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2015 (9) TMI 894

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....be allowed. 2. The brief facts of the case are : The assessee company (formerly known as M/s. Shirke Construction Equipments Private Limited) is engaged in manufacturing of tower Cranes and Mast Inserts, which are used in tower Cranes. The assessee filed its return of income for the assessment year 2008-09 on 12-03-2009 declaring total income of Rs. 19,49,46,219/-. The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued on 07-09-2009. Since, the assessee company had certain international transactions with its AE, the case of the assessee was referred to Transfer Pricing Officer (TPO). Apart from international transactions certain additions/disallowances were made by the Assessing Officer in respect of domestic transactions. The assessee had incurred an expenditure of Rs. 1,39,96,739/- on improvement of land taken on lease for the storage of raw materials and finished goods. The assessee claimed the said expenditure as revenue in nature. On the other hand, the Assessing Officer held the same to be capital in nature. Aggrieved by the findings of Assessing Officer in draft assessment order qua, the nature of expenditure on leasehold property, the assesse....

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....aken on lease by M/s. Shirke Construction Equipments Private Limited from B.G. Shirke Construction Equipments Pvt. Limited. The assessee had came into picture much later. As such, the assessee cannot claim the expenditure incurred on construction of new structures as revenue. The ld. DR vehemently defended the orders of the authorities below. In support of her submissions the ld. DR placed reliance on the following decisions: i. CIT Vs. Khimline Pumps Ltd.; 258 ITR 459 (Bom). ii. JCIT Vs. Mukund Ltd.; 106 ITD 231 (Mum)(SB). iii. National Stock Exchange of India Vs. ACIT in ITA No. 3799/Mum/2004 for assessment year 1998-99 decided on 27- 04-2011. 5. We have heard the submissions made by the rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the respective sides have placed reliance. The undisputed facts in the case are : M/s. Manitowoc Company Inc, acquired 100% shares of M/s. Shirke Construction Equipments Private Limited through a group company named Manitowoc Crane Group Asia Private Limited, Singapore on 19-07-2007. Subsequently, the name of Indian company was changed to Potain India Private Limited. On 18-07-2007....

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....tics Ltd. (supra) has explicitly explained the provisions of Explanation 1 to section 32. The relevant extract of the order of Hon'ble High Court is as under: "What constitutes a capital expenditure and what does not, to attract Explanation 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. Because the assessee did not acquire a capital asset, viz., the land in the instant case, but has put up a construction of the building only for the business advantage, with the result the entire construction cost is admissible as the revenue expenditure." 8. In the present case, the assessee constructed storage sites on a vacant piece of land for storage of raw materials and finished goods. It is not the case of Revenue that ....

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.... been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." 10. An analysis of the facts in the present case, makes it clear that the structures created by assessee for convenience of its business does not belong to the assessee. No new asset has been acquired by the assessee. The assessee created the structures on lease hold land for conducting its business in more profitable and convenient manner. Therefore, we are of the considered opinion that the expenditure incurred is of revenue in nature. 11. The ld. DR in support of his submissions has placed reliance on the decision of Jurisdictional High Court in the case of CIT Vs. Khimline Pumps Ltd. (supra). In the said case a plot of land was leased by MID....