When is repair expenditure allowed as a deduction?

This Income Tax Appellate Tribunal case clarifies when expenditure on repairs and maintenance can be claimed as a tax deduction. The Assessing Officer argued that significant expenses incurred by Hindustan EPC Company Ltd. for modifying rented premises were capital in nature and thus not deductible. However, the Tribunal upheld the decision that these costs were revenue expenditure, allowable as a deduction, particularly as the assessee was a tenant modifying the premises for business use.

INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH “C”: NEW DELHI ]
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
A N D
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)
ITA. No. 7842/Del/2017
(Assessment Year: 2011-12)

ACIT,
Circle : 11 (2)
New Delhi.

(Appellant)

vs

M/s. Hindustan EPC
Company Ltd. [Formerly
known as Moser Bear
Engineering Construction
Ltd.] 616A (16A 6th Floor)
Devika Tower, Nehru Place,
New Delhi – 110 019.
PAN: AAFCM9606E

(Respondent)

Assessee by : N o n e;
Department by: Ms. Anita Barnwal, Sr. D. R.;
Date of Hearing : 02/08/2021
Date of pronouncement : 02/08/2021

O R D E R

This appeal is filed by the ld. ACIT, Circle 5 (1), New Delhi, against the order passed by the ld. CIT (Appeals)–38, New Delhi, dated 18.09.2017 wherein the ld. CIT (Appeals) has deleted the disallowance of repairs and maintenance expenses of Rs. 1,97,64,495/- holding it to be revenue expenditure whereas the ld.

2. Assessee has also incurred a sum of Rs. 1,30,64,180/- by bill dated 8.03.2011 from Times Interiors Pvt. Ltd. According to the Assessing Officer the high cost of these expenses makes it evident and looking at the description these are construction relating expenditure and same should be capital expenditure. Accordingly these expenses were held to be capital expenditure in nature and the Assessing Officer granted depreciation at the appropriate rates.

3. According to the provisions of Section 30(a) where the assessee occupies a rented premise assessee is entitled to deduction of repairs expenditure. In this case assessee is not the owner of the premises, but a tenant and has incurred the expenditure to modify the rented premises to suit its business requirements.

4.In the result appeal of the ld. Assessing Officer is dismissed.
Order pronounced in the open court on : 02/08/2021.

Please find attached the enclosed file for the full judgement