2006 (10) TMI 117

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....ated the following substantial questions of law: (i) Whether, on the facts and circumstances of the case, the Tribunal was right in allowing the expenditure incurred on flooring and partitions, etc., for the newly extended area of space, as revenue expenditure, when very clearly new infrastructures have been provided and the space and capacity of the hospital has been increased? (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in allowing the expenditure incurred on flooring and partitions, etc., for the newly extended area of space, co-owners of the property and the directors of the assessee-company are same persons? 2. The brief facts arising out of the above tax case are as hereunder: ....

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....d that the Tribunal ought to have appreciated that the co-owners of the property and the directors of the assessee-company are the same persons and had colluded and have evaded the assessability of the capital expenditure in the hands of the co-owners. An alternative submission also has been made that the Tribunal ought to have applied the proviso under Explanation 1 to Section 32(1) of the Income Tax Act, which is inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1988, and held as capital expenditure. 5. Learned Counsel appearing for the assessee submitted that whenever the tenant had incurred expenditure, it would amount to only revenue expenditure and further stated that Explan....

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....assessee is carried 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. 8. From a reading of the above, it is clear that if the lessee incurs capital expenditure on the building of the nature mentioned above, the said provision treats the building as if owned by the assessee. The Explanation is an exceptiona....