Recently, the Mumbai bench of the Income Tax Appellate Tribunal held that the repair and maintenance expenditure are deductible under the provisions of the Income Tax Act, 1961 since they are revenue in nature.
Briefly explaining the facts of the case, the assessee engaged in the business of exporting sugar mill machineries, spares and other captive inputs in sugar industry. The assessees claim of deduction in respect of repairs and maintenance expenses were disallowed by the Assessing Officer on ground that the same amount to capital expenditure. The assessee challenged the impugned order claiming that such expenditures are revenue in nature. However, the Commissioner of Income Tax (Appeals)on appeal filed by the assessee, sustained the impugned order. Being aggrieved, the assessee approached the Appellate Tribunal on second appeal.
The Tribunal found that the assessee has taken the premise on leave and license basis and the assessee have undertaken the substantial renovation work in that premises. The amount claimed by the assessee as revenue expenditure was a part of the expenditure incurred by them in respect of renovation work. The reason for claiming deduction was that the expenses on items which cannot be removed from the premises were incurred, as the amount was incurred on floor marble and itsfixing, POP, civil work, flooring, false ceiling, plastering and painting etc.
The Tribunal further noticed that the Bombay High Court, in the case RPG Enterprises Limited v. DCIT, has recently allowed deduction on account of “repairs and maintenance.”
Referring to the above precedent, the Tribunal observed that “In our considered view, the ratio of decision of Hon’ble Bombay High Court in RPG Enterprises Limited(supra) is directly applicable in the instant case , and by undertaking of this substantial repairs , it could not be said that no enduring benefit has resulted to the assessee as the said major and substantial renovation work has led to improvements in its trading operations which would bring enduring benefit to the assessee for long period of time and hence is capital in nature. The assessee would be entitled and qualified for availing depreciation in view of the Explanation 1 to Section 32 of the Act despite the fact that the assessee is not the owner of the said premises wherein in the assessee has taken the said premises on leave and license basis. The assessee would be entitled for treatment of expenses such as breaking old plaster, carting away, plastering, POP etc. as revenue expenses which are in nature of current repairs in view of provisions of Section 30 of the Act.”
Read the full text of the order below.
