ALPHA PLUS TECHNOLOGIES LTD, MUMBAI V. ITO WD 8(1)(1), MUMBAI

ITA 2462/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88072 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: DEEPAK TRALSHAWALLA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SM C BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA, AM ./ I.T.A. NO. 2462/MUM/2015 ( / ASSESSME NT YEAR: 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. 13/62, TRIVENI HIG COMPLEX, LINK ROAD, ANDHERI (W), MUMBAI - 400 102 / VS. ITO, 8(1)(1), R. NO. 205, AAYKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. AAECA 4709 R ( / APPEL LANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DEEPAK TRALSHAWALLA / RESPONDENT BY : SHRI B. S. BIST / DATE OF HEARING : 19.11.2015 / DATE OF PRONOUNCEMENT : 29 .01.2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 16 , MUMBAI (CIT(A) FOR SHORT) DATED 02.1.2015 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U /S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2011 - 12 VIDE ORDER DATED 16.12.2013 . 2. THE SOLE ISSUE ARISING IN TH IS APPEAL, ON THE BASIS OF THE G ROUND RAISED AS WELL AS THE ARGUMENT S PRESENTED, IS THE DEDUCT IBILITY IN LAW OF THE ASSESSEES CLAIM FOR 2 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO REPAIR AND MAINTENANCE EXPENDITURE, PREFERRED AT RS.1,33,914/ - , UNDER THE ACT. THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE PRODUCTS AND PROVIDING REGULA TORY CONTENT SERVICES FOR BFSI S ECTOR , EXPLAINED IN THE ASSESSMENT PROCEEDINGS T HAT IT INCURRED AN EXPENDITURE OF RS.8,39,482/ - ON SETTING UP ITS BUSINESS PREMISES AT UNIT NOS. 638 AND 639, 6 TH FLOOR, LAXMI PLAZA, LAXMI INDUSTRIAL ESTATE, NEW LINK ROAD, ANDHERI (W), MUMBAI, A LEASE D P REMISES, TRANSFERRING ITS FURNITURE AND FIXTURE AND OTHER EQUIPMENT FROM ITS ERSTWHILE PREMISES ( AT UNIT NOS. 607 & 630 IN THE SAME BUILDING). APART FROM AN D INCIDENTAL TO THE SAID TRANSFER, EXPENDITURE WAS REQUIRED TO AND, ACCORDINGLY , INCURRED TOWARD IN STALLATION OF WORK STATIONS, F URNITURE AND F IXTURE, FLOORING, ELECTRIC WIRING, FAL SE CEILING, PAINTING, ETC. FURTHER, AS THE LEASE, WHICH DID NOT HAVE ANY RENEWAL CLAUSE, WAS FOR A PERIOD OF 24 MONTHS, BEGINNING 18.12.2010, I T HAD DEBITED THE PROPORTIONATE EXPENDITURE IN ITS OPERATING STATEMENT FOR THE YEAR. THE ASSESSING OFFICER (A.O.) WAS OF THE VIEW THAT THE ACCOUNTING TREATMENT CANNOT DETERMINE THE DEDUCTIBILITY, WHICH WAS TO BE GUIDED BY THE PROVISION/S OF LAW, RELYING FOR THE PURPOSE ON THE DECISION I N THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V. CIT [ 1 997] 227 ITR 172 (SC) , REPRODUCING THERE - FROM. C APITAL EXPENDITURE , WHERE INCURRED ON OR IN RELATION TO A BUILDING, QUA