ACIT, CHENNAI V. M/s. Nippo Batteries Co. Ltd., CHENNAI

ITA 1139/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5235 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Revenue expenditure

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: B - BENCH:CHEN NAI (BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER & ABRAHAM P. GEORGE. ACCOUNTANT MEMBER) ITA NOS.1139 & 1140/MDS/10 ASST.YEARS 2006-07 & 2007-08 THE ACIT, CO. CIR.1V(4), CHENNAI (APPELLANT) VS. M/S NIPPO BATTERIES CO.LTD, POTTIPATTI PLAZA,4 TH FLOOR, 77 NUNGAMBAKKAM H.RD, CHENNAI 600034 (PAN AAACI2291L) (APPELLANT) APPELLANT BY RESPONDENTS BY: SHRI P.B.SEKARAN,CIT(DR) SHRI R.VIJAYARAGHAVAN ORDER PER SHRI ABRAHAM P.GEORGE, A.M: THESE ARE APPEALS OF THE REVENUE FILED AGAINST THE ORDERS OF CIT(A) DATED 15-04-2010 FOR THE RESPECTIVE ASST. YEARS. GR IEVANCE OF THE REVENUE IS THAT THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON STRUCTURES COSTING ` 49,36,976/- FOR ASST. YEAR 2006-07 AND ` 24,75,200/- FOR ASST. YEAR 2007-08 CONSIDERING IT AS TEMPORARY IN NATURE. ACCORDING TO THE REVENUE, THE ITEMS INVOLVED HAD A LONG PERIOD OF LI FE AND CIT(A) ADMITTED ITA NO. 1139-40/MDS /10 2 SUCH CLAIM UNDER SEC.30(A)(I) OF THE INCOME-TAX ACT , 1961 (THE ACT FOR SHORT). FURTHER AS PER THE REVENUE, RELIANCE PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. TVS LEAN LOGISTIC LTD. (293 ITR 432) WAS INAPPROPRIATE SINCE THE FACT S WERE NOT COMPARABLE. 2. SHORT FACTS OF RELEVANCE ARE THAT ASSESSEE HAD DURING THE IMPUGNED ASST. YEARS CLAIMED DEPRECIATION ON CERTAIN BUILDIN G CONSIDERING IT TO BE PURELY TEMPORARY ERECTIONS. DEPRECIATION CLAIM WAS AT THE RATE OF 100% AS PROVIDED IN PART-A, OF APPENDIX-I TO INCOME-TAX RUL ES, 1962 (RULES FOR SHORT) CONSIDERING THE ADDITION TO BE OF PURELY TEM PORARY ERECTION LIKE WOODEN STRUCTURES. HOWEVER, THE AO WAS OF THE OPINI ON THAT THE PARTICULARS PROVIDED BY THE ASSESSEE DEMONSTRATED THAT THE ITEM S WERE GLASS AND ALUMINUM FRAME WORKS, FALSE CEILING, INTERIOR WORK, BEDS AND OTHER WOODEN STRUCTURES. HE, THEREFORE, HELD THAT NORMAL DEPRECI ATION AS ALLOWABLE TO BUILDINGS ALONE, COULD BE CONSIDERED. 3. IN ITS APPEAL BEFORE THE CIT(A) ARGUMENT OF THE ASSESSEE WAS THAT USE OF THE WORD WOODEN STRUCTURES APPEARING AS A PART OF ITEM NO.4 FALLING UNDER THE MAIN HEADING OF BUILDING, IN PAR T-A OF APPENDIX I TO THE RULES WAS ONLY ILLUSTRATIVE AND ITEMS LIKE GLASS AN D ALUMINUM FRAMEWORK, CARPET, AND WOODEN STRUCTURE COULD NECESSARILY ONLY BE CONSIDERED AS TEMPORARY ERECTIONS. ACCORDING TO THE ASSESSEE, NO CAPITAL ASSET WAS BEING BROUGHT INTO EXISTENCE BY SUCH ERECTIONS. AN ALTERNATIVE PLEADING ITA NO. 1139-40/MDS /10 3 WAS ALSO MADE THAT THE EXPENDITURE SHOULD BE ALLOWE D AS REVENUE OUTGOES, IF IT WAS NOT CONSIDERED AS FALLING UNDER THE HEAD PURELY TEMPORARY ERECTION SUCH AS WOODEN STRUCTURES. LD. CIT(A) WAS APPRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HIM , THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE ITEMS OF THE NATURE MENTIONED ABOVE, WAS PURELY REVENUE IN CHARATER. FOR COMING TO THIS CON CLUSION HE RELIED ON THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE O F MODI SPINNING. & WEAVING. MILLS CO. LTD. (200 ITR 544), CIT VS. HI L INE PENS P. LTD. (306 ITR 182) AND OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. TVS LEAN LOGISTIC LTD. (293 ITR 432). ACCORDING TO THE CIT(A), ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET NOR DID THE CONST RUCTION OR ERECTION, RESULT IN ANY PERMANENT STRUCTURES. HE ALSO NOTED THAT THE ADDITIONS WERE MADE IN THE REGISTERED OFFICE OF THE COMPANY WHICH WAS W ORKING FROM A RENTED PREMISES. HE, THEREFORE, HELD THE CLAIM TO BE ALLOW ABLE AS REVENUE EXPENDITURE. 4. NOW BEFORE US, LD. DR ASSAILING THE ORDER OF THE CIT(A), SUBMITTED THAT THE ITEMS ACQUIRED BY ASSESSEE WERE NOT PURELY TEMPORARY STRUCTURES LIKE WOODEN STRUCTURES. ACCORDING TO HIM, THE USE O F THE STRUCTURES GAVE AN ENDURING BENEFIT TO THE ASSESSEE RESULTING OUT OF S UBSTANTIAL RENOVATION. PER CONTRA, LD. AR STRONGLY SUPPORTED THE ORDERS OF THE CIT(A) AND SUBMITTED THAT EXPENDITURE ON RENOVATION/REPAIR FOR CONDUCTING THE ITA NO. 1139-40/MDS /10 4 BUSINESS WAS ALLOWABLE AS REVENUE OUTGOES AS HELD B Y THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. LAXMI TAL KIES (275 ITR 125). FURTHER RELIANCE WAS PLACED BY THE LD. AR ON THE DE CISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AY ESHA HOSPITALS P. LTD. ( 292 ITR 266) AND ALSO THAT OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S SUNDARAM BNP PARIBAS ASSET MANAGEMENT C O. LTD. (ITA NOS. 518,519 & 710/MDS/10 DATED 07-01-2011). 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. UNDISPUTEDLY THE EXPENDITURE INCURRED BY ASSESSEE W ERE ON ITEMS LIKE GLASS AND ALUMINUM FRAMEWORK, CARPETS, WOODEN STRUC TURES, GYPSUM BOARD AND WOODEN STRUCTURES. IN NO WAY WE CAN CONSI DER THESE ITEMS AS SOMETHING WHICH GIVE THE ASSESSEE AN ENDURING BENEF IT. THE RENOVATIONS WERE CARRIED OUT BY THE ASSESSEE IN ITS REGISTERED OFFICE WHICH WERE RENTED PREMISES AND THIS FINDING OF THE CIT(A) HAS NOT BEE N REBUTTED BY THE REVENUE. MAY BE, THE CLAIM OF 100% DEPRECIATION AVA ILABLE ON PURELY TEMPORARY ERECTION SUCH AS WOODEN STRUCTURES, MIGH T NOT HAVE BEEN CORRECT, BUT, NEVERTHELESS, EFFECT OF 100% DEPRECIA TION AND ALLOWANCE OF THE CLAIM AS REVENUE EXPENDITURE HARDLY MAKE ANY D IFFERENCE. THE CLAIM OF THE ASSESSEE COULD ONLY BE CONSIDERED AS REVENUE IN CHARACTER BY THE VERY NATURE OF THE OUTGOES. IN THE CASE OF LAXMI TA LKIES (SUPRA), HONBLE GUJARAT HIGH COURT CLEARLY HELD THAT EXPENDITURE ON RENOVATION, ITA NO. 1139-40/MDS /10 5 REFURNISHING AND MODERNIZING BUSINESS PREMISES COUL D BE ALLOWED AS REDUCTION ON REVENUE ACCOUNT, WHEN THE EXPENDITURE WAS INCURRED IN RENTED PREMISES. EVEN IF WE CONSIDER THAT THE EXPEN DITURE WERE INCURRED IN A PREMISES OWNED BY THE ASSESSEE, DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF ACT VS. M/S LINTAS (I) LTD. (ITA NOS.1696 & 1601/MUM/06 DATED 18-10-2010) WOULD COME TO ASSESSE ES AID. IT WAS HELD BY THE MUMBAI BENCH THAT REPAIR, MAINTENANCE A ND RENOVATION EXPENDITURE OF BUILDING, MACHINERY AND EQUIPMENT T O KEEP THE ASSET IN GOOD WORKING CONDITION COULD NOT BE CONSIDERED AS C APITAL OUTGO. AGAIN THE COORDINATE BENCH OF THE TRIBUNAL IN SUNDARAM BNP PA RIBAS ASSET MANAGEMENT CO. LTD. (SUPRA) HELD AS UNDER IN PARA-3 OF ITS ORDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE BREAK UP OF THE EXPENSES WHICH HAVE BEEN DISALLOWED CLEAR LY SHOWS THAT THE EXPENDITURE ARE ON THE INTERIOR DECORATIONS AND CREATION OF THE OFFICE ATMOSPHERE. THE EXPENDITURE HAS NOT RESULTED IN ANY BUILDING COMING INTO EXISTENCE NOR HAS THE EXISTING BUILDING BEEN MODIFIED OR THE STRUCTURE ALTERED. AS THE EXISTING BUILDING HAS NOT BEEN ALTERED AND THERE IS NO CHANGE TO ITS STRUCTURE AS A RESULT OF THE EXPENDITURE INCURRED BY THE ASSESSEE, IT CANNOT BE SAID THAT TH E EXPENDITURE INCURRED BY ASSESSEE IS IN THE CAPITAL FIELD. FURTH ER A PERUSAL OF THE EXPENDITURE CLEARLY SHOWS THAT IT IS IN THE REVENUE FIELD. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE EXPENDIT URE ON THE REPAIRS AND MAINTENANCE IN THE FORM OF ELECTRICAL F ITTINGS, ELECTRIFICATION, CABINET, WORK STATION, PARTITION, CUPBOARD, STAND ETC. ARE LIABLE TO BE TREATED AS A REVENUE EXPENDITURE. IN THE CIRCUMSTANCES, THE ORDERS OF THE LD. CIT(A ) AND THE AO ARE REVERSED ON THIS ISSUE AND THE AO IS DIRECTED TO GRANT THE A SSESSEE THE CLAIM OF REVENUE EXPENDITURE IN REGARD TO THE SAID EXPEND ITURE. CONSEQUENTLY, THE DEPRECIATION AS ALLOWED BY THE AS SESSING OFFICER ON THE SAID EXPENDITURE WHICH HAS BEEN CAPITALIZED WOULD STAND REVERSED. ITA NO. 1139-40/MDS /10 6 WE ARE, THEREFORE, OF THE OPINION THAT LD. CIT(A) W AS ABSOLUTELY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. NO INTERFERENCE IS CALLED FOR. 6. IN THE RESULT, APPEALS OF THE REVENUE FOR BOTH Y EARS STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN 21 - 04-2011 . SD/- SD/- (U.B.S.BEDI) JUDICIAL MEMBER (ABRAHAM P.GEORGE) ACCOUNTANT MEMBER CHENNAI: 21ST APRIL, 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.