TaxTMI 
TaxTMI 
2022 (2) TMI 215
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....old premises were not temporary without appreciating that the Appellant was permitted to make alterations which were of temporary nature as per the lease agreement entered into with the lessor of the premises. 4. The Learned CIT(A) erred in law and on facts in concluding that the additions made to the leasehold premises were not temporary without appreciating that the Appellant had to remove such partitions/ structures as may have been erected by it on the leased premises to its original condition on expiry of the lease period. as per lease agreement entered into with the lessor of the premises. 5. The Learned CIT(A) in his Order failed to understand the meaning of the term 'Purely temporary erections' included under the head 'Building' in New Appendix I. Part A. Tangible Assets. 6. The Learned CIT(A) ought to have appreciated that additions like air conditioners. electrical fittings, fire and access control. etc on the leased premises were purely of temporary nature and on removal upon expiry of the contract or vacation of premises they would be completely unusable for the Appellant. 7. The Learned CIT(A) erred in law and facts i....
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....d facts in concluding that the issue is not covered in the Appellant's own case by the order of the Hon'ble Delhi Income-tax Appellate Tribunal for AY 2000-01 and AY 200102 and by the order of the Learned CIT(A) itself for AY 2002-03. wherein it was held that the expenditure incurred was to facilitate day to day working so that the Appellant can run the business smoothly and that the entire expenditure on leasehold improvements was allowable as deduction. 2. The only issue that arises for consideration in this appeal is as to whether the Revenue authorities were justified in allowing depreciation @ 10% on improvements carried out in the lease hold premises of Rs. 2,10,01,372/- as against the claim of the assessee that it is entitled to 100% depreciation on the leasehold improvements as the improvements were of the nature falling within the ambit of part-A in Appendix-I to the Income Tax Rules, 1962 (Rules) under the head 'Tangible assets' entry (4) "Purely temporary erections such as wooden structure". The grounds of appeal are argumentative in nature and project the different facets of arguments that the assessee wants advance in support of its claim. 3. The assessee....
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....with 12 mm thikgysum board is fixed on both sides with 50 mm thik glass. ix. Fixing cabin doors. x. Putting false ceiling of 12 mm gypsum board sheets fixed... According to the AO, the expenditure would give enduring benefit and not a temporary one. The expenditure is part of setting up of a business or a new unit of business. To test the expenses as temporary and it is not giving any enduring benefit, the AO called upon the Assessee to furnish the details of all the premises used for the business purpose and the details of expenses incurred in leasehold improvements for the same. The Details provided by the assessee is reproduced below: Sl. No. Location Address Date on which leasehold improvements put to use Amount (Rs.) Date of Vacation of premises 1 Guwahati Mayur Gardens, Ground Floor, Opp. HDFC Bank, G.S. Road, Guwahati- 781005 31-03-2008 12,75,451 Not vacated till date 2 Mumbai AL-Dossal, 50, Pali Road, Bandra, Mumbai- 400050 31-03-2008 24,78,078 vacated in May 2012 3 Bangalore Vaswani Wilshire, No. 14, Commissariat Road, Bangalore - 25. 1/4/2007 1,50,68,567 Not vacated till date 4....
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....; ------------------------ Total Rs. 1,50,68,567/- ------------------------ 4.10 As per schedule 1 of the agreement with the vendor, the scope of work is defined as follows: "1. Detail study of the site/existing sir ictural conditions with infrastructure on site like : AC, Electrical, DG, Power, Fire and Safety, Plumbing and Sanitary with appropriate consultants and the client. 2. Super imposing clients requirement. 1. Schematic proposal and approval. 2. Proposed infrastructure - Renovation of required Civil work, Mezzanince floor structural work, Wet areas, Interiors and chairs. Landscaping, External required glazing and structure, AC, Electrical works, Access control, Fire and Safety." 4.11 As per the agreement, following drawings/details were also made available to the appellant by the vendor in relation to the work assigned to it: Following shall be the deliverables in the form of drawings / details. SUPER SIRUCTURE • Structural layout and details for Ground floor , Entrance, Mezzanine floor, Staircase - Ground and Mezzanine floor. • Fire escape staircase ....
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....ical work includes electrical wirings, various light fixtures, electrical room fittings, switches, boards etc, which would fall within the definition of 'electrical fittings' eligible for depreciation @10% only. 4.14 As regards interiors, a perusal of the details of the agreement reproduced supra shows that the same includes furniture provided in conference room, training room, discussion room, manager room, reception and includes modular furniture, storage units, various counters, chairs, tables, etc. Separate details of the amount spent on each of such item of purchase have not been provided by the appellant. However these items cannot be considered as 'building' to be treated as 'purely temporary erection'. All these items would fall within the definition of furniture and fittings. As regards the remaining interior works including flooring, false ceiling, floor structure work, glazing, etc., the same do not involve any work of temporary erection as the above said work is carried out on already existing structures in the building. So these would form part of the building eligible for depreciation @10% only. 4.15 As regards expenditure of ....
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....nsidered as building or a building in the nature of temporary erection. This amount would fall within the scope of furniture and fittings eligible for depreciation @10%. 4.20 In addition to above, an amount of Rs. 8,97,426/- has been spent on electrical fittings, data and access control system. The same includes work of electrical fittings e.g. internal wiring, switches, distribution boards, light fittings, earthing system etc. In addition to above data and telephone cables had been laid down. Access control includes various appliances or fittings installed for having door access control etc. All these items would fall within the scope of furniture and fittings including electrical fittings eligible for depreciation @10% as the same cannot be considered as building or a building in the nature of temporary erection. 4.21 Another amount of Rs. 2,61,390/- has been spent on various items of electrical fittings which includes main switches, electrical bus-bar, halogen blast and lamps, aluminium and copper cables, sockets, starters, MCBs, light fixtures, electricity meters, earthing etc. All these items would fall within the scope of electrical fittings eligible for dep....
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....ture to the extent of Rs. 2,59,065/-. As regards the balance amount of Rs. 22,19,009/-, a perusal of the detailed invoice shows that the same includes the expenditure on purchase of work station for store keeper, low weight storage unit, conference table, executive table, work station for staff, chairs, display panel, discussion table, counter for customers, soft board for suspended writing, suspended sun board, signage, electrical fittings (Switches, distribution board, lights), bathroom fittings, etc. All these items would fall within the scope of furniture and fittings including electrical fittings eligible for depreciation @10% as the same cannot be considered as building or a building in the nature of temporary erection. Further since these assets worth Rs. 24,78,074/- were put to use for less than 180 days, the depreciation rate would be 5%. 4.26 Guwahati - In relation to expenditure of Rs. 12,75,451/- incurred in Guwahati, the appellant has enclosed copy of an invoice of Rs. 10,35,000/-. For the balance amount of Rs. 2,40,451/-, the relevant details were not produced. Thus it can be presumed that the appellant does not want to dispute the action of the AO in relatio....
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....ions that the nature of improvements cannot be regarded as purely temporary erections entitled to 100% depreciation. As rightly observed by the CIT(A), the very fact that the assessee has claimed depreciation on the lease hold improvements only means that the assessee has treated the expenditure incurred on lease hold improvements as capital expenditure. Learned Counsel however made a submission that the treatment in the books of accounts is not final and determinative. While we agree with this proposition that treatment in the books of accounts is not conclusive but we observe that the issue whether the expenditure is capital or revenue is nature has not been examined by the lower authorities. In this regard, we find that though a specific ground viz., ground No.8 was raised by the assessee before the CIT(A) in this regard, the CIT(A) did not examine this issue specifically. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 inserted Explanation 1 to section 32 w.e.f. 1.4.1988, which reads thus : - "Explanation-1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lea....