WHICH THE ASSESSEE HAS LEASE HOLD OR OTHER RIGHT O F OCCUPANCY , WOUL D ONLY BE ENTITLED TO DEPRECIATION U/S. 32(1) R/W EXPLANATION 1 THERETO, WHICH READS AS UNDER: EXPLANATION 1 - WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. ACCORDINGLY, DISALLOWING THE CLAIM FOR EXPENDITURE, HE ALLOWED THE ASSESSEE DEPRECIATION ON EXPENDITURE OF RS.8,39,482/ - , I.E., AT RS.41,974/ - . IN APPEAL, THE 3 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO ASSESSEE EMPHASIZE D THAT THE EXPEN DITURE WAS NOT CAPITAL EXPENDITURE, BEING REQUIRED TO BE INCURRED FOR THE SMOOTH CONDUCT OF ITS OPERATIONS, LEAVING THE CAPITAL STRUCTURE UNTOUCHED. TWO, THE PREMISES WAS NOT A LEASE D PREMISES, BUT IN FACT A LEAVE AND LICENSE ARRANGEMENT. THE PROVISION OF EXPLANATION 1 TO SECTION 32(1) WOULD THEREFORE NOT APPLY. IN VIEW OF THE LD. CIT(A), THE ASSESSEES CLAIMS WERE NOT FACTUALLY CORRECT, WITH IT ITSELF ADMITTING V IDE IT S LETTER DATED 04 .10.2013 TO THE PREMISES BEING LEASE D. THE S AID PROVISION HAD BEEN RIGHTLY INVOKED. THE DISALLOWANCE BEING CONFIRMED THUS, THE ASSESSEE IS IN SECOND APPEAL. 3. I HAVE HEARD THE PARTIES , AND PERUSED THE MATERIAL ON RECORD, GIVING A CAREFU L CONSIDERATION TO THE MATTER. 3.1 BEFORE, HOWEVER, PROCEEDING TO DISCUSS THE MATTER, IT MAY BE CLARIFIED THAT IT WAS AT THE OUTSET IN QUIRED FROM THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, IF ANY SUBSEQUENT YEAR THE TREATMENT HAVI NG IMPLICATION THERE - FOR, W AS DECIDED BY THE TRIBUNAL, OR EVEN BEFORE IT, AND WHO CONFIRMED IN THE NEGATIVE. 3.2 THE ISSUE AT HAND, AS DISCERNED, IS IF THE IMPUGNED EXPENDITURE IS A CAPITAL EXPENDITURE OR IS IN TH E NATURE OF REPAIRS THE TWO BEING MUTUA LLY EXCLUSIVE (ALSO REFER EXPLANATION TO S. 30) . WHILE THE REVENUE REGARDS IT AS A CAPITAL EXPENDITURE, THE ASSESSEES CLAIMS IT TO BE ONLY REPAIRS, FURTHER EMPHASIZING THE SAME TO BE A TERM OF W IDE IMPORT, I.E., THAN CURRENT REPAIRS, WITH REFERENCE TO WHICH DEDUCTION IS ALLOWED QUA OWN BUILDING ONLY (U/S. 30(A)(II)), WHILE THE PREMISES IN THE INSTANT CASE WAS A TENANTED PREMISES , COVERED U/S. 30(A)(I), EMPLOYING, IN CONTRADISTINCTION , THE EXPRESSION REPAIRS. REPAIRS, EVEN IF BROADLY CONSTRUED , WOULD ONLY IMPLY EXISTENCE OF AN ASSET , O N THE PRESERVATION (IN A GOOD OPERATING STATE) O R MAINTENANCE OF WHICH THE EXPENDITURE IS INCURRED, AS EXPLAINED IN NEW SHORROCK SPINNING & MANUFACTURING CO. LTD. VS. CIT [ 1956 ] 130 ITR 338 (BOM) , RELIED UPON BY THE A.O. (REFER PARA 4.4, 5 OF THE ASSESSMEN T ORDER). IT MAY, HOWEVER, BE CLARIFIED HERE THAT THERE IS NO CONCEPT OF 4 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO A DEFERRED REVENUE EXPENDITURE UNDER THE ACT. AS SUCH, WHERE THE EXPENDITURE IS FOUND AS NOT CAPITAL IN NATURE, THE SAME SHALL BE, PER CONTRA , AND THE ENTIRE OF IT, REVENUE IN NATURE AND, ACCORDINGLY, EXIGIBLE TO DEDUCTION FOR THE YEAR IN WHICH IT IS INCURRED IRRESPECTIVE OF THE PERIOD OVER WHICH BENEFIT FROM IT IS LIKELY TO ARISE, WHICH, FUTURE BEING UNCERTAIN, IS INDEFINITE. ALSO, IT IS NOT A CONTRACTUAL ARRANGEMENT, WHEREBY THE BEN EFIT ENURES AS A FUNCTION OF TIME, SO AS TO ADOPT THE MATCHING PRINCIPLE, WHICH HAS BEEN UPHELD BY THE HONBLE COURTS. IN THE FACTS OF THE PRESENT CASE, THE PREMISES HAD BEEN ACQUIRED IN A S EMI - FINISHED STATE; IT REQUIRING FURTHER WORK BEING P E RF O R M ED THER EON TO MAKE IT FIT FOR USE. SURELY, AN OCCUPIER WOULD D O SO IN THE MANNER HE DEEMS FIT AND PROPER. THIS EXPLAINS THE EXPENDITURE ON FLOORING, ELECTRIC WIRING, WORK STATIONS, ETC. HOW, IT IS WONDER ED , COULD PREMISES IN A RAW OR SEMI - FINISHED STATE BE USED B Y THE ASSESSEE FOR ITS PURPOSES, I.E., THE DEVELOPMENT OF SOFTWARE, REQUIRING , BESIDES SKILLED HUMAN RESOURCE AND INTANGIBLE ASSETS, ALL THE NECESSARY PHYSICAL INFRASTRUCTURE. IT IS NOT THE CASE OF THE PREMISES BEING USED BY THE ASSESSEE EARLIER, MAKING C HANGES ONLY TO ENABLE A BETTER USER, WHEREIN AGAIN IT SHALL HAVE TO BE SEEN, IF ANY ASSET O R ADVANTAGE OF AN ENDURING NATURE ENURES AS A RESULT OF THE SAID EXPENDITURE. TOTAL RENOVATION IS, AFTER ALL, ONLY CAPITAL EXPENDITURE ( BALLIMAL NAWAL KISHOR & ANR. V. CIT [1997] 224 ITR 414 (SC) ). HOW COULD, FOR EXAMPLE, THE ASSESSEE WORK WITHOUT WORK STATION S , ELECTRIC C ABLE S , PROPER FLOORING, ETC. WHICH IS REQUIRED AS MUCH AS (SAY) FURNITURE AND FIXTURE, COMPUTERS, ETC. WHY, EVEN EXPENDITURE ON PLASTERING AND PAINT ING, NORMA LLY REGARDED AS MAINTENANCE EXPENDITURE, WHERE FOR THE FIRST TIME, WOULD HAVE TO BE REGARDED AS A PART OF THE SET - UP COST THE PREMISES BEING MADE READY ONLY FOR ITS INTEND ED USER. THE SAME , TOGETHER WITH THE FURNITURE AND FIXTURE AND PL ANT AND MACHINERY (COMPRISING COMPUTER SYSTEMS, ETC. ) FORM S PART OF THE CAPITAL STRUCTURE OR THE PROFIT - MAKING APPARATUS EACH WITH A DISTINCT PURPOSE/FUNCTION, REQUIRED FOR OPERATING IN THE MANNER DEEMED FIT AND PROPER. IT IS NEITHER NECESSARY NOR REQUIRED TO IS OLATE THE EXPENDITURE INCURRED IN RELATION TO BUILDING, HOUSING THE WORK OPERATIONS , FOR A SEPARATE TREATMENT, 5 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO MERELY BECAUSE THE SAME IS NOT OWNED. THE CHARACTER OF EXPENDITURE, AFTER ALL, DEPENDS ON ITS NATURE, I.E., WHETHER FOR MAINTENANCE OR SUSTENANCE OF AN ASSET OR AD VANTAGE , ALREADY ACQUIRED OR O BTAINED, OR TOWARD ACQUIR IN G OR OBTAINING THE SAME. THE CASE LAW IN THE MATTER IS LEGION, AND TOWARD WHICH ONE MAY PROFITABLY CITE SOME, VIZ. ASSAM