Dr. Parul Ashwin Shah, Ahmedabad V. The ACIT.,Circle-3, Baroda

ITA 2072/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0310 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: ANIL R SHAH
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %& %& %& %& , , , , &' ( & &' ( & &' ( & &' ( & ' ' ' ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) ITA NO.2072/AHD/2012 [ASSTT.YEAR : 2008-2009] DR.PARUL ASHWIN SHAH OPP: GOLDEN SILVER APARTMENT GANGA JAMNA HOSPITAL SUBHANPURA, ELLORAPARK, BARODA. PAN : AIZPS 0005 N /VS. ACIT, CIR.3 BARODA. ITA NO.2073/AHD/2012 [ASSTT.YEAR : 2008-2009] DR.ASHIWN HIRALAL SHAH OPP: GOLDEN SILVER APARTMENT GANGA JAMNA HOSPITAL SUBHANPURA, ELLORAPARK, BARODA. PAN : ABWPS 4271 N /VS. ACIT, CIR.3 BARODA. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) .% / 0 &/ ASSESSEE BY : SHRI ANIL R. SHAH ( / 0 &/ REVENUE BY : SHRI D.K. SINGH 2 / %3'/ DATE OF HEARING : 29 TH JANUARY, 2013. 456 / %3'/ DATE OF PRONOUNCEMENT : 15-2-2013 &7 / O R D E R ITA NO.2072 AND 2073/AHD/2012 -2 PER T.R. MEENA, ACCOUNTANT MEMBER: THESE TWO APPEALS BY THE ASSESSEES FOR THE ASSESSMENT YEAR 20 08-2009 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A)-II, BARO DA. SINCE SIMILAR ISSUE IS RAISED IN BOTH THE APPEALS, THE SAME ARE D ISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2072/AHD/2012 IN THE CASE OF DR.PARUL ASHWIN SHAH 2. THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE A S UNDER: 1. THE LD.CIT(A) HAS ERRED BOTH IN LAW AND IN FACT HOLDING THAT RS.2,49,751/- SPENT BY YOUR APPELLANT TOWARDS REPAIRS & MAINTENANCE OF RENTED PROPERTY CLAIMED AS REVENUE4 EXPENDITURE IS IN NATURE OF CAPITAL EXPENDITURE. IT IS SUBMITTED THAT KEEPING IN MIND THE NATURE AND DETAILS OF EXPENSE, IT BE HELD THAT THE ENTIRE EXPENSES OF RS. 2,49,751 BEING INCURRED DURING THE COURSE OF PROFESSIONAL ACTIVITI ES AND FOR RUNNING HOSPITAL WAS OF A REVENUE NATURE AND LIABLE TO BE ALLOWED IN COMPUTING TOTAL INCOME. 2. WITHOUT PREJUDICE TO THE ABOVE, AND IF IT IS HEL D THAT THE SAID EXPENDITURE OF RS.2,49,751/- OF REPAIRS & MAIN TENANCE IS OF CAPITAL NATURE EVEN THEN FOLLOWING RATIO LAID DO WN BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. L AXMI TALKIES, 275 ITR 125 BE ALLOWED DEDUCTION HOLDING T HAT EVEN CAPITAL EXPENDITURE IN A RENTED PREMISES IS DEDUCTI BLE EXPENDITURE IN COMPUTING TOTAL INCOME. 3. THE BRIEF FACTS AS CAN BE NOTED FROM THE RELEVAN T ORDERS OF THE REVENUE AUTHORITIES ARE THAT THE ASSESSEE IS A MEDI CAL PROFESSIONAL AND RUNNING A HOSPITAL NAMED GANGA JAMNA HOSPITAL AT BARODA. IN THE RETURN OF INCOME FILED, THE ASSESSEE CLAIMED AN AMO UNT OF RS.2,24,776/- AS REVENUE EXPENDITURE ON ACCOUNT OF RENOVATION OF THE HOSPITAL. HOWEVER, THE AO TREATED THE SAME AS A CA PITAL EXPENDITURE BY HOLDING THAT THE OBJECT OF THE EXPENSE WAS TO GE T THE ENDURING ITA NO.2072 AND 2073/AHD/2012 -3 BENEFIT AND NOT TO PRESERVE THE EXISTING ASSET. TH E LEARNED CIT(A) CONFIRMED THE ORDER OF THE AO. HENCE, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE IMPUGNED EXPENSES ARE INCURRED FOR RENOVATION OF TH E HOSPITAL PREMISES TO CATER THE NEEDS OF THE CUSTOMERS AND RE MAIN IN COMPETITION IN THE PROFESSION. THE EXPENSES INCLUD ED REPAIRING OF THE HOSPITAL EQUIPMENTS, COLOUR AND PAINTING WORKS, MAK ING SEPARATE ATTACHED BATHROOM TO THE HOSPITAL ROOMS, REPAIRING IN THE TERRACE SIDE OF THE HOSPITAL BUILDING, WHICH WAS GETTING DETERIO RATED DUE TO SEEPAGE/LEAKAGE CAUSED BY THE RAIN AND OTHER CLIMAT IC CONDITIONS AND TO MAINTAIN CLEAN AND HYGIENIC CONDITIONS IN THE HO SPITAL PREMISES. HE SUBMITTED THAT THESE EXPENSES ARE REQUIRED TO BE INCURRED FROM NOW AND THEN, AND ARE RECURRING NATURE TO REMAIN IN COMPETITION WITH OTHERS IN THE SAME FIELD, AND TO CATER EVER INCREAS ING MODERN NEED OF THE CUSTOMERS IN THE SOCIETY. IT IS FURTHER SUBMITT ED THAT BY INCURRING THE ABOVE EXPENDITURE, THE ASSESSEE HAS NOT CREATED ANY CAPITAL ASSET BUT FOR MANAGING AND CONDUCTING BUSINESS EFFICIENTL Y IN MORE PROFITABLE, WHICH ARE INTEGRAL PART OF THE DAY TO D AY BUSINESS. IT IS SUBMITTED THAT THE ASSESSEE HAS SUBMITTED DETAILS O F VARIOUS EXPENSES INCURRED ON THIS COUNT, AND DETAILS OF THE INDIVIDU AL PARTIES WHO CARRIED OUT THE WORK, HAVE NOT BEEN DISPUTED BY THE REVENUE. IT IS SUBMITTED THAT THE WORK OF RENOVATION NEVER AMOUNTS TO CREATION OF CAPITAL ASSETS, BUT A DAY TO DAY BUSINESS EXPEDIENC Y AND NECESSITY TO MAKE MAXIMUM USAGE OF THE EXISTING ASSETS. IN SUPP ORT THE LEARNED COUNSEL FOR THE ASSESSEE RELIED VARIOUS JUDGMENTS I NCLUDING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF THE CIT VS. LAXMI TALKIES, 275 ITR 125 FOR THE PROPOSITION THAT THE ITA NO.2072 AND 2073/AHD/2012 -4 EXPENDITURE INCURRED FOR GENERATING MORE PROFIT BY INVITING FLOW OF THE CUSTOMERS ARE ALLOWABLE AS REVENUE EXPENDITURE. 5. THE LEARNED DR OF THE REVENUE RELIED ON THE ORDE RS OF THE AO AND THE CIT(A). HE SUBMITTED THAT BY INCURRING HUG E EXPENDITURE THE ASSESSEE HAD ADDED NEW ASSETS AND UPGRADED EXISTING FACILITIES IN THE HOSPITAL TO GENERATE MORE REVENUE, AND HENCE AN ADV ANTAGE FOR THE ENDURING BENEFIT. BY FINDING THE NATURE OF THE EXPE NDITURE, BOTH THE AUTHORITIES RIGHTLY HELD THAT THE IMPUGNED EXPENDIT URE IS CAPITAL EXPENDITURE, AND HENCE JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE ASSESSEE IS A DOCTOR BY PROFESSION AND HAVING A HOSPITAL IN RENTED PREMISES. THE IMPUGNED EXPENDITURE WAS INCURRED FOR RENOVATION OF THE HOSPITAL FOR ATTRACTING MORE CUSTOMERS AND TO REMAIN IN THE COMP ETITION IN THE FIELD OF MEDICAL PROFESSION. THE EXPENDITURE INCLUDED WE RE FOR COLOUR PAINTING, REPAIRS TO THE TERRACE DUE TO LEAKAGE CAU SED BY THE RAIN WATER, SPLITTING THE EXISTING ROOMS AND MAKING ATTACHED BA TH ROOMS, REPLACEMENT OF ALUMINUM DOORS/WINDOWS FOR PROPER VE NTILATION ETC. THE DETAILS OF VARIOUS PARTIES INVOLVED IN THE ABOV E WORK WERE FURNISHED AT THE TIME OF ASSESSMENT, AND THE GENUIN ENESS OF THE PAYMENT MADE TO THESE INDIVIDUAL PARTIES HAS NOT BE EN DISPUTED BY THE REVENUE. IT IS A FACT THAT IN THE MODERN TIMES OF COMPETITION FOR CATERING DAILY NEEDS OF THE CUSTOMERS, THE BUSINESS PREMISES IS TO BE RENOVATED AND MODERNIZED AND THAT RECURRING EXPENDI TURE IS BOUND TO BE INCURRED PERIODICALLY. WHETHER AN EXPENDITURE I S REVENUE OR CAPITAL, CAN BE JUDGED LOOKING TO THE BUSINESS OR C OMMERCIAL NECESSITY, AND NOT MERELY FROM THE QUANTUM OF THE A MOUNT SPENT. THE ITA NO.2072 AND 2073/AHD/2012 -5 ASSESSEE HAS CARRIED OUT CERTAIN RENOVATION WORK TO EXISTING FACILITIES, WHICH CAN NEVER BE SAID TO HAVE