agrawal (Accountant Member) and Sanjay Garg (Judicial Member) relied upon the decision of the Supreme Court in the case of CIT vs Reliance Petroproducts Pvt Ltd observed that “There is no new asset which has been created giving benefit of enduring nature”

Further held that the expenses incurred for only repairing the current machines for running petrol pump business, hence, which would not be capital in nature .

To Read the full text of the Order CLICK HERE

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