BENGAL CEMENT CO. LTD. VS. CIT [1955] 27 ITR 34 (SC) ; CHALLA PALLI SUGARS LTD. VS. CIT [1975] 98 ITR 167 (SC); EMPIRE JUTE CO. LTD. VS. CIT [1980] 124 ITR 1 (SC) . AS FAMOUSLY AND SUCCINCTLY PUT IN ASSAM BENGAL CEMENT CO. LTD. (SUPRA) (PG.44): YOU DO NOT USE IT FOR THE PURPOSE OF YOUR CONCERN, WHICH MEANS, FOR THE PURPOSE OF CARRYING ON YOUR CONCERN, BUT YOU USE IT TO ACQUIRE THE CONCERN. THIS IS ALSO IN AGREEMENT WITH THE ACCOUNTING DEFINITION OF A FIXED ASSET, I.E., AN ASSET HELD WITH THE INTENTION OF BEING USED FOR THE PURPOSE OF PRODUCING OR PROVIDING GOODS O R SERVICES AND IS NOT HELD FOR SALE IN THE NORMAL COURSE OF BUSINESS (REFER PARA 6.1 OF THE ACCOUNTING STANDARD 10 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA). THE APEX COURT IN CHALLAPALLI SUGARS LTD. (SUPRA), AMONG OTHERS, CLARIFIED THAT T HE ACCOUNTING DEFINITION OR THE RULE OF ACCOUNTANCY , AS UNDERSTOOD BY THE MEN OF COMMERCE, SHALL OBTAIN IN THE ABSENCE OF ANY STATUTORY DEFINITION OR ANY INDICATION TO THE CONTRARY. THIS WOULD ALSO MEET THE ASSESSEES RELIANCE ON CIT VS. HI LINE PENS P. LT D. [2008] 306 ITR 182 (DEL); THE RELEVANT EXPENDITURE (RS.8.39 LACS) HAVING BEEN FOUND IN THE NATURE OF A SET - UP COST . TRUE, THE BUILDING IS NOT OWNED BY THE ASSESSEE, WHO HAS ONLY A RIGHT O F OCCUPANCY IN ITS RESPECT, BUT THEN THAT IS PRECISELY WHAT EXPLA NATION 1 TO SECTION 32(1), INCORPORATED IN THE STATUTE BOOK W.E.F. 01.4.1988, SEEKS TO EXPLAIN AND CLARIFY, MAKING OWNERSHIP NOT NECESSARY, SO THAT CAPITAL EXPENDITURE WOULD NONETHELESS BE REGARDED AS SU BJECT TO DEPRECIATION DESPITE BEING IN OR IN RELATION TO A BUILDING NOT OWNED BY THE ASSESSEE. IN OTHER WORDS, EXPLANATION 1 TO S. 32(1) IS AN ENABLING PROVISION, EXTENDING THE ALLOWANCE OF DEPRECIATION ON A CAPITAL ASSET NOT OWNED BY THE 6 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO ASSESSEE BY CAR V ING AN EXCEPTION FOR A BUILDING FOR WHICH IT HOLDS A R IGHT OF OCCUPANCY. THIS WOULD ALSO MEET THE ARGUMENT OF THE LD. AR , MADE RELYING ON THE DECISION IN THE CASE OF CIT VS. DR. A. M. SINGHVI [2002] 302 ITR 26 (RAJ), OF THE REDUNDANCY OF SUCH EXPENDI TURE ON THE EXPIRY OF THE LEASE IN - AS - MUCH AS ELECTRIC FITTI NGS, FLOOR ING, CEILING, PANELING, E TC ., GET IN WHOLE OR IN PART, ATTACHED TO THE BUILDING AND ARE NOT REMOVABLE. IMPLICIT IN THE ARGUMENT IS A TACIT ADMISSION OF THE LIFE OF THE SE ASSETS , FORMING PART OF THE BUILDING, EXCEEDING IN TERMS OF T HE PERIOD OF USER THE TERM OF THE LEASE ARRANGEMENT. THAT CONSIDERATION, APPEALING A T FIRST BLUSH , IN - AS - MUCH AS THE EXPENDITURE IS RENDERED UNPRO DUCTI VE OR OF NO USE AFTER THE TIME PERIOD OF THE LEASE, IS MISLEADING. THE SAME IN FACT IS APPLICABLE TO ANY