Shri M.Murali, CHENNAI V. ACIT, Coimbatore

ITA 1840/CHNY/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90513 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 32; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , . $ , % ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO . 1840/MDS/2012 ( / ASSESSMENT YEAR: 2009-10) MR. M.MURALI, 101, MAHADE BHASHYAKARAU ROAD WEST R.S. PURAM, COIMBATORE-641 002. VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-II, COIMBATORE. PAN:ADZPM4633P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SAROJ KUMAR PARIDA, ADVOCATE /RESPONDENT BY : MR. N.MADHAVAN, JCIT /DATE OF HEARING : 11 TH JUNE, 2015 /DATE OF PRONOUNCEMENT : 19 TH JUNE, 2015 / O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I , COIMBATORE DATED 26.07.2012. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO DISALLOWA NCE OF EXPENDITURE AMOUNTING TO ` 29,04,295/- INCURRED IN LEASED PREMISES AT SOWCARPET, WEST MAMBALAM, NANGANALLUR, MOTEL HIGHWAY AND CHROMPET. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD IN CURRED A SUM OF ` 75,01,509/- AS BUILDING MAINTENANCE, AN AMOUNT OF 2 ITA NO.1840 /MDS/2012 ` 30,90,061/- WAS INCURRED ON MAINTENANCE OF ALL LEA SED AND EXISTING BRANCHES AND ` 15,07,153/- ON OWN KITCHEN PREMISES. THE ASSESSING OFFICER ALLOWED THESE EXPE NDITURE AS REVENUE EXPENDITURE . THE ASSESSEE OPENED NEW OU TLETS AT SOWCARPET, WEST MAMBALAM, NANGANALLUR, MOTEL HIG HWAY, CHROMPET ETC. IN ALL THESE OUTLETS, ASSESSEE HAS T AKEN THE PROPERTY FOR LEASE FOR A PERIOD OF 6 TO 12 YEARS AN D HAS COMPLETELY DONE UP THE PREMISES BY LAYING GRANITE, FLOORING, MARBLE FLOORING, WALL TILES AND HAS ALSO PAID GOOD AMOUNT AS PROFESSIONAL FEES FOR DESIGN AND EXECUTION OF WORK AT EACH BRANCH. THE ASSESSEE HAS ALSO MADE CONSIDERABLE ALTERATIONS WITH PARTITIONS AND DESIGNS ON CEILING AND GLASS FITTINGS WERE PUT UP IN THE PREMISES INCLUDING GLAS S DOORS. AFTER GOING THROUGH THE DETAILS FURNISHED BY THE AS SESSEE, COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE VIE W THAT ASSESSEE HAS SPENT MONEY NOT FOR THE MAINTENANCE OF LEASED PREMISES BUT FOR CREATING ASSET OF ENDURING BENEFIT . AFTER CONSIDERING THE LEASE PERIOD OF THE PROPERTY, COMMI SSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE PARTITIONS C REATED, LAYING OF MARBLES AND GRANITE FLOORINGS CLEARLY GIV E AN ENDURING BENEFIT TO THE ASSESSEE IN HIS BUSINESS AN D THUS, HE 3 ITA NO.1840 /MDS/2012 AFFIRMED THE ORDER OF THE ASSESSING OFFICER, AGAINS T WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.15/MDS/2012 DATED 10.05.2013 WHEREIN THE TRIBUNA L OBSERVED AS UNDER:- 6 . WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE COMMON ASSESSMENT ORDER AND CIT(A)S ORDER. IT IS NOTED THAT SO FAR AS THE ASSESSEES APPEAL IS CONCE RNED, HIS GRIEVANCE IS THAT CIT(A) HAS WRONGLY CONFIRMED THE FINDING OF THE ASSESSING OFFICER THAT THE EXPENDITU RE INCURRED IN DEVELOPING NEW INFRASTRUCTURE FACILITIES/CONSTRUCTION OF NEW SHOP IS CAPITAL IN NATURE. ON THIS ISSUE WE FIND THAT IN THE PRECEDING ASSESSM ENT YEAR, THE TRIBUNAL (SUPRA) HAS RESTORED BACK THE V ERY ISSUE TO THE FILE OF THE ASSESSING OFFICER OBSERVIN G AS UNDER:- WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERIALS ON RECORD AND LOOKED INTO THE DETAILS OF VARIOUS EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS INDICATED IN ANNEXURE B FILED BEFORE US. AFTER CAREFULLY, CONSIDERING THE ENTIRETY OF FACTS, CIRCUMSTANCES OF THE CASE, MATERIAL ON RECORD AND CASE LAW CITED, WE ARE OF THE OPINION THAT IF ANY EXPENDITURE IS INCURRED FOR SMOOTH RUNNING OF THE BUSINESS BY IMPROVING THE ASSETS TAKEN ON RENT FOR RUNNING OF THE BUSINESS, EXPENDITURE OF THE NATURE DESCRIBED IN THE ACCOUNTS SHOULD BE ALLOWED AS REVENUE