2016 (5) TMI 352 - AT - Income Tax

Revenue's appeal dismissed, store relocation & debenture expenses upheld as revenue expenditures. Precedents & High Court rulings cited.

DCIT, Circle 4 (1), New Delhi Versus M/s Jubilant Food Works Ltd. (Formerly Known As Domino’s Pizza India Ltd)

DCIT, Circle 4 (1), New Delhi Versus M/s Jubilant Food Works Ltd. (Formerly Known As Domino’s Pizza India Ltd) - [2016] 48 ITR (Trib) 302 Issues Involved:1. Deletion of addition of Rs. 12,44,678/- being store relocation expenses by treating the same as revenue expenditure.2. Deletion of addition of Rs. 84,80,000/- being debentures restructuring by treating the same as revenue expenditure.Detailed Analysis:Issue 1: Deletion of Addition of Rs. 12,44,678/- as Store Relocation ExpensesThe Revenue contested the deletion of Rs. 12,44,678/- added as store relocation expenses by the Ld. Commissioner of Income Tax (Appeals) [CIT(A)], arguing it should not be treated as revenue expenditure. The assessee, a company engaged in the manufacture and sale of pizzas, had its case reopened for assessment under section 147 of the Income Tax Act. The Assessing Officer (AO) disallowed the store relocation expenses, treating them as capital expenditure.The CIT(A) allowed the expenses by examining various documents and determining that the expenses were in the nature of rent, security, transportation, and other routine charges, which are revenue in nature. The CIT(A) followed the precedent set in the assessee's own case for the assessment year 2003-04, where similar expenses were allowed.The Tribunal upheld the CIT(A)'s decision, noting that the AO had already allowed similar expenses in the assessment year 2003-04. The Tribunal found no reason to differ from the CIT(A)'s well-reasoned order and dismissed the Revenue's ground of appeal.Issue 2: Deletion of Addition of Rs. 84,80,000/- as Debentures Restructuring ExpensesThe Revenue also contested the deletion of Rs. 84,80,000/- added as debentures restructuring expenses, arguing it should not be treated as revenue expenditure. The CIT(A) allowed the expenses by following the jurisdictional High Court's decision in CIT vs. Gujarat Guardian Ltd., which held that restructuring fees paid to renegotiate the rate of interest on debentures should be allowed as revenue expenditure.The Tribunal upheld the CIT(A)'s decision, referencing its own earlier order for the assessment years 2003-04 to 2005-06, where it had dismissed the Revenue's appeal on similar grounds. The Tribunal noted that the Hon'ble High Court of Delhi had also dismissed the Revenue's appeal in the assessee's own case, confirming that the payment for restructuring debentures was in the nature of debt servicing and not a capital payment.The Tribunal found that the CIT(A) had passed a well-reasoned order and dismissed the Revenue's ground of appeal.Conclusion:The appeal filed by the Revenue was dismissed in its entirety. The Tribunal upheld the CIT(A)'s decisions on both issues, confirming that the store relocation expenses and debentures restructuring expenses were correctly treated as revenue expenditures. The Tribunal relied on precedents set in the assessee's own case and the jurisdictional High Court's rulings to support its conclusions.