CAPITAL EXPEN DITURE FOR THAT MATTER. IT IS INCURRED ON AN ASSESSMENT OF THE COST - BENEFIT ANALYSIS, FORMAL OR NON - FORMAL, WITH BENEFITS LIKELY TO ARISE OVER FUTURE. FUTURE IS ALWAYS UNCERTAIN, SO THAT IT COULD BE THAT THE ASSETS OR THE RIGH TS ACQUIRED BY INCURRING THE E XPENDITURE REMAIN NO LONGER BENEFICIA L IN VIEW OF THE CHANGED CIRCUMSTANCES, VIZ. MARKET CONDITIONS, TECHNOLOGICAL OBSOLESCE NCE , ETC. A MACHINERY, FOR EXAMPLE, IS BOUGHT TO PRODUCE AN ITEM X . SOON AFTER, ANOTHER PRODUCT Y, TECHNICALLY SUPERIOR AND/OR COST/ PRICE E FFICIENT, HITS THE MARKET, DISPLACING X T HERE - FROM, EVEN AS THE FIRM HAD BY THEN EXHAUSTED ONLY A FRACTION OF T HE PRODUCTIVE CAPACITY OF THE MACHINERY . THIS EXAMPLE , IN VARYING DEGREES , OBTAINS AS A REGULAR FEATURE IN TRADE AND INDUSTRY, SO THAT SUC H CHANGES FOR M A CONTINUUM , WITH OLD PRODUCT S YIELDING TO NEW ONE S, INCLUDING THE MANNER OF OR THE TECHNOLOGY ADOPTED IN PRODUCING THE SAME , OR IN UNDERTAKING THE RELEVANT PROCESSES OR RENDERING THE RELATED SERVICES. C OMING BACK TO OUR EXAMPLE, THE MACHINE RY IS, AS A RESULT, RENDER ED OTIOSE, AND IS TO BE DISCARDED. WHILE THIS REPRESENTS ONE SCENARIO, IT MAY BE RENDERED LARGELY REDUNDANT OR OPERATIVE AT A MUCH LOWER CAPACITY UTILIZATION LEVEL, ET. EL. THE DISCARDED MACHINERY THOUGH REMAINS ON THE BOOKS OF TH E ASSESSEE, ALSO FORMING PART OF ITS BLOCK OF ASSETS AND, ACCORDINGLY, DEPRECIATION WOULD CONTINUE TO BE EXIGIBLE THEREON (SECTION 43(6) (C) ). PRIOR TO THE INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSETS, TERMINAL DEPRECIATION WAS ALLOWED 7 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO UNDER SUCH CIRCUMST ANCES. ANY MONIES REALIZED ON THE SALE OF SUCH MACHINERY, NO LONGER VIABLE AND DISCARDED , OR ITS SCRAPPING, GETS R EDUCED FROM ITS WRITTEN DOWN VALUE (WDV) OF THE RELEVANT BLOCK OF ASSETS. ALL SUCH FITTINGS/MATERIALS AS ARE EMBEDDED IN THE BUILDING, WHICH CANNOT BE USED AT A DIFFERENT PLACE AND, THEREFORE, IS TO BE DISCARDED (VIZ. WORK STATIONS) , SHALL , IN THE FACTS AND CIRCUMSTANCES , CONTINUE TO BE SUBJECT TO DEPRECIATION. SURELY, IT IS NOT FOR US OR THE REVENUE TO COMMENT OR ASSESS AS TO WHY SUCH EXPENDIT URE, UNSUSTAINABLE IN TERMS OF THE PRO DUCTIVE TIME WITH REFERENCE TO THE LEASE PERIOD, ASSUMING SO, WAS INCURRED IN THE FIRST PLACE. THAT IS THE BUSINESS DECISION OF THE ASSESSEE AS A BUSINESSMAN. WHY, HE MAY BE CONFIDENT OF RECOUPING THE COST AND , IN FACT , GENERATING PROFIT, OVER THE LEASE TERM , OR OF BARGAINING AN EXTENSION AT THE END OF THE TERM, ETC. THE FACT OF THE MATTER IS THAT IF ANY ASSET FORMING PART OF BLOCK OF ASSETS GETS DISCARDED, DEPRECIATION THEREON ON ITS UNABSORBED COST CONTINUES TO BE AVA ILABLE TILL