Cholamandalam Distribution, CHENNAI V. ACIT, CHENNAI

ITA 1932/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8057 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1932/MDS./2016 / ASSESSMENT YEAR : 2007-08 M/S.CHOLAMANDALAM , DISTRIBUTION SERVICES LTD., NO.1, NSC BOSE ROAD, CHENNAI 600 001 VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-I(2), CHENNAI 600 034. [PAN AABCC 4868 J ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MS.BHAVUA,ADVOCATE /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT D.R / DATE OF HEARING : 29 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I DATED 5.4.2016 PERTAINING TO ASSESSMENT YEAR 2007-08. ITA NO.1932/16 :- 2 -: 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS WITH REGRD TO CONFIRMING THE RESTRICTION OF DEPRECIATION TO 10% AS AGAINST 100% CLAIM BY THE ASSESSEE ON INTERIOR WORKS ON LEASED HOLD PREMISES AS CAPITAL E XPENDITURE. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD IN CURRED EXPENDITURE TOWARDS INTERIOR DECORATION LIKE FALSE CEILING, PARTITION, CARPETS, WOODEN STRUCTURES ETC.. THE ASSESSEE CLAIM ED THE ENTIRE EXPENDITURE AS 100% DEPRECIATION AMOUNTING TO ` 14,86,058/- AS THERE WAS NO BENEFIT OF ENDURING NATURE. THE AO RESTRICTE D THE CLAIM TO 10% AGAINST THE CLAIM OF THE ASSESSEE AT 100% AD DISALL OWED ` 13,37,454/-. AGGRIEVED WITH THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT( A) CONFIRMED THE ACTION OF THE LD. ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NOS.1952& 1953/MDS./2016 FOR ASSESSMENT YEARS 2008-09 & 2009-10 DATED 05.10.2016 WHEREIN THE TRIBUNAL HELD AS UNDER:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IN THIS CASE THE ASSESSEE CARRIE D OUT THE RENOVATION WORK WHICH INCLUDES FALSE CEILING, FLOOR ING, INTERIOR ITA NO.1932/16 :- 3 -: WORKS, ELECTRICAL WORKS, CARPETS, PARTITIONS, WOODE N STRUCTURES ETC. IN VARIOUS RENTAL PREMISES SO AS TO MAKE THE PREMIS ES HABITABLE AND THE ASSESSEE CANNOT EXTEND OR ANY IMPROVEMENT T O THE LEASED PREMISES SO AS TO HOLD IT AS AN EXPENDITURE BROUGHT BENEFIT TO THE ASSESSEE WHICH IS ENDURING NATURE. FURTHER, IT IS NOTED THAT IN THE CASE OF M/S.RIALTO ENTERPRISES PVT LTD., VS. JCIT IN ITA NO.803/MDS./2016 FOR ASSESSMENT YEAR 2008-09 VIDE O RDER DATED 11.08.2016, THE TRIBUNAL OBSERVED THAT EXPENDITURE INCURRED BY THE ASSESSEE ON PAINTING, RELAYING OF DAMAGED FLOOR S, PARTITIONS ETC. IN LEASEHOLD PREMISES IS ALLOWABLE AS REVENUE IN NATURE. FURTHER, THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AYESHA HOSPITALS (P) LTD. REPORTED IN 292 ITR 266(MAD.) OB SERVED THE SAME. FURTHER, THE JURISDICTIONAL HIGH COURT IN T HE CASE OF THIRU AROORAN SUGARS LTD VS. DCIT REPORTED IN [2013] 350 ITR 324 (MAD) HELD AS UNDER:- 3. LEARNED COUNSEL APPEARING FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THIS COURT REPORTED IN CIT V. AYESHA HOSPITALS P. LTD. [2007] 292 ITR 266 (MAD), WHEREIN IN RESPECT OF THE CLAIM MADE FOR THE ASSESSMENT YEAR 1991-92, THE ASSESSEE CLAIMED THE AMOUNTS SPENT ON PAINTING, RELAYING OF THE DAMAGED FLOORS, PARTITIONS, ETC., A S REVENUE EXPENDITURE. ON AN APPEAL BEFORE THIS COURT BY THE REVENUE, IT WAS POINTED OUT THAT THE ASSESSEE INCURRED EXPENDITURE FOR RELAYING OF THE DAMAGED FLOORS, PAINTING AND PARTITION IN RESPECT O F THE LEASED PROPERTY. REFERRING TO THE DECISION OF ITA NO.1932/16 :- 4 -: THE APEX COURT REPORTED IN CIT V. MADRAS AUTO SERVICE P. LTD. [1998] 233 ITR 468 (SC), THIS COURT POINTED OUT THAT THE EXPENDITURE INCURRED IN RESPECT OF THE MAINTENANCE OF THE LEASED PREMISES WAS DEDUCTIBLE AS REVENUE EXPENDITURE. 4. AS REGARDS THE CONTENTION TAKEN BY THE REVENUE P LACING RELIANCE ON EXPLANATION 1 TO SECTION 32(1)(II) OF T HE INCOME-TAX ACT, WHICH WAS INSERTED WITH EFFECT FROM APRIL 1, 1 988, THIS COURT POINTED OUT THAT THE EXPLANATION IS AN EXCEPT IONAL ONE WHICH PERMITS DEPRECIATION IN CASES WHERE THE ASSES SEE DOES NOT OWN A BUILDING, IN RESPECT OF WHICH THE ASSESSE E INCURS CAPITAL EXPENDITURE ON THE CONSTRUCTION OF ANY STRU CTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO THE B UILDING. 5. APPLYING THE ABOVE SAID DECISION OF THIS COURT T O THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE TEMPORARY STRUCT URE BY MEANS OF FALSE CEILING AND OFFICE RENOVATION HAD NO T RESULTED IN ANY CAPITAL EXPENDITURE. THE BENEFIT OF THE ABOVE S AID DECISION OF THIS COURT HENCE, APPLIES TO THE FACTS OF THE CA SE. ACCORDINGLY, THE QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE AND THE TAX CASE (APPEAL) STANDS ALLOWED. NO COSTS. IN VIEW OF THE BINDING DECISIONS OF THE JURISDICTIO NAL HIGH COURT, WE ARE INCLINED TO HOLD THAT THE EXPENDITURE INCURRED BY T HE ASSESSEE FOR RENOVATING THE EXISTING LEASED PREMISES IS ONLY IN THE FIELD O F REVENUE AND IT CANNOT BE SAID THAT THE EXPENDITURE WAS IN NATURE OF CAPITAL FIELD. MORE SO, ALL THE JUDGMENTS CITED BY THE LD.A.R WERE DECIDED IN FAVOU R OF THE ASSESSEE HOLDING ITA NO.1932/16 :- 5 -: THAT EXPENDITURE INCURRED IN LEASED PREMISES WITHO UT EXTENDING THE AREA OF CONSTRUCTION, THE SAID EXPENDITURE IS REVENUE IN NA TURE. ACCORDINGLY, THE APPEALS OF ASSESSEE IN BOTH THE ASSESSMENT YEARS AR E ALLOWED. 5. IN VIEW OF THE ORDER OF TRIBUNAL, WE ARE OF THE OP THAT THE ASSESSEE IS ENTITLED FOR 100% DEPRECIATION IN RESPE CT OF GLASS PARTITIONS, MODULAR STORAGE, WORK STATION, ETC. IN THE LEASED PREMISES AS THEY ARE TEMPORARY STRUCTURES. ACCORDINGLY, WE ALLOW THE APPEAL OF ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF