Cmi Industry Automation P.Ltd(Earlier ... vs Assessee

This appeal is filed by the assessee against the order of CIT(A),

dated 11-5-2012, for the assessment year 2009-10, in the matter of order

passed under Section 143(3) of the I.T. Act, wherein following grounds

have been taken by the assessee :-

The appellant objects to the order dated 11 May 2012 passed by the Commissioner of Income-tax (Appeals)-37, Mumbai on the following, among other grounds:

Disallowance of Professional Fees

1. The learned Commissioner (Appeals) erred in confirming the disallowance of an amount of Rs.20,00,000 towards payment of professional fees as prior period expenditure.

2 ITA No.4899/2012 2. The learned Commissioner (Appeals) ought to have appreciated that the liability or obligation to pay this expenditure arose during the financial year 2008-09 and hence the same is deductible in the assessment year 2009-10.

3. Without prejudice to above, the learned Commissioner (Appeals) erred in not appreciating that even if this expenditure is presumed to be accrued in financial year 2007-08, the same is to be allowed during financial year 2008-09 as per the provisions of section 40(a)(ia) of the Act since the corresponding withholding tax on such expenditure was deducted and paid during the financial year 2008-

09.

Disallowance of expenditure on repairs and maintenance

4. The learned Commissioner (Appeals) erred in confirming the disallowance of the following amounts towards routine and annual maintenance charges treating it as a capital expenditure:

(a) Repairs as well as replacement of spares of overhead tank Rs.55,000

(b) Annual maintenance charges for monsoon shed Rs.3,01,325

2. Rival contentions have been heard and record perused. Facts in

brief that the assessee company is engaged in automation, gauge control

system, management information system, mill management system,

steering system, equipment/components for cold rolling mills etc. The

assessee company filed its e-return of income declaring total loss of

Rs.2,43,04,135/-. During the course of assessment, the AO noted that the

assessee company had paid Rs.20 lacs as consultancy charges to Mr.

Raman Madhok for providing advisory services to the management during

financial year 2007-08 relevant to assessment year 2008-09. The service

which he started providing from the year 2007-08 onwards were not

accounted in the books of account for year 2007-08 in absence of

confirmation by directors. Therefore, the assessee company accounted

the same in the year 2008-09 after confirming his service.

3. We have considered rival contentions and found that bill for the

services so rendered was received by the assessee during the relevant 3 ITA No.4899/2012

assessment year under consideration. The assessee not only made

payment of the said bill during the year under consideration but also

deducted due tax thereon and also deposited the same in the

Government treasury. Thus, the expenditure was not only crystallized

during the year under consideration but also paid after deducting due tax

thereon. Accordingly, we do not find any merit in the action of the lower

authorities for disallowing the payment made for professional fees.

4. The AO further noted that assessee company had debited

expenses of Rs.55,000/- for installing M.S.Ladder, which has been for the

purpose of overhead tank of the assessee company, therefore, the AO

observed that the same was not in the nature of repairs but capital in

nature and hence disallowed the amount after allowing depreciation of

Rs.2,750/- @ 5%of Rs.55,000/-. The AO further disallowed the amount of

Rs.3,01,325/- for construction of monsoon shed at the factory premises.

5. By the impugned order, the CIT(A) confirmed the action of the AO,

against which the assessee is further appeal before us.

6. We have considered rival contentions and perused the record

carefully. The AO also disallowed repairs and replacement of spares of

overhead tank of Rs.55,000/-. As the aforesaid expenditure is revenue in

nature, accordingly, the AO is directed to delete the disallowance of

Rs.55,000/- incurred on repairs and replacement of spare parts of

overhead tank.

7. With regard to disallowance of fabrication and installation of

monsoon shed amounting to Rs.3,01,325/-, we found that same is capital

in nature. Accordingly, lower authorities were justified in disallowing the 4 ITA No.4899/2012

same on the plea that expenditure was not of revenue nature but of

capital nature. Therefore, no interference is required in the orders of the

lower authorities.

11. In the result, appeal filed by the assessee is allowed in part.

Order pronounced in the open court on this 21st January.2015.

21st Jan,2015

Sd/- Sd/- ( ) ( ) (SANJAY GARG) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER Mumbai; Dated 21/01/2015 /pkm, PS Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. / The CIT(A)-X, Mumbai. 4. / CIT 5. / DR, ITAT, Mumbai

6. Guard file. / BY ORDER,

//True Copy//

(Asstt. Registrar) / ITAT, Mumbai