The Income Tax Appellate Tribunal (ITAT), Bengaluru, by two members bench comprising of N.V. Vasudevan (Vice President) and B.R. Baskaran (Accountant Member), in the case of Joint Commissioner of Income Tax (JCIT) vs. M/s. Kingfisher Airlines Limited, granted partial relief to respondent/assessee-Kingfisher Airlines while disposing the appeal in an ex-parte as the assessee was not present during the proceeding.
The Tribunal set aside the order passed by Commissioner of Income Tax Appeals [CIT(A)] and restored the same to the Assessing Officer for examining it afresh.
The assessee company, Kingfisher Airlines claimed to be engaged in Airline business. The appeals were related to relief granted by CIT(A) in respect of disallowance of 'repairs and maintenance' expenses claimed by the assessee. The Assessing Officer (AO) took the view that the assessee had got 'enduring benefit' by incurring the repairs and maintenance expenses and hence they were capital in nature.
Accordingly, the AO was of the view that the repairs expenses claimed by the assessee in all the four years (2009-2013) needs to be disallowed. Since they were taken as capital in nature, the AO allowed depreciation thereon and accordingly disallowed only net amount.
The AO noticed that the assessee had purchased two helicopters during the year relevant to the assessment year 2009-10. According to AO, though the assessee had claimed depreciation on the purchase of helicopters, they did not declare any revenue therefrom. Hence the AO asked the assessee to submit Directorate General of Civil Aviation (DGCA) records to prove that there was no revenue. The AO had also asked the assessee to furnish the details of expenditure incurred thereon.
However, the assessee failed to produce the necessary details. Since the assessee was unable to prove the business expediency in purchasing the helicopters, the AO disallowed the depreciation claimed on the cost of helicopters. In the absence of any other information, the AO also disallowed an ad-hoc amount of Rs. ten crore as expenses relating to operation of helicopters during the year under consideration.
Initially in the appellate proceedings, the CIT(A) confirmed the disallowance of depreciation. However, the CIT(A) had deleted the disallowance of expenses of Rs. ten crore without examining the details of expenses.
The Tribunal observed that "in effect, both the tax authorities have not examined the nature of expenses incurred by the assessee under the head repairs and maintenance".
The Tribunal opined that without examining the details of repairs and maintenance expenses, particularly with regard to the nature of expenses, one cannot decide the nature of expenses, i.e., whether they are capital or revenue in nature.
However, the ITAT in the interest of natural justice granted that the assessee may be provided with one more opportunity to furnish the details called for by the AO. The appeal filed by the revenue for assessment year 2009-10 were allowed. Therefore, the ITAT set aside the order passed by CIT(A) on this issue and restored the same to the file of the AO for examining it afresh.