DCIT, CHENNAI V. N.Raghunath, CHENNAI

ITA 12/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4668 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-01-2017
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Depreciation; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.12/MDS./2017 / ASSESSMENT YEAR : 2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE -2, CHENNAI 600 034. VS. MR.N.RAGHUNATH, NEW NO.19,OLD NO.9,JUDGE JAMBULINGAM STREET, MYLAPORE, CHENNAI 600 004. [PAN ACCPR 4059 E] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.A.V.SREEKANTH, JCIT, D.R /RESPONDENT BY : MR.T.N.SEETHARAMAN, ADVOCATE / DATE OF HEARING : 21 .03.2017 !' / DATE OF PRONOUNCEMENT : 01 .05 .2017 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, CHENNA I DATED 31.10.2016 PERTAINING TO ASSESSMENT YEAR 2013-14. ITA NO.12/MDS./2017 :- 2 -: 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE EX PENDITURE INCURRED ON INTERIOR DECORATION OF SHOW ROOMS, INVOLVING HUGE S UMS ARE ALLOWABLE AS REVENUE EXPENDITURE, WITHOUT APPRECIATING THE FA CT THAT THE A.O., HAD ANALYZED THE MODIFICATIONS IN MINUTE, AND DISAL LOWED ONLY A PORTION OF THE EXPENDITURE CLAIM AS CAPITAL, AFTE R JUSTIFICATION, THAT THE ADDITIONS WOULD HAVE ENDURING EFFECT, ON THE AS SESSEES BUSINESS ?. 2.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT THE INTERIOR WORK INVOLVING DESIGNING OF SHOWROOMS WITH ELECTRICAL INSTALLATIONS AND THE MATERIAL USED THEREIN HAVE AN ENDURING VALUE AND ENDURING BENEFIT FOR ENHANCEMENT OF ASSESSEES BUSINESS ACTIVITY AND ARE AKIN TO CAPITEL ASSET UNDER FURNITURE AND FITTINGS ONLY. 2.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT IN THE BOOKS OF ACCOUNTS THE ASSESSEE HAD CLAIMED DEPRECIATION AT 1 0% ONLY ON SUCH INTERIOR DECORATION, AND ONLY FOR THE PURPOSE OF CO MPUTATION OF TOTAL INCOME, THE ASSESSEE HAS CLAIMED DEPRECIATION AT LO O% FROM WHICH IT IS EVIDENT THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER THE I.T. ACT ONLY TO DIMINISH THE TAX LIABILITY. 2.4 THE LEARNED CIT(A) ERRED IN APPLYING THE DECISI ON IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS UPTO 2012-13, WHEREI N THE 100% DEPRECIATION CLAIM OF THE ASSESSEE ON THE SAID TEMP ORARY CONSTRUCTIONS, WERE TREATED AS PERMANENT STRUCTURES BY THE A.O, WHEREAS FOR THE A.Y. 2013-14, THE A.O HAD TREATED A PORTION OF THE MODIFICATION CLAIM, AS CAPITAL AFTER DUE VERIFICATI ON. 2.5 THE LEARNED CIT(A) ERRED IN APPLYING THE DECISI ON OF THE HONBLE ITAT ALSO, RELATING TO THE EARLIER YEARS (2008-09 TO 201 0-11 ), WHEREIN THE DECISION WAS RENDERED IN THE CONTEXT OF TEMPORARY C ONSTRUCTIONS ELIGIBLE FOR 100% DEPRECIATION, WHEREAS FOR THE PRE SENT A.Y. THE ISSUE IS TREATMENT OF A PORTION OF THE REVENUE EXPENDITUR E CLAIM ON INTERIOR DECORATION AS CAPITAL, AFTER THREADBARE ANALYSIS OF ALL THE EXPENDITURE CLAIMS? 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE SIMILAR ISSUE CAME FOR CONSIDERATION B EFORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.2280, 2281 & 2282/MD S./2015 FOR ITA NO.12/MDS./2017 :- 3 -: ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11 DATED 29.06.2016 WHEREIN THE TRIBUNAL HELD AS FOLLOWS:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE LD.CIT(A). IN OUR OPINION, THE ISSUE IS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF JURISDICTIONAL H IGH COURT IN THE CASE OF CIT VS. ARMOUR CONSULTANT (P) LTD. REPORTED IN (2013) 355 ITR 418(MAD.) WHEREIN HELD THAT:- THE EXPENDITURES WERE MADE BY THE ASSESSEE MAINLY TOWARDS CHARGES FOR DESIGN, LAYOUT AND MATERIAL CONSTRUCTION, FABRICATION WORKS. BOTH THE APPELLATE AUTHORITIES HAD POINTED OUT THAT THE ASSESSEE-COMPA NY WAS REQUIRED TO INCUR SUCH EXPENDITURE FOR PROVIDIN G PARTITIONS, VINYL FLOORING AND THE INTERIOR DECORAT ION IN ORDER TO PROVIDE BUSINESS AMBIENCE AND ACHIEVE FUNCTIONAL UTILITY. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD SPECIFICALLY POINTED OUT THAT THE EXPENDITURE MADE BY THE ASSESSEE TO MAKE THE PREMISES MORE USEFUL AND ENHANCE ITS FUNCTIONAL UTI LITY WILL NOT COME UNDER THE PURVIEW OF CAPITAL EXPENDIT URE AND BY FOLLOWING THE DECISION OF THIS COURT REPORTE D IN CIT V. SANCO TRANS LTD. [2006] 284 ITR 51 (MAD) THE COMMISSIONER (APPEALS) FOUND THAT THOSE EXPENDITURE S ARE TO BE ALLOWED ONLY AS A REVENUE EXPENDITURE AND ALSO HELD THAT THE ASSESSEE WAS ONLY A LESSEE I N RESPECT OF THE PREMISES IN WHICH IT WAS SETTING UP ITS OFFICE AT M UMBAI. THE LEASE PERIOD WAS 30 MONTHS. THE DEDUCTION WAS SOUGHT IN R ESPECT OF THE EXPENSES MADE TOWARDS DESIGNING AND LAY OUT AS WELL AS OTHER TEMPORARY PARTITION AND CONSTRUCTION MADE FOR MAKIN G THE OFFICE FUNCTIONAL. THEREFORE, THE EXPENDITURE ON SETTING U P OF A NEW OFFICE AT MUMBAI OF RS.57,25,036 WAS ALLOWABLE AS REVENUE EXPENDITURE. 5. BEING SO, IN OUR OPINION THE CIT(A) HAS TAKEN C ORRECT VIEW OF THE FACTS OF THE CASE AND DECIDED THAT THE EXPEN DITURE INCURRED ON LEASED PREMISES ON TEMPORARY WOODEN STRUCTURE (I NTERIOR ITA NO.12/MDS./2017 :- 4 -: DECORATION) IS A REVENUE EXPENDITURE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IN ALL THESE APPEALS IS DISMI SSED . 3.1. BEING SO, IN OUR OPINION THERE IS NO ERROR IN THE ORDER OF THE LD.CIT(A), WHO HAS FOLLOWED THE CORRECT POSITION OF LAW AND THE EXPENDITURE INCURRED BY THE ASSESSEE, WHICH IS IN T HE TEMPORARY NATURE TO BE CONSIDERED AS REVENUE EXPENDITURE ONLY. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 01 ST MAY, 2017, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 1 ST MAY, 2017. K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF