AI Drafter 
TaxTMI 
TaxTMI 
2014 (12) TMI 130
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.... is a leading dealer of vehicles, spares and accessories of Maruti Suzuki and is an authorized service centre of its vehicles. The assessee is having dealership in various districts across Kerala and in Chennai, Tamil Nadu. Return of income for the year was filed on 30- 10-2007, which was processed u/s. 143(1). Subsequently, the case was selected for scrutiny and the scrutiny assessment was completed on 31.12.2009, making certain disallowances/additions. Aggrieved the assessee went in appeal before the CIT(A). 5. The first issue is against treating Rs. 3,12,34,772/- being the aggregate of the expenditure incurred on constructing superstructure on leasehold land as revenue expenditure instead of capital expenditure. The assessee had incurred an expenditure of Rs. 2,23,09,152/- for construction of superstructures on leasehold lands/premises and another sum of Rs. 89,25,620/- for setting up of workshop facilities in leasehold premises. As regards Rs. 2,23,09,152/-, it was the contention of the assessee that though this amount was treated as capital expenditure in the books of account of the assessee, the same has been claimed as revenue expenditure in the return of income in view o....
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....ctronic Data Systems (India) (P) Lt. 3. CIT vs. M/s. Armour Consultants P. Lt. 214 Taxman 444 (Mad. HC) 9. On appeal, the CIT(A) considered the decision of the Cochin Bench of ITAT in the case of MM Publications Ltd. and judgment of Madras High Court in the case of CIT vs. TVS Lean Logistics Ltd. (2007) 293 ITR 432 and observed that Explanation1 to section 32(1) of the Act depends upon the construction of any structure or doing of any work in or in relation to, and by way of renovation but not in case of construction of any structure or doing any work where such building is put up or constructed for the purpose of business or profession of the assessee any land taken on lease by the assessee. According to the CIT(A), the assessee did not acquire a capital asset between the two put up a construction of the building only for the purpose of business with the result that the entire construction cost was admissible for deduction as revenue expenditure. Accordingly, the CIT(A) rejected the arguments advanced by the Department. Against this, the Revenue is in appeal before us. 10. The Ld. DR strongly oppose the order of the CIT(A) on this issue and submitted that the provisions o....
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....imited period. These structures were put up for the business purposes and had to be demolished/removed after the period of lease and hence are not of permanent nature. The Ld. AR submitted that the payment of monthly rent is only revenue expenditure and hence payment of such revenue expenditure cumulatively in one year is only revenue in nature. 12. Relating to revenue expenditure on leasehold building, the Ld. AR submitted that the assessee had also taken on lease land and building for its business purposes. But for making it functional the assessee had to incur revenue expenditure in the nature of making temporary partitions, floorings etc. Such expenses were treated as revenue expenditure for the reason that no asset or advantage of an enduring nature was acquired out of such expenses. The Ld. AR submitted that as can be seen from the details of expenditure incurred at each location and nature of facilities created, these facilities are not of a permanent nature and no civil structure has been created. The expenses were only to make the structure useful to the assessee during the tenure of the lease period which was for a short period. 13. The Ld, AR by referring to Ground....
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....adras High Court in the case of TVS Lean Logistics Ltd. is directly on the point. Sanghvi & Doshi Enterprises Ltd. vs. ITO (141 TTJ 1(Chennai)(tm) . Also in N Nambhi D. Dev vs .ACIT (162 TTJ 673) (SB). CIT vs. Godavaridevi Saraf (113 ITR 589) (Bom.) wherein it was held as under: "Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different state, so long as there is no contrary decision of any other High Court on that question." ITO vs. Ranisati Fabric Mills (P) Ltd. (116 TTJ 177) (Mum) wherein it was held as under: "A solitary judgment of any High Court in the country on a particular point or issue should be followed in its letter and spirit by all Benches of the Tribunal. It held......."The better wisdom of the Court below must yield to the higher wisdom of the Court above." 15. The Ld. AR submitted that a similar view was taken in the case of AC vs. Aurangabad Holiday Resorts P. Ltd. (111 TTJ 741) by the Pune Bench of the ITAT and AC vs. Chandra vs. Chandragiri Construction Co. (136 ITD 133(Coch) (tm).. 16. The Ld. AR relied on the following case law: Society of Presentation Sisters vs. ITO (318 ITR (AT....
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....d no asset or advantage of an enduring nature was created. 19. The Ld. AR further relied on the decision of the Hon'ble Supreme Court in the case of LH Sugar Factory & Oil Mills P. Ltd. vs. CIT (125 ITR 293) wherein it was held similar expenditure as revenue. After considering the decision of Travancore Cochin Chemicals Ltd., the Supreme Court held that the decision in the case of TCC is applicable only on its facts. 20. The Ld. AR relied on the following judgments to hold that such expenditure is revenue. Indo Rama Synthetics India Ltd. vs. CIT (333 ITR 18) (Del.) CIT vs. Priya Village Roadshows Ltd. (332 ITR 594) (Del.) 21. In view of the above submissions, the Ld. AR prayed that the order of the CIT(A) may be confirmed. 22. We have heard the parties and perused the record. In the present case, the assessee has taken the land on leasehold on which the assessee constructed super structure and claimed as revenue expenditure. The same was allowed by the CIT(A). The Ld. DR contended that the assessee constructed the building in the leased land and it is not the case of renovation of the leased building or improvement of the leased building as in the case of Joy Aluk....
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....tion is admissible as revenue expenditure. Explanation 1 categorically states that the business or profession is carried on in a leased building and not on land. The Hon'ble High Court in para 4.4 of the judgment further held as under:- "4.4 What constitutes a capital expenditure and what does not, to attract Expln. 1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or improvement to the building which is put up in a building taken on lease by him for carrying on his business and profession of the assessee, but not in a case of construction of any structure or doing any work or relation to where such building is put up/constructed for the purpose of business or the profession of the assessee in a land taken on lease by the assessee." 25. Thus it is clear that the ratio laid down by the Hon'ble Madras High Court in the said judgment does not support the case of the assessee. 26. In the present case, the assessee has taken land on lease and made certain construction. It is the case that the assesse has constructed a new building on the leased land. The Hon'ble High Court has fur....