2015 (5) TMI 1035

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....panelling of the interiors including temporary sheds for workers, new showcases, false ceilings were done since a new branch was started at Kadavanthara. The Assessing Officer treated the expenditure as capital in nature. Aggrieved, the assessee went in appeal before the Commissioner (Appeals). 4. On appeal, the Commissioner (Appeals), after examining the details furnished by the assessee and the order of the Assessing Officer, observed that the expenditure towards rods, pipes, angles, etc., at Kadavanthara amounts to Rs. 8,06,328. These rods, pipes were used for the construction of a temporary shed. He has also verified the lease deed of the Kadavanthara branch property. The initial lease deed was entered with the building owner in the year 2003 at the time of commencing of construction. The building approval got delayed and another deed was prepared in the year 2009, i.e., on July 2, 2009. The period of lease is for 10 years. The assessee has constructed a temporary shed in the second floor for the workers. According to the Commissioner (Appeals), this cannot be called as a temporary shed but it is a case of permanent fixture for sheltering the work force and it cannot be claime....

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....the judgment, the Tribunal has considered the judgment of the Madras High Court in the case of ClT v. TVS Lean Logistics Ltd. reported in [2007] 293 ITR 432 (Mad) and another judgment of the jurisdictional High Court in the case of Thiru Arooran Sugars Ltd. v. Deputy ClT [2013] 350 ITR 324 (Mad) decided on July 26, 2011. Therefore, respectfully following the decision of the Tribunal "B" Bench in I. T. A. Nos. 1557 and 1558/Mds/11, ABT Ltd. v. Asst. CIT [2013] 21 ITR (Trib) 634 (Chennai) the Commissioner (Appeals) confirmed the action of the Assessing Officer in treating the expenditure as capital in nature. 6. As far as Alinchuvadu branch is concerned, the Commissioner (Appeals) observed that the expenditure incurred in this branch was for Rs. 6,46,929. The expenditure was incurred towards the interiors, floor tiling and construction of temporary shed. The lease agreement for this branch was entered on October 23, 2008, and was for a period of 5 years. A temporary shed for workers stay was constructed along with interiors, floor tiling and temporary shed. Following the discussion made in the case of Kadavanthara branch and following the decision of the Tribunal cited supra, he con....

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....ed by the assessee for the purposes of business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee." 11. To fall within the ambit of Explanation 1 the questions which are to be answered are : "(i) Whether the assessee is carrying on business or profession in a leased building or other rights of occupancy ? (ii) Whether the assessee has incurred any capital expenditure for the purpose of business on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension or improvement in the building ? 12. If the answer to the aforementioned questions is in affirmative, the assessee falls within the purview of Explanation 1 to section 32(1). In the instant case, it is an admitted fact that the assessee has taken building on lease for setting up of bakery. It is also undisputed that the assessee has carried on interior work in the leased building. These interior decoration works carried out by the assessee....

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....er this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view. What advantage did the assessee get by constructing a building which belonged to somebody else and spending money for such reconstruction ? The assessee got a long lease of a newly constructed building suitable to its own business at a very concessional rent. The expenditure therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts. The saving in expenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee therefore could not have claimed any depre ciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure." 16. Thereafter, the apex court referring to several cases dec....