TaxTMI 
TaxTMI 
2016 (12) TMI 743
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....and related activities. For the year under consideration, the assessee filed return of income declaring loss of Rs. 5,95,36,759/- on 13/10/2007. The case was selected for scrutiny under Computer Assisted Selection of Scrutiny (CASS) and statutory notice was issued and complied with. In the scrutiny proceedings, the Assessing Officer made certain additions including the disallowance of depreciation claimed of Rs. 31,97,677/- on temporary structure at the rate of 100% by the assessee. The learned Assessing Officer, however, allowed depreciation at the rate of 10% on the expenses of Rs. 31,97,677/- amounting to Rs. 3,19,767/-. The learned Commissioner of Income-tax (Appeals) also sustained the disallowance of 100% depreciation and allowed 10% depreciation on the expenses claimed by the assessee as in the nature of temporary erections. Aggrieved with the finding of the learned Commissioner of Income Tax (Appeals) on the issue of depreciation on temporary structure, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. In the ground No. 1, the assessee has challenged the upholding of disallowance of depreciation claimed at the rate of 100% on struc....
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....fter taking on lease and was for enduring benefits and not in the nature of repairs or renovation of the leased premises and thus the case laws referred by the learned Authorized Representative were not applicable over the facts of the assessee. 6. We have heard the rival submissions and perused the relevant material on record. We find from the para -B of terms of lease agreement, which is available on page 1 to 20 of the assessee's paper book that the assessee, has taken factory premises on lease for a initial period of five years from 01/03/2006. The relevant financial year in the case of the assessee started from 01/04/2006, therefore, the premises have been taken on lease, one month prior to the beginning of the relevant financial year. In the year under consideration, the assessee carried out various works, which have been claimed by the assessee of temporary nature. On perusal of page- 21 of the assessee's paper book, we find that the assessee carried out work from following parties:- Details of Temporary Shed From 01.04.2006 to 21.03.2007 SI. No. Date of Entry Name of Party Date Amount &n....
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....rial Corporation 21/03/2007 20,500.00 3,442,549.49 7. Further on perusal of the bills available in the paper book, we find that according to the page 22 of the paper book, a bill of Rs. 78,297/- has been raised by M/s. Design Studio for carrying out civil construction, flooring etc. Similarly, on page 24, bill of M/s. Design Studio of Rs. 1,36,748/- for constructing trenches, transformer foundation, steel structural etc. is available. On page 25, again a copy of the bill of M/s. Design Studio, amounting to Rs. 31,470/- for demolition of wall, slab casting, construction of brick wall, plaster etc. has been filed. On page 35, 36 and 37, copy of a bills of M/s. Design Studio of Rs. 1,02,011/- is available which contains work in the nature of civil construction like Crane girder fixing, Exhaust Fan fixing, motor foundation for cooling tower, Air washer tank foundation, diesel tank foundation. According to the page No. 40, which is a bill of design studio for work of construction of brickwall, plaster, steel door window etc. carried out. On page 23, a copy of Bill of M/s Abhishek ....
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....s with the factory. In the case of M/s. Dredging International India Private Limited (supra) the expenses incurred were related to the temporary housing units at the project site in Hazira, on the land not owned by the assessee company, which were required in connection with execution of the contractual work and not for the other purposes. In the case of M/s Nippo Batteries Company Limited ( supra) also following the decision of Mumbai bench of Tribunal in the case of ACIT vs. M/s. Lintas (I) Ltd (ITA Nos. 1696 and 1601/Mum/06 dated 18-10-2010) it is held that repair and maintenance and renovation expenditure or building, machinery and equipment to keep the asset in good working condition ITA No.163/Del/2012 AY: 2007-08 could not be considered as capital outgo. In the case of Amrutanjan Finance Ltd (Supra), the Hon'ble Madras High Court has held the expenses of temporary wooden structure and partitions for running computer centres is eligible for 100% depreciation, but from the facts of the case it is not clear whether the expenses were in the nature of repairs or first-time installments. In the case of Peri (India) (P) Ltd (supra) also the Tribunal has held the expenses incurr....
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....A No. 1716/Del/2014, dated 15th February, 2016, has decided the identical issue as under: "18.1. The only other ground raised in this appeal is against the confirmation of addition of Rs. 23,91,810/- towards the expenditure incurred on account of leasehold improvements by treating the same as capital in nature. 18.2. The facts apropos this issue are that the assessee claimed leasehold improvement expenses of Rs. 23.90 lac and architect fee of Rs. 33.14 lac as revenue. The AO observed that the assessee started its business during this year only and civil and construction work was done on the premises taken on lease. He treated this ITA No.163/Del/2012 AY: 2007-08 work as construction of a permanent structure on leasehold premises. After entertaining objections from the assessee, he made disallowance of Rs. 51,34,426/- (Capitalization of two amounts of Rs. 23.90 lac and Rs. 33.14 lac as reduced by depreciation). The ld. CIT(A) allowed the assessee's claim in respect of payment to architect amounting to Rs. 33.14 lac. However, the remaining amount of Rs. 23.90 lac was treated as capital in nature. The assessee is aggrieved against the confirmation of addition to ....
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....on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the 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." 18.6. A circumspection of the above Explanation reveals that where a business is carried on in a building not owned by the assessee but in respect of which it holds a lease or either occupancy rights, then the expenditure on i. the construction of a structure or ii. doing of any work in or in relation to and by way of renovation or extension of, or improvement to the building, shall be considered as structure or work in the nature of building owned by the assessee for the purpose of depreciation. Spirit and text of Explanation 1 to section 32 is that any capital expenditure by the assessee on a building not owned by him, in which he carries on the business, shall be considered as building owned....