2016 (4) TMI 870

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.... capitalized in and claimed depreciation. 2. That, on the facts and circumstances of the case, the ld. CIT(A) has erred in law as well as on facts in holding that the assessee is not an owner of such booths whereas it has been mentioned in the agreement that the assessee is the sole owner of these booths for the period of 15 years after which the booths will be handed over o the Kolkata Police. 3. That, on the facts and circumstances of the case, the ld. CIT(A) has erred in law as well as on facts in allowing depreciation at the rate of 100 percent on Police Booth treating it as temporary erection whereas such booths are included in the block of assets under the head 'Buildings' as per the 'Depreciation Schedule' of tangible assets, filed by the assessee along with Return of Income which entitles the assessee to claim depreciation at the rate of 10 percent." Shri Miraj D Shah, Ld. Authorized Representative appearing on behalf of assessee and Shri Satyendra Mohan Das, Ld. Departmental Representative appearing on behalf of Revenue. 2. Grounds raised by Revenue in its appeal are common in nature. The common issue is that Ld. CIT(A) erred in treating the expense....

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....ade with KP. 3) Assessee itself is agreeing that the live span of said temporary police booths for 2 years so @ 100% depreciation cannot be allowed. 4) As per IT. Rules 1962, depreciation of such structure is allowed @ 10% only. So the depreciation claimed @ 100% by assessee is disallowed. 3. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has deleted the addition made by Assessing Officer by observing as under:- "5. I have considered the submission of the A/R, perused the impugned order, computation of income, audited accounts, agreement dated 7th April 2005 and the letter dated 6/12/2008. I have also gone through the judicial decisions on which reliance was placed. I find that the land on which the booths were erected belonged to Kolkata Municipal Corporation & this fact is not in dispute. The letter issued by the Addl. Commissioner of Kolkata Police dated 16/12/2008 shows that the police booths was the property of Kolkata Police which the appellant was obliged to maintain in exchange of availing exclusive right to place advertisement on the said booths. The possession of the booths always remained with Kolkata Police who had fully righ....

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.... 'There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, my, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. Even the test itself restricts the application of the test to the special cases as it uses the wording ....

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....purposes of trade or business is that it is incurred by the assessee as incidental to his trade for the purposes of keeping the trade going and of making it pay and not in any capacity other than that of a trader. The question whether a particular expenditure is a revenue expenditure incurred for the purposes of the business must be determined on a consideration of all the facts and circumstances and by the application of the principle of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on, or conduct of, the business that it may be regarded as an integral part of the profitearning process and not for acquisition of an asset or a right of a permanent character the possession of which is a condition for the carrying on of the business, the expenditure should be regarded as a revenue expenditure incurred wholly and exclusively for the purposes of the business.' 10. Applying the test laid down in above judicial decisions; to the facts of the assessee's case, I find that the expenditure incurred by the assessee on erecting Police Booths did not result in acqui....

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....s and if instead of paying such fees periodically; the appellant incurred expenditure on erection of police booths; such expenditure continued to retain same character in the hands of the payer. Irrespective of the period for which assessee displayed advertisements, the assessee's contractual obligation to incur initial expenditure on erection of booths & thereafter maintain it during contract period remained unchanged & therefore merely because in the initial year assessee expended large sums on erection of Booths did not change the character of expenditure from revenue expenditure to capital. In my considered opinion therefore the entire expenditure incurred on erection of Police Booths was revenue in nature and accordingly the AO is directed to allow the deduction for Rs. 1,02,19,884/- being the expenditure incurred on erection of Police Booths. Since I have allowed the deduction for the expenditure incurred on erection of police Booths as revenue deduction; the AO is directed to withdraw the depreciation of Rs. 10,21,988/ which AO allowed in the assessment." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 4. We have heard rival parties and peru....