THE SAME GETS TOTALLY CHARGED OR REALIZED BY WAY OF SALE/SCRAP, ETC. IN OTHER WORDS, THE CIRCUMSTANCES ADVERSELY IMPACTING THE REALIZATION OF THE BENEFIT /ADVANTAGE ENVISAGE D FROM THE CAPITAL EXPENDITURE, EVEN IF UNREALIZED IN WHOLE OR IN PART , WOULD NOT RENDER IT AS OF REVENUE NATURE , AND THE LAW PROVIDES FOR A COMPLETE ABSORPTION OF SUCH EXPENDITURE, I.E., AS THAT WHICH DOES NOT S UFFER FROM SUCH AN IMPACT. 3.3 THE NEXT LIMB OF THE ASSESSEES ARGUMENT IS THAT I T IS NOT A LEASE BUT A LEAVE AND LICENSE ARRANGEMENT. THAT IS, IN FACT, THE ONLY ASPECT HIGHLIGHTED BY THE ASSE SSEE PER ITS SOLE GROUND RAISED , AS UNDER: - 1. SUSTAINING THE ADDITION MADE BY THE AO FOR REPAIRS & MAINTENANCE EXPENSES OF RS.1,33,914/ - ON THE GROUND THAT THE OFFICE PREMISE S IS TAKEN ON LEASE AND NOT ON LEAVE AND LICENSE AND THEREFORE THE SAID EXPENDITURE IS OF CAPITAL NATURE . IT MAY BE CLARIFIED THAT, EVEN SO, ALL THE RELEVANT ASPECTS OF THE CASE HAVE BEEN DISCUSSED IN VIEW OF THE ARGUMENTS AS MADE DURING HEARING. TOWARD THE SAID GROUND, 8 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO FIRSTLY, THERE IS NO BASIS FOR US TO DETERMINE OR HOLD EITHER WAY THE ASSESSEES CASE BEING SANS ANY MATERIAL ON RECORD. ONCE, THEREFORE, THE REVENUE AUTHORITIES HAVE HELD IT TO BE A LEASE, I.E., A S THE ARRANGEMENT WAS DESCRI B ED (WHICH THOUGH IS NOT BINDING) BY THE ASS ESSEE BEFORE THE A.O. , IT WAS INCUMBENT ON THE ASSESSEE TO FURNISH A COPY OF THE RELEVANT AGREEMENT ( DATED 18.12.2010 ) . BE THAT AS IT MAY, EVEN AS POS ED DURING HEARING, TO AN AGREEMENT BY THE LD. AR: HOW DOES IT MATTER ? THA T IS, WHETHER WHAT THE ASSESSEE HOLDS QUA ITS WORK PREMISES IS A LEASE HOLD RIGHT, OR IS A LEAVE AND LICENSE ARRANGEMENT. THIS IS IN VIEW OF EXPLANATION 1 TO SECTION 32(1), WHICH IS BROADLY WORDED, AND CLEARLY STATES OF A LEASE OR OTHER RIGHT O F OCCUPANCY. LEASE IS A TRANSFER UNDER THE TRAN SFER OF PROPERTY ACT, WHILE A LEAVE AND LICENSE ARRANGEMENT IS DEFINITELY NOT. BUT, SURELY, THE LEAV E AND LICENSE ARRANGEMENT GIVE S THE ASSESSEE A RIGHT OF OCCUPANCY, SO THAT THE PRECISE NATURE IN THE TECHNICAL SENSE, O F THE SAID RIGHT , IS OF LITTLE MOMENT. 3.4 THEN, AGAIN, IT IS OPEN TO BE ARGUED AND, IN ANY CASE, A CONSIDERATION, THAT THE LEASE OR THE RIGHT OF OCCUPANCY IS ONLY FOR 24 MONTHS. HOW W ILL , HOWEVER, IT MAY BE ASKED, THE PERIOD OF RIGHT OF OCCUPANCY RELEVA NT. THAT IT OBTAINS AT THE TIME OF INCURRING THE EXPENDITURE; IN FACT, DURING THE RELEVANT YEAR, IS NOT IN DISPUTE. EXPLANATION 1 SUPRA DOES NOT PROVIDE ANY STIPULATION WITH REGARD THERETO, I.E., THE SAID PERIOD, AND WHICH IN THE ADMI TTED FACTS OF THE CASE SUBSISTS FOR 20 MONTHS AFTER THE END OF THE RELEVANT YEAR, I.E., GOING BY THE CURRENT ARRANGEMENT. THE ASSESSEE MAY WELL BE ABLE TO SECURE ITS RENEWAL. THE SAME, IN ANY CASE, I.E., IRRESPECTIVE OF EXTENSION, IS NOT TO BE CONFUSED WITH THE NATURE OF THE EX PENDITURE INCURRED CAPITAL OR REVENUE. I N OTHER WORDS, THE FAL LA CY IN THE ARGUMENT L I ES IN DETERMINING THE NATURE OF THE EXPENDITURE BASED ON OR WITH REFERENCE TO THE PERIOD OF THE RIGHT OF OCCUPANCY. THE TWO ARE INDEPENDENT OF EACH OTHER . IN THE INSTANT CASE, IT HAS ALREADY BEEN INDICATED THAT THE ENTIRE EXPENDITURE IS IN THE NATURE OF A SET - UP COST OF THE BUS IN ESS. EVEN ASSUMING, FOR WHICH THERE IS NOTHING ON RECORD TO SUGGEST SO, THAT THE BUSINESS WAS 9 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO ALREADY SET UP AT THE PR EVIOUS LOCATION, DISLOCATIO N IS DISRUPTIVE OF ITS BUSINESS AND WOULD ACCORDINGLY BE REQUIRED TO BE SET UP AGAIN. TO THE EXTENT THIS ENTAILS ADDITIONAL EXPENDITURE, THE SAME ONLY IMPLIES A HIGHER CAPITAL EXPENDITURE IN - AS - MUCH AS THE CAPITAL WORK OR ASSETS DISCARDED (AT THE OLD LOCAT ION) CANNOT BE PUT TO USE AGAIN. S UCH DISCARDED ASSETS SHALL, HOWEVER, CONTINUE TO BE SUBJECT TO DEPRECIATION UNDER LAW, AS EXPLAINED EARLIER. 3.5 THE FOREGOING WOULD ALSO MEET THE ASSESSEES RELIANCE ON OTHER DECISIONS BEFORE THE LD. CIT(A), WHICH WE HA VE PERUSED. THE DECISION ARRIVED AT IS CONSISTENT WITH FACTS AS FOUND AND THE LAW AS LAID DOWN IN THE BINDING DECISIONS CITED SUPRA. REFER E NCE IN THIS REGARD MAY ALSO BE MADE TO THE DECISION BY THE TRIBUNAL IN VARDHMAN DEVELOPERS LTD. VS. ITO (IN ITA NO. 6 820/MUM/2012 DATED 04.2.2015), WHEREIN THE ISSUE IS DEAL T WITH AT LENGTH, REFERRING TO DECISIONS INTER ALIA IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS (P . ) LTD. [ 2007] 293 ITR 201 (SC); BALLIMAL NAWAL KISHOR & ANR. ( SUPRA ), BESIDES NEW SHORROCK SPG . & M F G . CO. LTD. (SUPRA). 4. IN VIEW OF THE FOREGOING, THE ASSESSEES CLAIMS CANNOT BE ACCEDED TO, AND THE TREATMENT ACCORDED BY THE REVENUE IS TO BE UPHELD. IT MAY ALSO BE CLARIFIED THAT THOUGH THE ASSESSEE HAS IMPUGNED THE ENTIRE EXPENDITURE CLAIMED (RS. 11.34 LACS), THE NET (OF DEPRECIATION) DISALLOWANCE IS ONLY FOR RS.91,940/ - (1,33,914 41,974). AN ACCEPTANCE OF THE ASSESSEES CLAIM (AT ANY FURTHER APPELLATE STAGE) WOULD ENTAIL WITHDRAWAL OF DEPRECIATION AND, AS EXPLAINED EARLIER, AN ALLOWANCE OF THE E NTIRE EXPENDITURE INCURRED FOR RS.8.39 LACS. I DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 29 , 201 6 SD/ - (S ANJAY ARORA) / A CCOUNTANT MEMBER 10 ITA NO. 2462/MUM/2015 (A.Y. 2011 - 12) ALPHA PLUS TECHNOLOGIES P. LTD. VS. ITO MUMBAI ; DATED : 29 . 01 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, IT AT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI