Tribunals
Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Wednesday, 02 September 2015 12:13

Adhoc addition out of Repairs & maintenance on the basis of mechanically and perfunctorily without establishing any expenditure as capital expenditure is unjustified - Bombay Tribunal

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Gist

Adhoc addition of 20% out of Repairs and Maintenance and treating it as capital expenditure on the basis of mechanically and perfunctorily without establishing any expenditure as capital expenditure is unjustified

Facts

1. Assessee is engaged in the business of manufacturing and sale of cold rolled coils and filed return of income declaring total income at NIL

2. Assessment was completed u/s 143(3) r.w.s.144(3) determining the income of the assessee at Rs 28.36 crores

3. During the course of assessment proceedings AO found that the assessee had entered in to various international transactions with its Associated Enterprises(AE) and accordingly he made a reference to the Transfer Pricing Officer (TPO) u/s.92CA(1)of the Act for determination of the Arm’s length price(ALP) in relation to the international transactions

4. The TPO vide his order dt.28 9.2011 recommended a total adjustment of 26.74 crores

5. ITAT following the earlier year's order of the same assessee in another assessment year remitted the matter back to the AO with the same direction given by theTribunal

6. AO also made 20% ad-hoc disallowance on Repairs & Maintenance and treated the same as Capital Expenditure and the same was confirmed by the CIT(A)

7. Tribunal respectfully followed the decision of Tribunal of the same assessee in another assessment year and decided the issue in favour of assessee stating that AO very mechanically and perfunctorily disallowed 20% on adhoc basis without establishing any expenditure as capital expenditure

Adjudication

For Transfer Pricing : Respectfully,following the above order of the Tribunal we remit back the matter to the file of AO/TPO with the same direction given by theTribunal in the above order. Grounds of appeal raised by the assessee pertaining to TP adjustment are allowed in favour of the assessee in part.

For Ad-hoc disallowance : We are convinced that AO very mechanically and perfunctorily disallowed 20% on adhoc basis without establishing any expenditure as capital expenditure. There cannot be any adhoc disallowance out of the revenue expenditure as was done by AO. Therefore, we reverse the order of the CIT (A) and direct AO to allow the claim as such. In case any depreciation was allowed on the disallowed amount, AO is directed to withdraw the same. With these directions, the ground is allowed.

Cases referred to

None

Additional Info

Read 3107 times Last modified on Saturday, 13 February 2016 16:01
Deepak Kumar

A Post Graduate and Chartered Accountant Deepak Sinha is a member of Taxpundit's core team. An analytical, result oriented professional with more than 10 years of combined experience in industry and consultancy.

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1 comment

  • Comment Link Amit Wednesday, 02 September 2015 12:48 posted by Amit

    Tribunal has simply followed earlier years order on both the issues...

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