ITO, Ward - 6(1), Kolkata, Kolkata V. M/s. CO. OP. PVT. LTD., Kolkata

ITA 1707/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9264 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-09-2010
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR LD
• Assessee Lawyers: A K DUTTA LD
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA () BEFORE . . , , SHRI B.R MITTAL, JUDICIAL MEMBER. . ! /AND .'.#, '$ , SHRI B.K.HALDAR, ACCOUNTANT MEMBER !% / I.T.A.NO. 1707/KOL/2010 &' ()/ ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER WARD 6(1), KOLKATA - & - - VERSUS - . M/S. CO OP PVT. LTD PAN:AABCC 9473D (,- / APPELLANT ) (./,-/ RESPONDENT) ,- 0 1 '/ FOR THE APPELLANT: / SHRI S.K MALAKAR, LD.DR ./,- 0 1 '/ FOR THE RESPONDENT: / SHRI A.K DUTTA, LD.AR '2 /ORDER .'.#, '$ , SHRI B.K.HALDAR, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VI, KOLKATA DA TED 11-06-2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- 1. THAT LD.CIT(A)-VI, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN DISALLOWING THE ADDITION OF RS.13.54 LACS B EING IN THE NATURE OF CAPITAL EXPENDITURE. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, DELETE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE ASSESSEE COMPANY WORKS AS AN ADVERTISEMENT A GENCY. DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE CONSTRUCTED 8 BUS PASSEN GERS SHELTER HOARDING ON EASTERN METROPOLITAN BY PASS JOINTLY WITH M/S. KARUKRIT PUB LICITY PVT. LTD AND BORE 50% SHARE OF THE CONSTRUCTION COST BEING RS.13,54,621/-. THE SHE LTERS WERE CONSTRUCTED ON LEASE HOLD LAND AND THESE WERE TO BE UTILIZED FOR ADVERTISING. TH E AO WAS OF THE OPINION THAT THE SAME WILL BE USED FOR ADVERTISING PURPOSES AGAIN AND AGAIN AN D THE INCOME WILL BE EARNED FROM THE ITA NO. 1707/KOL/2010-BKH 2 SAME FROM YEAR TO YEAR. ACCORDING TO HIM THE SHELTE RS BROUGHT INTO BEING AN ADVANTAGE OR ASSET OF AN ALMOST PERMANENT NATURE OR OF AN END URING BENEFIT. HE, THEREFORE, HELD THE SAME AS CAPITAL EXPENDITURE AND DISALLOWED THIS AMO UNT. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE L D.CIT(A). 5. BEFORE THE LD.CIT(A) IT WAS SUBMITTED BY THE ASS ESSEE THAT BUS PASSENGER SHELTERS WERE NOT PERMANENT CONSTRUCTION AND THE ASSESSEE DI D NOT DERIVE ANY ENDURING BENEFIT, SINCE THE SHELTERS WERE BUILT FOR A GIVEN PERIOD FOR PUTT ING UP ADVERTISEMENT AND WERE TO BE SURRENDERED TO THE MUNICIPAL CORPORATION THEREAFTER . EVEN THE LAND ON WHICH SUCH SHELTERS WERE BUILT WERE LEASED TO M/S. KARUKRIT PUBLICITY PVT.LTD AND NOT TO THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITTED THAT THE SAID EXPENDITURE WAS INCURRED FOR TWO PURPOSES NAMELY I) CONSTRUCTION OF THE HOARDINGS AND II) MAINTENANCE EXPENSES OF THE SHELTER. SUCH EXPENDITURE DID NOT YIELD ANY ASSET OF ENDURIN G BENEFIT TO THE ASSESSEE. IT WAS CLAIMED THAT THE EXPENDITURE INCURRED ON THE HOAR DINGS WILL BRING INCOME FOR FUTURE YEARS ALSO, WITHOUT BEING ANY FURTHER EXPENDITURE INCURR ED ON THEM. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- A. CIT VS. SHAKTI FINANCE LTD 291 ITR 83(MAD) B. CIT VS. TVS LEAN LOGISTICS LTD 293 ITR 432(MAD) C. CIT VS. BOMBAY DYEING MFG.CO.LTD 219 ITR 521(SC) 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(A) OPINED THAT THE SALIENT FEATURES OF THE CONTRACT BETWEEN THE KMDA [KOLKATA METROPOLITAN DEVELOPMENT AUTHORITY] AND M/S. KARUKRIT PUBLICITY PVT. LTD WERE AS UNDER: - I). LICENSE SHALL BE FOR A PERIOD OF FIVE YEARS TE RMINABLE AT THE OPTION OF KMDA ON 30 DAYS NOTICE. II). THE LICENSE SHALL NOT ACQUIRE ANY RIGHT OR TI TLE TO THE LAND ON WHICH THE PASSENGER SHELTERS WILL BE ERECTED/INSTALLED/CONSTR UCTED. III). COST OF CONSTRUCTION AND COST OF MAINTENANCE SHALL BE BORNE BY THE LICENSEE. IV). AFTER TERMINATION OF LICENSE PERIOD THE SHELTE RS SHALL AUTOMATICALLY VEST IN KMDA 7. THE LD.CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE HOARDINGS ARE NOT PERMANENT STRUCTURES AND HAVE SHORT LIFE. LOOKING A T THE NATURE OF THE BUSINESS CARRIED ON BY THE ASSESSEE HE HELD THAT SUCH EXPENDITURE WAS TO BE INCURRED BY THE ASSESSEE FROM TIME TO TIME AND IT CANNOT, THEREFORE, BE SAID TO BE CAPITA L EXPENDITURE. HE, THEREFORE, DIRECTED THE AO TO ALLOW THE EXPENDITURE AS REVENUE EXPENDITURE. 8. AGGRIEVED THE REVENUE HAS FILED APPEAL BEFORE TH E TRIBUNAL. ITA NO. 1707/KOL/2010-BKH 3 9. THE LD.DR TOOK US THROUGH THE RELEVANT PORTIONS OF THE ORDERS OF THE AUTHORITIES BELOW. IT WAS EMPHASIZED BY HIM THAT THE EXPENDITUR E WAS INCURRED FOR CONSTRUCTION OF 8 PASSENGER SHELTERS AND NOT HOARDING. AS SUCH THE S AME WILL REMAIN WITH THE ASSESSEE AND M/S. KARUKRIT PUBLICITY PVT. LTD FOR A PERIOD OF 5 YEARS AS PER THE AGREEMENT BETWEEN KMDA & M/S. KARUKRIT PUBLICITY PVT. LTD. UTILIZATIO N OF BUS PASSENGER SHELTERS WOULD YIELD INCOME EVEN IN SUBSEQUENT YEARS. THUS, IT WAS CONTENDED BY HIM THAT THE SAME HAS TO BE CONSIDERED AS CAPITAL EXPENDITURE. 10. THE LD.AR FOR THE ASSESSEE, IN ADDITION TO THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW HAS SUBMITTED THAT STRUCTURES WE RE SUBJECTED TO THE VAGARIES OF WEATHER, STORM, RAIN, VANDALISM BY THE MISCREANTS, THEFT AND DAMAGE BY THE BUSSES, TRUCKS, PUBLIC OR PRIVATE VEHICLES. IT WAS FURTHER SUBMITTED THAT THE NATURE OF EXPENDITURE INCURRED WAS NOT DULY LOOKED INTO BY THE AO. ACCORDING TO HIM THE EX PENDITURE INCURRED WERE ON FOLLOWING ACCOUNTS:- CONSTRUCTION MATERIALS LIKE ANGLE CHANNEL, PIPES - RS.429761.00 COST OF CORRUGATED SHEET RS. 49300.00 BRICKS CEMENT RS. 6825.00 COST OF WELDING & LAYOUT RS.102850.00 COST OF WOODEN BOARD & CLOTH(FLEX) RS.112283.00 CARRYING CHARGES AND SITE INSPECTION RS. 3380 0.00 RS. 734819.00 LICENSE FEE PAID TO KMDA RS. 92084.00 ADVERTISEMENT TAX RS.100000.00 ELECTRICAL GOODS AND LABOUR FOR FITTING RS.312283 .00 GENERATOR HIRE CHARGE RS. 78493.00 METER INSTALLATION CHARGE PAID TO CESC RS. 71914 .00 RS.654802.00 RS.1354621.00 11. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RD. WE HAVE ALSO GONE THROUGH THE CASE LAWS CITED BY THE LD.AR FOR THE ASSESSEE. WE A RE OF THE CONSIDERED OPINION THAT EXPENDITURE INCURRED FOR CONSTRUCTION OF PASSENGER SHELTERS WOULD CONSTITUTE CAPITAL EXPENDITURE AS SUCH STRUCTURE WOULD BE UNDER THE J OINT OWNERSHIP OF THE ASSESSEE AND M/S. KARUKIRT PUBLICITY PVT. LTD AS PER THE AGREEMENT EN TERED INTO BY THEM. THE SAME IS MADE OF STEEL & BRICK WORK. IT, THEREFORE, CANNOT BE CATEGO RIZED AS PURELY TEMPORARY STRUCTURES. HOWEVER, ANY EXPENDITURE INCURRED ON HOARDINGS AND MAINTENANCE OF THE STRUCTURES AND RECURRING EXPENDITURE, IF ANY, I.E TAXES AND LIGHTI NG ETC, WHICH ARE TO BE PAID ANNUALLY OR ITA NO. 1707/KOL/2010-BKH 4 MONTHLY ARE REQUIRED TO BE ALLOWED AS REVENUE EXPEN DITURE. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW ON THIS IS SUE AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH THE FOLLOWING DIRECTIONS:- I) THE NATURE OF EXPENDITURE BE ASCERTAINED FROM THE ASSESSEE, AND II) THE EXPENDITURE INCURRED FOR CONSTRUCTION OF P ASSENGER SHELTERS SHOULD BE TAKEN AS CAPITAL EXPENDITURE. AS THE SAME ARE UTIL IZED FOR THE PURPOSE OF ASSESSEES BUSINESS DEPRECIATION AS PER LAW SHOULD BE ALLOWED ON THE SAME III) EXPENDITURE, IF ANY, AS MENTIONED BY US IN TH E PARA HEREINABOVE SHOULD BE ALLOWED AS REVENUE EXPENDITURE . THE AO IS DIRECTED TO PASS A FRESH ORDER IN CONSONA NCE WITH THE ABOVE DIRECTION AFTER ALLOWING THE ASSESSEE ADEQUATE OPPORTUNITY FOR PR OVIDING NECESSARY DETAILS. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED IN PART FOR STATISTICAL PURPOSE. # '2 $3' 4 3& 5 #6 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 18- 03-2011 SD/- SD/- ( . . ), ( .'.# ), '$ , (B.R MITTAL, JUDICIAL MEMBER. ) (B.K.HALDAR, ACCOUN TANT MEMBER) (7$) DATE :18/03/2011 *PP / SR. PRIVATE SECRETARY : '2 0 .8 9'8(:- COPY OF THE ORDER FORWARDED TO: 1. (,- / APPELLANT ) : INCOME-TAX OFFICER, W 6(1), P-7 CHOWRINGHEE SQ., 6 TH FL., KOL-69. 2. ( ./,-/ RESPONDENT) : M/S. CO-OP PVT. LTD 14 BENTINCK STREE T, KOL-1. . 2. 2& ( )/ THE CIT(A) 3. 2& ( )/ THE CIT 5. ;5 .& / DR, KOLKATA BENCH 4. GUARD FILE /8 ./ TRUE COPY, '2&3/ BY ORDER # !< /ASSTT. REGISTRAR