CREATED NEW ASSETS, RATHER A NECESSITY FOR THE TRADE OR BUSINESS OF THE ASSESSEE TO GENERA TE MORE PROFIT BY ATTRACTING MORE CUSTOMERS. THE DETAILS OF THE EXP ENSES INCURRED AND THE PARTIES INVOLVED IN THE WORK, FURNISHED DURING THE ASSESSMENT PROCEEDINGS, CLEARLY SHOWED THAT THE EXPENSES INCUR RED BY THE ASSESSEE ARE OF RECURRING NATURE, AND HENCE A REVEN UE EXPENDITURE, ENTITLING THE ASSESSEE FOR BUSINESS DEDUCTION. THE REFORE, HAVING REGARD TO THE AIM AND PURPOSE OF THE EXPENDITURE IN CURRED BY THE ASSESSEE IN IMPROVEMENT OF THE EXISTING FACILITIES, WE ARE UNABLE TO BUY THE CONTENTION OF THE REVENUE THAT THESE EXPENS ES BEING PERMANENT IN NATURE, SHOULD BE TREATED AS CAPITAL N ATURE. IT IS SETTLED BY VARIOUS HONBLE HIGH COURTS THAT IF THE ADVANTAG E OBTAINED BY ENTAILING THE EXPENDITURE CONSISTED IN FACILITATING THE ASSESSEES TRADING OPERATIONS, OR ENABLING HIM TO MANAGE AND C ONDUCT HIS BUSINESS MORE EFFICIENTLY OR MORE PROFITABLY, THE E XPENSES SHOULD BE CONSIDERED AS PROPER CHARGE ON REVENUE ACCOUNT. THE REFORE, IN OUR CONSIDERED OPINION, THE IMPUGNED EXPENSES INCURRED BY THE ASSESSEE WOULD BE PROPERLY CHARGEABLE TO REVENUE ACCOUNT. IN THIS VIEW OF THE MATTER, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 8. ITA NO.2073/AHD/2012 IN THE CASE OF DR.ASHWIN HI RALAL SHAH. 9. THE GROUNDS RAISED IN THIS APPEAL OF THE ASSESSE E ARE AS UNDER: 1. THE LD.CIT(A) HAS ERRED BOTH IN LAW AND IN FAC T HOLDING THAT RS.2,99,797/- SPENT BY YOUR APPELLANT TOWARDS REPAIRS & MAINTENANCE OF RENTED PROPERTY CLAIMED AS REVENUE E XPENDITURE IS IN NATURE OF CAPITAL EXPENDITURE. ITA NO.2072 AND 2073/AHD/2012 -6 IT IS SUBMITTED THAT KEEPING IN MIND THE NATURE AND DETAILS OF EXPENSE, IT BE HELD THAT THE ENTIRE EXPENSES OF RS. 2,99,798/- INCURRED DURING THE COURSE OF PROFESSIONAL ACTIVITI ES AND FOR RUNNING HOSPITAL WAS OF A REVENUE NATURE AND LIABLE TO BE ALLOWED IN COMPUTING TOTAL INCOME. 2. WITHOUT PREJUDICE TO THE ABOVE, AND IF IT IS HEL D THAT THE SAID EXPENDITURE OF RS.2,99,797/- OF REPAIRS & MAIN TENANCE IS OF CAPITAL NATURE EVEN THEN FOLLOWING RATIO LAID DO WN BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. L AXMI TALKIES, 275 ITR 125 BE ALLOWED DEDUCTION HOLDING T HAT EVEN CAPITAL EXPENDITURE IN A RENTED PREMISES IS DEDUCTI BLE EXPENDITURE IN COMPUTING TOTAL INCOME. 10. AT THE OUTSET, BOTH THE PARTIES AGREED THAT THE FACTS STATED IN THIS APPEAL IS SIMILAR TO FACTS STATED IN ITA NO.2072/AH D/2012, AND THEREFORE THE DECISION MAY BE TAKEN ON SIMILAR LINE . 12. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E FACTS IN THE PRESENT CASE IS SIMILAR TO THE FACTS STATED IN ITA NO.2072/AHD/2012. IN THE FOREGOING PARAGRAPHS, IN ITA NO.2072/AHD/201 2, WE HAVE HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS RE VENUE EXPENDITURE AND THE ASSESSEE IS ENTITLED FOR THE BUSINESS DEDUC TION. THEREFORE, THE FACTS AND CIRCUMSTANCES BEING SIMILAR, WE HOLD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE EXPENDITURE AND THE ASSESSEE IS ENTITLED FOR BUSINESS DEDUCTION FOR THE IMPUGNED EX PENDITURE. 13. IN THE RESULT, THE BOTH THE APPEALS OF THE ASSE SSEES ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %& %& %& %& / TEJ RAM MEENA) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER