ACIT, Circle - 5, Kolkata V. M/s. Suman Industries Ltd., Kolkata

ITA 1522/KOL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5088 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYENDRA MOHON DAS
• Assessee Lawyers: MIIRAJ D SHAH
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1522 / KOL / 2009 ASSESSMENT YEAR :2006-07 ACIT, CIRCLE-5, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAVAN, 8 TH FLOOR, KOLKATA-700 001 V/S . M/S SUMAN INDUSTRIES LTD., 149, RADHA BAZAR STREET-700 001 [ PAN NO.AAECS 7550 E ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SATYENDRA MOHON DAS, JCIT, DR /BY RESPONDENT SHRI MIIRAJ D. SHAH, ADVOCATE /DATE OF HEARING 21-01-2016 /DATE OF PRONOUNCEMENT 29-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, KOLKATA IN APPEAL NO.CIT(A) -V/KOL/267/CIR-5/08-09 DATED 05.06.2009. ASSESSMENT WAS FRAMED BY ACIT, CI RCLE-5, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 04.12.2008 FOR ASSESSMENT YEAR 2006 -07. REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT E RECTION OF POLICE BOOTS IS REVENUE EXPENDITURE WHEREAS THE ASSESSEE, IN ITS AGREEMENT WITH KOLKATA POLICE, HAD SPECIFIED THAT THE LIFE OF SUCH BOOTHS IS MORE THAN 15 ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 2 YEARS WHEREAS THE ASSESSEE HAS CAPITALIZED IN AND C LAIMED DEPRECIATION. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT TH E ASSESSEE IS NOT AN OWNER OF SUCH BOOTHS WHEREAS IT HAS BEEN MENTIONED IN THE AGREEMENT THAT THE ASSESSEE IS THE SOLE OWNER OF THESE BOOTHS FOR THE PERIOD OF 15 YEARS AFTER WHICH THE BOOTHS WILL BE HANDED OVER O THE KOLKATA POLICE. 3. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN ALLOWING DEPREC IATION AT THE RATE OF 100 PERCENT ON POLICE BOOTH TREATING IT AS TEMPORAR Y ERECTION WHEREAS SUCH BOOTHS ARE INCLUDED IN THE BLOCK OF ASSETS UND ER THE HEAD BUILDINGS AS PER THE DEPRECIATION SCHEDULE OF TANGIBLE ASSETS, FILED BY THE ASSESSEE ALONG WITH RETURN OF INCOME WHICH E NTITLES THE ASSESSEE TO CLAIM DEPRECIATION AT THE RATE OF 10 PE RCENT. SHRI MIRAJ D SHAH, LD. AUTHORIZED REPRESENTATIVE AP PEARING ON BEHALF OF ASSESSEE AND SHRI SATYENDRA MOHAN DAS, LD. DEPARTME NTAL REPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 2. GROUNDS RAISED BY REVENUE IN ITS APPEAL ARE COMM ON IN NATURE. THE COMMON ISSUE IS THAT LD. CIT(A) ERRED IN TREATING T HE EXPENSE INCURRED ON ERECTION OF POLICE BOOTH AS REVENUE EXPENDITURE VIS --VIS ALLOWED THE DEPRECIATION @ 100%. 2.1 FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVAT E LIMITED COMPANY AND ENGAGED IN BUSINESS OF HOARDING RENTALS BY WHICH IT EARNS REVENUE FROM THE ADVERTISEMENT OF SPACE ATOP BOOTHS. THESE BOOTHS AR E AVAILABLE TO THE ASSESSEE AS A RESULT OF CONTRACT AWARDED BY KOLKATA POLICE FOR ERECTION AND MAINTENANCE OF POLICE BOOTHS. THE ROLE OF ASSESSEE IS TO ERECT THE POLICE AND TO MAINTAIN IT FOR 15 YEARS AS PER THE AGREEMENT WI TH KOLKATA POLICE. AFTER THE EXPIRY OF THE AGREEMENT THESE BOOTHS SHALL BE HANDE D OVER TO KOLKATA POLICE. THESE POLICE BOOTHS ARE MAINTAINED AND OPERATED UND ER THE SCHEME OF BOT (BUILD OPERATE TRANSFER FOR SHORT) BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE CLAIMED DEPRECIATION @ 100% OF COST INCURRED ON THE ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 3 ERECTION OF POLICE BOOTHS. ON QUESTION BY ASSESSING OFFICER ABOUT DEPRECIATION OF 100%, ASSESSEE SUBMITTED AS UNDER:- A) THE POLICE BOOTHS ERECTED STRUCTURES ARE PURELY TEMPORARY MADE AND BEING MADE OF WOODEN DEPRECIATION @ 100% IS ALLOWAB LE. THE TEMPORARY STRUCTURE BOOTHS ARE NOT MADE OF BUILDING MATERIALS AND IT IS MOVABLE FROM ONE PLACE TO OTHER, B) NO NEW ASSET IS BEING CREATED FOR THE EXPENDITUR E ON THE ERECTION OF POLICE BOOTHS. C) THE NON-OPERATIONAL POLICE BOOTHS ARE UNDER THE LOCK & KEY WITH THE KOLKATA POLICE (KP FOR SHORT), SO IT CLEARLY SHOWS THAT THE OWNERSHIP OF POLICE BOOTHS IS NOT WITH ASSESSEE. D) AS PER AGREEMENT IN CLAUSE-C, KOLKATA POLICE IT CAN BE TERMINATED WITHOUT WARNING ANY NOTICE FROM EITHER SIDE. SO ASS ESSEE CANNOT TAKE THE VIEW THAT ALLOWED/OBTAINED WAS ENDURING IN NATURE, E) THERE IS NO PROVISION UNDER THE ACT FOR AMORTIZA TION OR FOR DEFERMENT OF EXPENSE TO SPREAD OVER A GIVEN PERIOD OF TIME EX CEPT FOR CASE AND CIRCUMSTANCES REFERRED TO U/S. 35D AND SEC. 35D, F) THE ASSESSEE ALSO SUBMITTED A LETTER FROM COMMIS SIONER OF KOLKATA POLICE CLARIFYING THAT SAID (ERECTED STRUCTURE) EXC LUSIVELY BELONGS TO KP I.E. OWNERSHIP IS NOT WITH THE ASSESSEE. HOWEVER, AO DISREGARDED THE CLAIM OF ASSESSEE BY OB SERVING AS UNDER:- 1) LETTER OF KP IS MEANINGLESS IN THE CODE OF LAW A S AGREEMENT WRITTEN ON THE STAMP PAPER SHALL BE ACCEPTED. 2) THERE IS OWNERSHIP WITH THE ASSESSEE OF THE SAID TEMPORARY POLICE BOOTHS AS PER AGREEMENT MADE WITH KP. 3) ASSESSEE ITSELF IS AGREEING THAT THE LIVE SPAN O F SAID TEMPORARY POLICE BOOTHS FOR 2 YEARS SO @ 100% DEPRECIATION CANNOT BE ALLOWED. 4) AS PER IT. RULES 1962, DEPRECIATION OF SUCH STRU CTURE IS ALLOWED @ 10% ONLY. SO THE DEPRECIATION CLAIMED @ 100% BY ASS ESSEE IS DISALLOWED. ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 4 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO HAS DELETED THE ADDITION MADE BY ASSESSING OFFICER BY O BSERVING AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSION OF THE A/R, PE RUSED THE IMPUGNED ORDER, COMPUTATION OF INCOME, AUDITED ACCOUNTS, AGR EEMENT DATED 7 TH APRIL 2005 AND THE LETTER DATED 6/12/2008. I HAVE A LSO GONE THROUGH THE JUDICIAL DECISIONS ON WHICH RELIANCE WAS PLACED. I FIND THAT THE LAND ON WHICH THE BOOTHS WERE ERECTED BELONGED TO KOLKATA M UNICIPAL CORPORATION & THIS FACT IS NOT IN DISPUTE. THE LETT ER ISSUED BY THE ADDL. COMMISSIONER OF KOLKATA POLICE DATED 16/12/2008 SHO WS THAT THE POLICE BOOTHS WAS THE PROPERTY OF KOLKATA POLICE WHICH THE APPELLANT WAS OBLIGED TO MAINTAIN IN EXCHANGE OF AVAILING EXCLUSI VE RIGHT TO PLACE ADVERTISEMENT ON THE SAID BOOTHS. THE POSSESSION OF THE BOOTHS ALWAYS REMAINED WITH KOLKATA POLICE WHO HAD FULLY RIGHT TO OCCUPY; USE & ENJOY THE POLICE BOOTHS AT ALL TIMES. FROM THE FACT ON RE CORD I NOTE THAT THE ASSESSEE WAS IN THE BUSINESS OF ADVERTISING & FOR T HIS PURPOSE IT REQUIRED PUBLIC SPACES TO DISPLAY ADVERTISEMENTS. E RECTION OF POLICE BOOTHS ONLY FACILITATED THE ASSESSEE TO CARRY ON IT S BUSINESS OF ADVERTISING BECAUSE UNDER THE AGREEMENT IT HAD OBTA INED RIGHT TO USE THE SPONSORS AREA FOR DISPLAYING ADVERTISEMENT. TH E AO LOST SIGHT OF THE FACT THAT THE LETTER DATED 16/12/2008 WAS ISSUE D BY AN ADDL. COMMISSIONER OF KOLKATA POLICE WHO IS A SENIOR OFFI CER OF THE POLICE DEPARTMENT. WHEN A SENIOR OFFICER OF THE STATE GOVE RNMENT ISSUES AN OFFICE MEMO THE SAME COMMANDS EVIDENTIARY VALUE BEC AUSE SUCH COMMUNICATION IS ISSUED IN TERMS OF STATUTORY POWER S VESTED IN HIS OFFICE. I HAVE THEREFORE, NO HESITATION IN HOLDING THAT THE CONTENTS OF THE LETTER DATED 16/12/2008 ISSUED ON BEHALF OF KOLKATA POLICE CLARIFIED THE FACTUAL POSITION REGARDING OWNERSHIP OF THE BOOTHS BEING VESTED IN KOLKATA POLICE. 6. NOW COMING TO THE CASES LAWS RELIED O BY THE A/R , I NOTE THAT DECISION OF THE APEX COURT IN THE CASE OF CIT V. MADRAS AUTO SERVICE (P) LTD. [1998] 233 ITR 468 SUPPORTS THE CASE OF THE ASSESSE E. IN THIS CASE, THE ASSESSEE OBTAINED LEASE OF PREMISE FOR A PERIOD OF 39 YEAR ON A NOMINAL RENT. THE ASSESSEE CONSTRUCTED A NEW BUIL DING ON THE LAND TAKEN ON LEASE. THE ISSUE BEFORE THE APEX COURT WAS WHETHER THE EXPENDITURE INCURRED ON CONSTRUCTION OF THE BUILDIN G WAS CAPITAL OR REVENUE. THE APEX COURT OBSERVED THAT ONE HAS TO LO OK AT THE EXPENDITURE FROM A COMMERCIAL POINT OF VIEW. IN THA T CASE THE ASSESSEE GOT A LONG LEASE OF A BUILDING SUITABLE FOR ITS BUS INESS AT A CONCESSIONAL RENT. THE ASSESSEE MADE SUBSTANTIAL SAVINGS IN MONT HLY RENT FOR A PERIOD OF 39 YEARS BY EXPENDING THE AMOUNT ON CONST RUCTION OF BUILDING. THE SAVING IN EXPENDITURE WAS THE SAVING IN REVENUE EXPENDITURE IN THE FORM OF RENT. THE COURT THEREFORE HELD THAT WHATEVE R WAS THE SUBSTITUTE FOR REVENUE EXPENDITURE; WOULD NORMALLY BE CONSIDER ED AS REVENUE IN NATURE. SINCE THE BUILDING NEVER BELONGED TO THE AS SESSEE, THE COURT ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 5 HELD THAT THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET BY SPENDING MONEY ON THE CONSTRUCTION OF BUILDING & ACCORDINGLY THE EXPENDITURE WAS HELD TO BE REVENUE IN NATURE. 7. THE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. V. CIT [1980] 124 ITR 1 OBSERVED AS FOLLOWS:- THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCU RRED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, MY, NON ETHELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTA GE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLO WABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEES TRADING OPERATIONS OR E NABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS T O BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHIL E LEAVING THE FIXED CAPITAL UNTOUCHED THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR A N INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AN D MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMST ANCES OF A GIVEN CASE. EVEN THE TEST ITSELF RESTRICTS THE APPLICATIO N OF THE TEST TO THE SPECIAL CASES AS IT USES THE WORDING IN THE ABSENC E OF SPECIAL CIRCUMSTANCES LEADING TO AN OPPOSITE CONCLUSION. 8. ON THE SAME MATTER AGAIN, THE SUPREME COURT IN A LEMBIC CHEMICAL WORKS CO. LTD. V. CIT 177 ITR 377 HELD THAT AN EXPE NDITURE WOULD BE TREATED AS BEING ON CAPITAL ACCOUNT WHERE AN ENDURI NG ADVANTAGE OR BENEFIT WAS RECEIVED IN THE CAPITAL FIELD. WHERE HO WEVER AN ENDURING BENEFIT WAS IN THE REVENUE FIELD AND DID NOT RESULT IN THE CREATION OF A CAPITAL ASSET, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT. ACCORDING TO THIS DECISION, EXPENDITURE CANNOT BE TREATED AS CAPITAL IN NATURE IF THE ENDURING ADVANTAGE OR BENEFIT IS NOT DERIVED IN THE CAPITAL FIELD. THE WORD E NDURING MEANS ENDURING IN THE WAY THAT FIXED CAPITAL ENDURES AND IT CANNOT BE A BENEFIT THAT ENDURES IN THE SENS E THAT FOR GOOD NUMBER OF YEARS IT RELIEVES THE ASSESSEE FROM REVEN UE PAYMENT. AN ASSET OR ADVANTAGE MAY ENDURE IN THE BUSINESS ONLY IN THE COURSE OF CONTRACT. THE QUESTION WHETHER THE ADVANTAGE IS OF AN ENDURING OR TRANSIENT NATURE HAS TO BE DECIDED AFTER CONSIDERIN G THE NATURE OF THE ASSET OR ADVANTAGE IN THE CONTEXT OF THE TRADE IN Q UESTION. EXPENDITURE ON A SCHEME OR AN ITEM WHICH INCREASES THE VALUE OF A CAPITAL ASSET B AN ADVANTAGE OF ENDURING BENEFIT IS A CAPITAL EXPEN DITURE. IN FACT THE EXPENDITURE IS TO BE ATTRIBUTED TO CAPITAL IF IT IS MADE WITH A VIEW TO ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 6 BRINING AN ASSET OR ADVANTAGE OF ENDURING NATURE IN TO EXISTENCE. IF, FOR INSTANCE, THE EXPENDITURE IS INCURRED FOR THE ACQUI SITION OF PROPERTY OR RIGHTS OF AN ENDURING CHARACTER, THE POSSESSIONS OF WHICH IS A CONDITION FOR CARRYING ON OF THE TRADE, THE OUTLAY WILL BE HE LD TO BE AN EXPENDITURE OF CAPITAL NATURE. THE MAIN TEST APPEARS TO BE ITS PERMANENCY, I.E., WHETHER THE CAPITAL OF THE COMPANY OR ITS ASSETS OR ITS GOODWILL IS PERMANENTLY INCREASE BY REASON OF SUCH EXPENDITURE AND IT WAS A TANGIBLE ASSET FOR THE ENDURING BENEFIT OF THE TRAD E. WHERE THE PREDOMINANT AND MAIN PURPOSE OF INCURRING THE EXPEN DITURE WAS CARRYING ON OF THE BUSINESS, THE INCIDENTAL ADVANTA GE OF THAT EXPENDITURE, IN THAT THE PROPERTY WAS SECURED MORE AND THEREBY THE ASSESSEE GAINED ADVANTAGE WHICH WAS OF SOME ENDURAN CE, COULD NOT AFFECT ITS REVENUE CHARACTER. 9. IN THE CASE OF ROYAL CALCUTTA TURF CLUB V. CIT [ 1991] 188 ITR 352 , THE HON'BLE CALCUTTA HIGH COURT HELD AS UNDER:- THE TRUE TEST OF AN EXPENDITURE LAID OUT WHOLLY AN D EXCLUSIVELY FOR THE PURPOSES OF TRADE OR BUSINESS IS THAT IT IS INC URRED BY THE ASSESSEE AS INCIDENTAL TO HIS TRADE FOR THE PURPOSE S OF KEEPING THE TRADE GOING AND OF MAKING IT PAY AND NOT IN ANY CAPACITY OTHER THAN THAT OF A TRADER. THE QUESTION WHETHER A PARTI CULAR EXPENDITURE IS A REVENUE EXPENDITURE INCURRED FOR T HE PURPOSES OF THE BUSINESS MUST BE DETERMINED ON A CONSIDERATION OF ALL THE FACTS AND CIRCUMSTANCES AND BY THE APPLICATION OF T HE PRINCIPLE OF COMMERCIAL TRADING. THE QUESTION MUST BE VIEWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. IF THE OUTGOING OR EXPENDITURE IS SO RELATED TO THE CARRYING ON, OR CO NDUCT OF, THE BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PAR T OF THE PROFIT- EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER THE POSSESSION OF WHICH IS A CO NDITION FOR THE CARRYING ON OF THE BUSINESS, THE EXPENDITURE SH OULD BE REGARDED AS A REVENUE EXPENDITURE INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. 10. APPLYING THE TEST LAID DOWN IN ABOVE JUDICIAL D ECISIONS; TO THE FACTS OF THE ASSESSEES CASE, I FIND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ERECTING POLICE BOOTHS DID NOT RESULT I N ACQUISITION OF A DEPRECIABLE ASSET BY THE ASSESSEE. THE APPELLANT HE REIN WAS IN THE BUSINESS OF ADVERTISING AND DERIVED REVENUE FROM AD VERTISEMENTS DISPLAYED IN PUBLIC AREAS. FOR DISPLAYING ADVERTISE MENTS APPELLANT NEEDED PUBLIC SPACES AND FOR THIS PURPOSE APPELLANT ERECTED TEMPORARY STRUCTURES IN THE FORM OF POLICE BOOTHS OVER WHICH ADVERTISEMENTS COULD BE PLACED. IN TERMS OF THE AGREEMENT WITH KOLKATA P OLICE ASSESSEE WAS ONLY GRANTED LICENSE TO USE AND/OR SALE DESIGNATED ADVERTISING AREAS DESCRIBED IN THE AGREEMENT AS SPONSORS AREAS . THE APPELLANT ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 7 OBTAINED ONLY LICENSE TO DISPLAY ADVERTISEMENTS AND DERIVED REVENUE THEREFROM. FROM PERUSAL OF THE AGREEMENT IT APPEARE D THAT THE ASSESSEE HAS BEEN DESCRIBED AS LICENSEE BECAUSE UND ER THE AGREEMENT THE APPELLANT WAS PROVIDED ONLY LIMITED R IGHT OR LICENSE TO USE DESIGNATED AREAS OF THE BOOTHS FOR ADVERTISING PURPOSES WHEREAS OWNERSHIP OF THE BOOTHS REMAINED WITH KOLKATA POLIC E. THE ERECTION OF TEMPORARY STRUCTURES IN THE FORM OF POLICE BOOTHS W AS THEREFORE INCIDENTAL TO CARRYING ON APPELLANTS ADVERTISING B USINESS & THUS IT WAS ONLY A TOOL OF TRADE WHICH ENABLED THE APPELLANT TO CARRY ON ITS BUSINESS MORE EFFECTIVELY. ERECTION OF POLICE BOOTHS ONLY FA CILITATED THE ASSESSEE TO CARRY ON ITS EXISTING BUSINESS. THE AGREEMENT AN D THE LETTER ISSUED BY ADDL. COMMISSIONER OF KOLKATA POLICE FAIRLY INDI CATED THAT THE APPELLANT ONLY ENJOYED LICENSE TO DISPLAY ADVERTISE MENTS ON THE DESIGNATED SPACES OF THE POLICE BOOTHS BUT RIGHT TO ON, USE AND ENJOYED THESE STRUCTURES ALWAYS VESTED IN KOLKATA POLICE AL ONE. THE LAND ON WHICH THE BOOTHS WERE ERECTED BELONGED TO KOLKATA M UNICIPAL CORPORATION AT ALL TIMES AND STRUCTURES STANDING TH EREON REMAINED THE PROPERTY OF KOLKATA POLICE. THE AGREEMENT BETWEEN T HE ASSESSEE AND KOLKATA POLICE DID NOT ENVISAGE POSSESSION OF THE B OOTHS BEING TAKEN BY THE ASSESSEE & THE POLICE BOOTHS WERE TO REMAIN THE PROPERTY OF KOLKATA POLICE WHO ALONE HAD RIGHT TO OCCUPY AND US E THE SAID BOOTHS. SAVE AND EXCEPT LIMITED RIGHT OR LICENSE TO EXHIBIT ADVERTISEMENTS IN DESIGNATED AREAS; APPELLANT DID NOT ACQUIRE OWNERSH IP RIGHTS IN THE BOOTHS ITSELF AND THEREFORE EXPENDITURE INCURRED BY THE APPELLANT FOR OBTAINING LIMITED LICENSE TO DISPLAY ADVERTISEMENTS ; DID NOT RESULT IN ACQUISITION OF DEPRECIABLE ASSET BY THE APPELLANT. FOR OBTAINING LICENSE TO DISPLAY ADVERTISEMENTS APPELLANT WAS REQUIRED TO PAY FEES OR CHARGES AND IF INSTEAD OF PAYING SUCH FEES PERIODICALLY; TH E APPELLANT INCURRED EXPENDITURE ON ERECTION OF POLICE BOOTHS; SUCH EXPE NDITURE CONTINUED TO RETAIN SAME CHARACTER IN THE HANDS OF THE PAYER. IR RESPECTIVE OF THE PERIOD FOR WHICH ASSESSEE DISPLAYED ADVERTISEMENTS, THE ASSESSEES CONTRACTUAL OBLIGATION TO INCUR INITIAL EXPENDITURE ON ERECTION OF BOOTHS & THEREAFTER MAINTAIN IT DURING CONTRACT PERIOD REMAI NED UNCHANGED & THEREFORE MERELY BECAUSE IN THE INITIAL YEAR ASSESS EE EXPENDED LARGE SUMS ON ERECTION OF BOOTHS DID NOT CHANGE THE CHARA CTER OF EXPENDITURE FROM REVENUE EXPENDITURE TO CAPITAL. IN MY CONSIDER ED OPINION THEREFORE THE ENTIRE EXPENDITURE INCURRED ON ERECTION OF POLI CE BOOTHS WAS REVENUE IN NATURE AND ACCORDINGLY THE AO IS DIRECTE D TO ALLOW THE DEDUCTION FOR RS.1,02,19,884/- BEING THE EXPENDITUR E INCURRED ON ERECTION OF POLICE BOOTHS. SINCE I HAVE ALLOWED THE DEDUCTION FOR THE EXPENDITURE INCURRED ON ERECTION OF POLICE BOOTHS A S REVENUE DEDUCTION; THE AO IS DIRECTED TO WITHDRAW THE DEPRECIATION OF RS.10,21,988/ WHICH AO ALLOWED IN THE ASSESSMENT. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 8 4. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. BEFORE US LD. DR SUBMITTED VARIOUS CASE LAW S AND RELIED ON THE ORDER OF ASSESSING OFFICER, WHEREAS LD. AR SUPPORTED THE ORDER OF LD. CIT(A) AND SUBMITTED PAPER BOOKS WHICH IS RUNNING PAGES 1 TO 6 4. 4.1 BEFORE US LD. DR SUBMITTED THAT IN TERMS OF AGR EEMENT OF 15 YEARS BETWEEN THE KP AND ASSESSEE BOOTHS ARE THE PROPERTY OF ASSESSEE. THEREFORE, ONLY DEPRECIATION SHOULD BE ALLOWED INST EAD OF COST INCURRED ON ERECTION OF POLICE BOOTHS. ON THE CONTRARY, LD. AR SUBMITTED THAT ASSESSEE IS NOT THE OWNER OF POLICE BOOTHS AND THERE IS NO CREA TION OF NEW ASSETS AND REQUESTED THE BENCH THAT ENTIRE AMOUNT OF EXPENDITU RE SHOULD BE ALLOWED AS REVENUE EXPENDITURE. 4.2 FROM THE AFORESAID DISCUSSION, WE UNDERSTAND TH AT ASSESSEE HAS INCURRED EXPENDITURE ON ERECTION OF POLICE BOOTHS W HICH IS MADE OF WOOD AND TREATED AS REVENUE EXPENDITURE BUT AT THE ASSESSMEN T PROCEEDING AO TREATED IT AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION @ 10% ONLY. THOUGH IN APPELLATE PROCEEDINGS LD. CIT(A) TREATED IT SAME AS REVENUE EXPENDITURE ON THE GROUND THAT NO FIXED ASSETS WAS CREATED AND ASS ESSEE WAS NOT THE OWNER OF THE POLICE BOOTHS AS PER LEASE BETWEEN ASSESSEE AND KP. THE LD. AR ALSO CITED VARIOUS CASE LAWS AS GIVEN BELOW: I) CIT V. ASSOCIATED CEMENT COMPANIES LTD. (1998) 3 8 TAXMAN 110A (SC), WHERE SECTION 10(2)(XV) OF THE INDIAN INCOME- TAX ACT, 1922 [CORRESPONDING TO SECTION 37(1) OF THE INCOME-TAX A CT, 1961] CAPITAL OR REVENUE EXPENDITURE UNDER AN AGREEMENT, ASSESS EE-COMPANY INCURRED EXPENDITURE ON LAYING OF WATER PIPELINES I N A PARTICULAR TOWN AND HANDED OVER POSSESSION AND OWNERSHIP OF THOSE P IPELINES TO MUNICIPALITY IN CONSIDERATION, GOVERNMENT HAD EXE MPTED ASSESSEE FROM MUNICIPAL TAXES FOR 15 YEARS WHETHER IMPUGNE D EXPENDITURE ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 9 WAS REVENUE IN NATURE AND, WAS THUS, ALLOWABLE AS D EDUCTION HELD, YES II) CIT V. MADRAS AUTO SERVICE (P) LTD. (1998) 99 T AXMAN 575 (SC), WHERE THE HEAD NOTE SECTION 37(1) OF THE INCOME-T AX ACT, 1961 BUSINESS EXPENDITURE ALLOWABILITY OF [ ASSESSMEN T YEAR 1968-69 ASSESSEE OBTAINED PREMISES ON LEASE FOR 39 YEARS IN TERMS OF LEASE AGREEMENT, ASSESSEE DEMOLISHED EXISTING CONST RUCTION AND CONSTRUCTED NEW BUILDING TO SUIT ITS BUSINESS AT IT S OWN EXPENSES IN ANY CIRCUMSTANCES ASSESSEE WOULD NOT BE ENTITLED FO R ANY COMPENSATION ON ACCOUNT OF PUTTING UP NEW CONSTRUCT ION AND IT SHOULD BE TREATED AS TENANT SUBJECT TO PAYMENT OF R ENT LOWER THAN RENT PREVAILING ASSESSEE CLAIMED SAID CONSTRUCTIO N EXPENDITURE AS REVENUE EXPENDITURE ASSESSING OFFICER REJECTED IT S CLAIM AND TREATED SAID EXPENDITURE AS CAPITAL EXPENDITURE W HETHER SINCE ASSET CREATED BY ASSESSEE BY SPENDING AMOUNTS DID N OT BELONG TO ASSESSEE BUT ASSESSEE GOT ONLY BUSINESS ADVANTAGE O F USING MODERN PREMISES AT A LOW RENT, THUS, SAVING CONSIDE RABLE REVENUE EXPENDITURE FOR NEXT 39 YEARS, SAID EXPENDITURE SHO ULD BE TREATED AS REVENUE EXPENDITURE HELD, YES III) CIT V. BIRLA JUTE MFG. CO. LTD. (1990) 51 TAXM ANN 402 (CAL), WHERE SECTION 37(1) OF THE INCOME-TAX ACT 1961 BUSINESS EXPENDITURE ALLOWABILITY OF ASSESSMENT YEAR 1972-73 FOR FAC ILITATING SUPPLY OF ELECTRICITY TO IT UNDER AN AGREEMENT ASSESSEE MAD E PAYMENT TO WEST BENGAL STATE ELECTRICITY BOARD FOR LAYING SERV ICE LINES AGREEMENT PROVIDED THAT SERVICE LINES MAY BE USED B Y OTHER PERSONS ALSO AND THAT LINES WOULD, NEVER BECOME PROPERTY OF ASSESSEE WHETHER PAYMENT MADE BY ASSESSEE WAS ALLOWABLE AS A REVENUE EXPENDITURE HELD, YES FROM THE ABOVE DISCUSSION AND VARIOUS CASE LAWS CIT ED BY LD. AR, WE FIND THAT NEITHER ANY NEW ASSET HAS COME INTO EXISTENCE NOR THE ASSESSEE HAS THE ITA NO.1522/KOL/2009 A.Y. 2006-07 ACIT CIR-5, KOL. V. M/S SUMAN INDS. LTD. PAGE 10 OWNERSHIP OF THE POLICE BOOTHS SO IT SHOULD BE TREA TED AS REVENUE EXPENDITURE. WE ARE ALSO PUTTING OUR RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MADRAS AUTO SERVICES (P) LTD. (SUPRA). THEREFORE WE HAVE NO HESITATION TO UPHOLD THE ORDER OF THE LD. CIT(A) AN D THIS GROUND OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 29/ 02/2016 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 29 / 02 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIRCLE-5, P7, CHOWRINGHEE SQUARE, AAYAKAR BHAVAN 8 TH FLOOR, KOLKATA-700 001 2. /RESPONDENT-M/S SUMAN INDUSTRIES LTD., 149 RADHA BA ZAR, STREET, KOL-01 3. ) *+, , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5.01233*+, , *+ , / DR, ITAT, KOLKATA 6.26789 / GUARD FILE. BY ORDER/ ,, /TRUE COPY/ / , *+ ,