TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 663
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....law, the learned Commissioner of Income Tax Appeals erred in confirming the action of Assessing Officer, of treating Rs. 37,56,259/- as capital expenditure instead of revenue expenditure as claimed by the assessee and disallowing Rs. 35,68,446/- (being 37,56,259 less 7.5% depreciation)." 3. The brief facts of the case are that the assessee company is engaged in the business as exporter of sugar mill machineries, spares and other captive inputs in sugar industry. During the course of assessment proceedings u/s. 143(3) of the Act, the assessee was asked by the AO to give details of repairs and maintenance expenses and on perusal of the details filed by the assessee, the A.O. observed that part of the repair expenses were capital in nature. The assessee was asked to explain as to why the renovation expenses should not be capitalized and how it can be allowable as revenue expenditure. In reply, the assessee submitted as under :- "The total expenditure of Renovation for the year ended 31-03- 2009 is Rs. 94,61,331/- out of which Rs. 57,05,072/- has been capitalized the details are as follows: 1) Furniture & Fixtures - Rs. 26,99,495 2) Office Equipment- Rs. 12,24,142/- 3) Air....
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....milarly the assessee's reliance in the case of CIT v. Hedge Consultancy, 127 Taxman 597 is also misplaced on account of the reasons mentioned above as the case pertained to assessment year 1988-89. Thus, in nutshell the A.O. rejected the contentions of the assessee and held that the expenses of Rs. 37,56,259/- out of repairs and maintenance is capital expenditure and depreciation @ 50% of 10% i.e. 5% was allowed to the assessee while the remaining sum of Rs. 35,68,446/- was added to the total income of the assessee by the AO vide assessment order dated 20-12-2011 passed u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 20-12-2011 passed by the A.O. u/s 143(3) of the Act, the assessee filed its first appeal before the ld. CIT(A). 5. Before the ld. CIT(A) the assessee reiterated the submissions what was made before the A.O. and submitted that the expenses of Rs. 37,56,259/- was incurred on current repairs as well as expenses incurred on furniture and fixtures which are fixed to the office and cannot be removed without substantial damage and making the item non-usable. It was submitted that the premises was taken on leave and license basis and was not owned by the as....
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.... the assessee is in appeal before the Tribunal. 7. The ld. Counsel for the assessee submitted that the assessee has taken a premise on rent on leave and license basis. Expenditure to the tune of Rs. 94,61,331/- was incurred by the assessee towards renovation work, out of which Rs. 57,05,072/- was capitalized by the assessee and balance of Rs. 37,56,259/- was claimed as revenue expenditure as these amounts are expended on items of floor marbles and its fixing, civil work, flooring, civil work and painting on the premise etc. and hence these cannot be removed from the premise hence these are written off as revenue expenditure. The ld. Counsel drew our attention to the paper book page 2 which contains all the details of the repair expenses of Rs. 37,56,259/- such as breaking old plaster, floor marbles and fixing, plastering, floor tiles, filling up the floor, POP work, ceiling work, carpentry work, partition and architect fees etc. 8. The ld. D.R., on the other hand, relied on the order of the authorities below. 9. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has taken the premise on leave and license....
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....nsive renovation involving civil work. This expense resulted in an advantage/benefit of a enduring nature in as much as it inter alia resulted in the appellant being able to accommodate more number of employees and facilitate improving its trading operations. Thus the benefit obtained by the appellant, according to the Authorities was substantially in the capital field and could not be entirely allowed as revenue expenditure. The submission on behalf of the appellant, before us, that as the appellant does not own the premises the expenditure incurred on renovation goes to the benefit of the owner of the said premises, therefore in the hands of the tenant it can only be revenue expenditure is more then met by the impugned order of the Tribunal. This in view of the fact that the impugned order places reliance upon Explanation-I to Section 32 of the Act, which allows depreciation to a tenant in case of any capital expenditure incurred for renovation/improvement to the building in the hands of the tenant by deeming the tenant to be the owner of the premises. In this case the benefit of depreciation has been given to the appellant on the capital expenditure incurred for renovation. 6....
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....pheld the view of the Tribunal that the expenditure for repairs and renovation was in the revenue field. As pointed out above, in the present case, there is nothing on record to indicate that any benefit was obtained by the assessee in the revenue field for having expended the amount of Rs. 31.32 lakhs for repairs/renovation of the office premises. Thus, the aforesaid decisions would have no application to the facts of the present case. 8. It was next contended there is no basis indicated by the Authorities under the Act for apportioning the expenditure in the ratio of 75% and 25% between capital and revenue account by the Revenue. We find that the authorities on facts found that some of the expenditure incurred out of Rs. 31.32 lakhs was incurred for maintenance such as plastering etc. This allowing of 25% was on the basis of an estimate. Nothing has been shown to us that the estimation by the authorities on the basis of facts found was in any way arbitrary or perverse. Thus we find no merit in the above submission. 9. In the view taken by us that the expenditure of 75% of Rs. 31.32 lacs i.e. Rs. 23.49 lakhs is on capital account, the submission to claim deduction on account....