Cit v. Agricultural Produce Marketing Committee

MANMOHAN, J SEPTEMBER 13, 2010 vk

* HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on : 12th August, 2010 % Judgment Pronounced on: 13th September, 2010 + ITA No.1163/2010 CIT ..... Appellant Through Ms. Suruchi Aggarwal, Adv. versus AGRICULTURAL PRODUCE MARKETING COMMITTEE ..... Respondent Through Ms. Avnish Ahlawat, Adv. CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes DIPAK MISRA, CJ The present appeal preferred under Section 260A of the Income Tax Act (for brevity `the Act") against the order dated 22nd December, 2009 passed by the Income Tax Appellate Tribunal, Delhi Bench "F" Delhi (for short "the tribunal") in ITA No.3704/Del/2009 pertaining to the assessment years 2003-04 was admitted on the following substantial question of law:- 1. Whether the expenses incurred by the assessee towards errection of boundary walls, construction of tanks, construction of roads etc. under the nomenclature Maintenance of market yard (Civil) and Maintenance of market yard (Electric) are to be treated as Capital or Revenue? 2. At the very outset, we may note that in the memorandum of appeal, number of substantial questions were raised but at the time of admission, the learned counsel for the revenue as well as the assessee fairly conceded that the only question that really survived for adjudication in this appeal is the question that has been framed. Thus, we shall filter the facts from the orders relating to the said facet only. The assessee namely, M/s Agriculture Produce Marketing Committee, filed its return for the relevant assessment year declaring the total income as nil. The case was selected for scrutiny and notices under Sections 143(2) and 142(1) along with a detailed questionnaire were issued which were duly served on the assessee. From the books of account, it was noticed by the assessing officer that the expenses relating to maintenance of market yard (civil) amounting to Rs.1,75,21,608/- and maintenance of market yard (electrical) amounting to Rs.69,48,683/- were capital in nature and, accordingly, he held that the assessee had created assets which would give benefit that would be enduring in nature. The said order dated 22nd March, 2004 was challenged before the CIT(A) and the first appellate authority came to hold that the expenditure to the extent of Rs.86,04,618/- was in the nature of revenue expenditure and, accordingly, deleted the addition to that extent. Being grieved by the aforesaid order, the assessee as well as the revenue preferred appeals before the tribunal. Before the tribunal, it was contended by the assessee that the CIT(A) was not justified in disallowing part of the expenses incurred on the maintenance of market yard (civil) being capital in nature whereas the assessee had debited the same in the Income & Expenditure account as the expenses were revenue in nature and were recurring expenses; that the first appellate authority was not correct in disallowing part of the expenses incurred on the maintenance of market yard (Electrical) being capital in nature whereas the assessee had debited the same in the Income & Expenditure account as the expenses were revenue in nature and were recurring expense. 3. At this juncture, we may refer to the view expressed by the CIT(A) which reads as under:- "B.4 In the light of the above principles the nature of expenditure incurred by the appellant is examined and the following items of expenditure to the extent of Rs.86,04,618/- are held to be revenue in nature:- (i) Major repair of road (exit gate NSM) – Rs.2,74,253/- +Rs.9,55,579/- + Rs.2,01,135/- + Rs.76,618/- = Rs.15,07,585/- (ii) Major repair of footpath (D-Block NSM) – Rs.2,22,765/- + Rs.6,99,739/- + 9,22,504/- (iii) Improvement work of the market RCC UG Tank – Rs.2,82,383/- (i) Major repair of boundary wall at Okhla sub yard – Rs.2,57,727/- (ii) Major