2014 (4) TMI 396

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.... facts of the case and the nature of expenses incurred. 2) The assessee reserves right to add, alter or amend the above grounds of appeal as and when found necessary. 2.Assessee-company,engaged in the business of manufacturer of drugs and pharmaceuticals, filed its return of income on 30.09.2009 declaring total income of Rs. 13,01,77,00/-.Assessing Officer (AO) finalised the assessment on 10.10.2011 determining the total income of the assessee at Rs. 1,57,77,060/-. 3.The effective ground of appeal is about disallowance of expenditure amounting to Rs. 24.08 lacs debited under the head 'other operating expenses. During the assessment proceedings AO found that turnover of the assessee had increased by 8.065% whereas the expenditure ha....

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....held that the assessee was entitled for depreciation as per the Income-tax Rules (1962(Rules). He further held that most of the expenditure on the repairs of building was incurred during the 2nd half of the year, that assessee was entitled to claim depreciation @ 5%. After working out the depreciation of Rs. 2.40 lacs he made an addition of Rs. 21.67 lacs to the business income of the assessee. 4.Assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submissions of the assessee and the assessment order, he held that similar issue has been decided by his predecessor against the assessee for the year 22008-09, that the expenditure was capital in nature and needed to be disallowed. 5.Before us, Aut....

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....rs. The complete area of the premises comprises approximately 1500 sq ft on first floor and 2nd floor with 16 to 18 car parking places allocated in the said premises.We observe that the assessee has renovated the said premises by incurring the expenditure aggregating to Rs 59,65,835/- in Financial Year 2007-08, relevant to the assessment year under consideration We are not aware as to whether the assessee has incurred any expenditure in the preceding Financial Year and/or in the succeeding assessment year as well.The assessee after incurring the said expenditure has let out the said premises to M/s S.Kumar Nationwide Ltd at a monthly rent of Rs.15,00,000/- for a fixed period of 24 months, besides taking interest free refundable advance of R....

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....w that the said expenditure cannot be said to be a revenue expenditure but it is a capital expenditure giving enduring benefits to the assessee in the form of regular receipt of monthly rent at the rate of Rs.15,00,000/- per month and interest free refundable security deposits of Rs.1,80,00,000/-.Hence, we are of the consider view that the ld.CIT(A) has rightly held that the said expenditure incurred by the assessee in relation to the premises under consideration for complete renovation to suit the requirements of licencee is a capital expenditure and the assessee is entitled to depreciation. Explanation to section 32(1) of the Act also stipulates that all the expenditures incurred by the assessee in relation to lease premises for renovatio....