EXPENDITURE. BUT, SO FAR AS THE CIT(A)S 4 ITA NO.1840 /MDS/2012 FINDINGS THAT THREE NEW SHOP WERE CONSTRUCTED BY THE ASSESSEES FOR WHICH THE OUTLAY AMOUNTING TO ` 17,15,726.90 IS CONCERNED, THE ASSESSEES CATEGORICAL STATEMENT THAT THESE SHOPS WERE ALSO TAKEN ON LEASE, THE ASSESSEE IS NOT OWNER OF THE SHIP AND NECESSARY REPAIRS AND RENOVATION HAVE BEEN CARRIED OUT TO MAKE THE PREMISES CONGENIAL TO THE RUNNING OF THE BUSINESS OF THE ASSESSEE. THEREFORE, WE WHILE CONFIRMING THE ACTIN OF THE CIT(A) IN ALLOWING THE PART RELIEF TO THE ASSESSEE, SET ASIDE THE ISSUE IN RELATION TO EXPENDITURE OF ` 17,15,726.90 ON STATED CONSTRUCTION OF THREE NEW SHOPS AND TO HAVE RE-LOOK ON THESE ASSETS AND INCASE IT IS FOUND THAT THESE SHOPS ARE ALSO ON LEASE BASIS, THE EXPENDITURE WOULD BE ALLOWED AS REVENUE EXPENDITURE AND IF IT IS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS ACTUALLY PURCHASED THE SHOPS AND CONSTRUCTED THESE BY MAKING EXPENDITURE OF ` 17,15,726.90/- THEN IT WILL AMOUNT TO CAPITAL EXPENDITURE AND HE WILL ALLOW PERMISSIBLE DEPRECIATION ON THE SAME. WITH THESE OBSERVATIONS, THE APPEAL OF THE REVENUE IS DISMISSED AND CO OF THE ASSESSEE, WHICH IS SUPPORTIVE OF THE ORDER OF THE CIT(A), HAVING BECOME INFRUTUOUS IS ALSO DISMISSED, WHERE AS THE APPEAL OF THE ASSESSEE WOULD BE TREATED TO HAVE BEEN PARTLY ALLOWED FOR STATISTICAL PURPOSE. TAKING CUE FROM THE SAME AND IN ORDER TO MAINTAIN CONSISTENCY, WE ARE OF THE OPINION THIS ISSUE DESERVES TO BE RE-EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT OF AFORESAID FINDINGS. ACCORDINGLY, WE DEEM IT APPROPRIATE THAT FOR IMPUGNED ASSESSMENT YEAR AS WELL, THE ISSUE DESERVES TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE IN LAW. RESULTANTLY, THE ASSESSEES APPEAL STANDS ACCEPTED FOR STATISTICAL PURPOSE. 5 ITA NO.1840 /MDS/2012 THEREFORE, THE COUNSEL SUBMITS THAT THE ISSUE MAY BE REMITTED BACK TO THE ASSESSING OFFICER WITH SIMILAR DIRECTION. 4. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, ANY EXPENDITURE INCURRED IN LEASED PREMISES CANNOT BE CONSIDERED AS REVENUE OR CAPITAL EXPENDITURE WITHOUT FURTHER PROOF REGARDING NATURE OF EXPENDITURE. IN ORDER TO FIND OUT THE NATURE OF EX PENDITURE, IT IS NECESSARY TO FIND OUT THE NATURE OF CONSTRUCTION PUT UP, THE PURPOSE OF CONSTRUCTION / RENOVATION AND THE USE T O WHICH THE CONSTRUCTION PUT UP AND ALSO IF IT IS A CASE OF REP AIR, REPLACEMENT, ADDITION OR IMPROVEMENT HAS TO BE GONE INTO. IT IS ONLY ON THE AFORESAID MATERIAL, KEEPING IN MIND THE PRINCIPLES ENUNCIATED IN THE JUDGMENTS BY THE SUPR EME COURT IN THE CASE OF CIT VS. MADRAS AUTO SERVICES ( P) LTD. (233 ITR 468) (SC) AND KEEPING IN MIND SECTION 37 A ND SECTION 32 OF THE ACT, THAT ONE HAS TO DETERMINE WH ETHER THE EXPENDITURE IS REVENUE EXPENDITURE OR CAPITAL EXPEN DITURE. WHAT WOULD APPLY TO CIVIL WORK EQUALLY APPLIES TO E LECTRICAL 6 ITA NO.1840 /MDS/2012 WORK OR INTERIOR DECORATION. THE ASSESSEE HAD NOT S TATED THE NATURE OF CIVIL WORKS CONSTRUCTED, THE NATURE OF IN TERIOR DECORATION MADE TO THE LEASEHOLD PREMISES AND ALSO THE NATURE OF ELECTRICAL WORK UNDERTAKEN. IN THE ABSENC E OF THAT MATERIAL AND WITHOUT PROPER APPLICATION OF MIND, TH E ASSESSING AUTHORITY PROCEEDED ON THE FOOTING THAT T HE EXPENDITURE CONSTITUTED CAPITAL EXPENDITURE. ACCOR DINGLY, THIS ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER WHETHER THE EXPENDITURE IS REVENUE OR CAPI TAL IN NATURE AND DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE OBSERVATIONS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2015 SD/- SD/- ( . ) ( % ) ( V.DURGA RAO ) ( CHANDRA POOJARI ) ( ) / JUDICIAL MEMBER ) / ACCOUNTANT MEMBER ( /CHENNAI, + /DATED 19 TH JUNE, 2015 SOMU -. /. /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .