DCIT, Hyderabad V. M/s Chaya Lakshmi Creations Pvt. Ltd., Hyderabad

ITA 250/HYD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3156 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 28-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-02-2010
• Court: TRIBUNAL
• Department Lawyers: A PATRA
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 32; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI N.R.S. GANESAN, JM AND SHRI CHANDRA POOJARI, AM ITA NO.250/HYD/2010 : A.Y. 2003-04 ITA NO.251/HYD/2010 : A.Y. 2005-06 ITA NO.252/HYD/2010 : A.Y. 2006-07 THE DY. CIT, CIRCLE 13(1), HYDERABAD VS M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD (PAN AABCC 7343 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A. PATRA RESPONDENT BY : SHRI C.P. RAMASWAMI O R D E R PER N.R.S. GANESAN, JM THESE THREE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE CIT(A)-II, HYDERABAD DATED 24.12.2009 FOR THE ASSESSMENT YEARS 2003-04, 2005-06 AND 2006-07. SINCE COMMON ISSUES ARISE FOR CONSIDERATION IN ALL THE THREE APPEALS, W E HEARD THE SAME TOGETHER AND DISPOSING OF THE SAME BY THIS COM MON ORDER. 2. SHRI A. PATRA, THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS THE EXPENDITURE INCURRED BY THE ASSESSEE IN RENOVATION OF THE CINEMA THEATRE BUILDING TAKEN ON LEASE. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ASSESSEE H AS TAKEN ON LEASE A THEATRE COMPLEX CONSISTING OF FIVE CINEM A THEATRES FROM M/S SATYAM SAYI CORPORATION (P) LTD,. DURING T HE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AS INCURRED SUBSTANTIAL AMOUNTS TOWARDS CONSULTATION C HARGES, ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 2 INTERIOR DESIGN, MODERNIZATION, CHANGING OF FLOOR T ILES, FALSE CEILING, LANDSCAPING, CHAIRS, EARTH FILLING ETC. A CCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THESE EXPE NDITURES WERE INCURRED BY THE ASSESSEE FOR OBTAINING ENDURIN G BENEFIT. THE LEARNED DEPARTMENTAL REPRESENTATIVE F URTHER SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE BROUGHT INTO EXISTENCE A CAPITAL ASSET FOR CONDUCTI NG THE BUSINESS. THE CINEMA THEATRE, ACCORDING TO THE LE ARNED DEPARTMENTAL REPRESENTATIVE IS A PERMANENT BUSINESS ASSET, THEREFORE ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR RENOVATING THE CINEMA THEATRE HAS TO BE TREATED AS CAPITAL EXPENDITURE. REFERRING TO SEC. 32 EXPLANATION 1 OF THE I.T ACT, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT AFTER INTRODUCTION OF SEC. 32 EXPLANATION 1, THE A SSESSEE AT THE BEST IS ENTITLED FOR DEPRECIATION U/S 32 EXPLAN ATION 1 OF THE I.T. ACT W.E.F. 1.4.1988. SINCE THE ASSESSING OFFICER HIMSELF HAS GRANTED THE DEPRECIATION TO THE ASSESSE E, THE CIT(A) HAS COMMITTED AN ERROR IN ALLOWING THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. THE LEARNED DEPAR TMENTAL REPRESENTATIVE PLACED RELIANCE ON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR. 3. ON THE CONTRARY, SHRI C.P RAMASWAMY, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY, THE ASSESSEE HAS TAKEN FIVE CINEMA THEATRES IN A THEATR E COMPLEX FROM M/S SATYAM SAYI CORPORATION (P) LTD, O N LEASE. FOR THE PURPOSE OF CARRYING OUT ITS BUSINES S EFFECTIVELY AND EFFICIENTLY, THE ASSESSEE INCURRED THE EXPENDITURE FOR REPAIRING THE CINEMA THEATRE. ACCO RDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE EXPENDITU RE INCURRED BY THE ASSESSEE IN REPAIRING THE THEATRE C OMPLEX IS ONLY IN THE PROCESS OF EARNING PROFIT IN THE COURSE OF ITS ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 3 BUSINESS ACTIVITIES. THE EXPENDITURE INCURRED BY T HE ASSESSEE, ACCORDING TO ASSESSEES COUNSEL, DOES NOT BROUGHT INTO EXISTENCE ANY NEW ADVANTAGE OR ANY NEW ASSET. EVEN AFTER THE SPENDING THE AMOUNT ON REPAIR, THE ASSESS EE CONTINUED TO BE AS LESSEE OF THE CINEMA THEATRE AND HE CONTINUED TO CARRY ON THE BUSINESS OF EXHIBITING FI LMS IN THE THEATRE. THEREFORE, THE BUSINESS OF THE ASSESSEE R EMAINS THE SAME EVEN AFTER THE EXPENDITURE AND THE ASSET CONTI NUED TO BE ONE OF THE LEASE HOLDING ASSETS. THEREFORE, ACC ORDING TO THE LEARNED COUNSEL, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE HAS OBTAINED AN ENDURING BENEFIT AFTER INCURRING TH E EXPENDITURE. REFERRING TO THE NATURE OF THE EXPEND ITURE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) HIMSELF DISALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF MARBLE FLOORING. THE OTHER EXPENDITU RES ARE IN THE NATURE OF EARTH FILLING WORKS, UNDER GROUND SUM P REPAIRING, DRAINAGE AND CABLE WORKS, WALL PAPER FIX ING, DUST OPENING, CARPENTRY, PLUMBING WORKS, FALSE CEILING R EPAIR, SEAT REPAIR, PEST CONTROL, HOUSE KEEPING MATERIAL, THEATRE CLEANING, CHARGES ON BANDOBUST AND FIXING OF CHAIRS ETC. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THESE EXPENDITURES ARE ABSOLUTELY NECESSARY FOR THE PURPO SE OF CARRYING OUT ITS BUSINESS. THESE EXPENDITURES ARE INCURRED IN THE PROCESS OF EARNING THE PROFIT AND NOT IN THE PROCESS OF ACQUIRING ANY CAPITAL. FOR THE ASSESSMENT YEAR 200 5-06, THE ASSESSEE HAS ALSO INCURRED EXPENDITURE IN REPAIRING THE CANTEEN COMPOUND WALL, UNDER GROUND WORK, SUMP REPAIRING, WATER ROOFING OF CEILING, THEATER PATCH UP WORK, EXTERIOR PAINTING ETC. SIMILARLY, FOR THE ASSESSME NT YEAR 2006-07, THE ASSESSEE HAS INCURRED EXPENDITURE IN F IXING ALUMINUM PANEL, SCRAMBLING, CHANGE OF WALL PAPERS A ND ALSO ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 4 PAID CONSULTANCY CHARGES WHILE REPAIRING THE FALSE CEILING ETC. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS EXPENDITURE WAS INCURRED ONLY FOR THE PUR POSE OF CARRYING ON THE BUSINESS IN AN EFFECTIVE AND PROFIT ABLE MANNER AND NOT FOR THE PURPOSE OF ACQUIRING ANY NEW ASSET. PLACING RELIANCE ON THE JUDGEMENT OF THE APEX COUR T IN THE CASE OF CIT VS. MADRAS AUTO SERVICE (P) LTD., 233 I TR 468, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SUPREME COURT HELD THAT THE EXPENDITURE INCURRED IN CONSTRUCTION OF A BUILDING IN THE LEASED PREMISES A S REVENUE EXPENDITURE. SINCE CIT(A) HIMSELF DISALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE ON MARBLE FLOO RING, NO INTERFERENCE IS CALLED FOR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS TAKEN FIVE CIN EMA THEATRES IN A THEATRE COMPLEX ON LEASE FROM M/S SAT YAM SAYI CORPORATION (P) LTD,. FOR EXHIBITION OF FEATUR E FILMS. FROM THE MATERIALS AVAILABLE ON RECORD, IT APPEARS THE ASSESSEE TOOK THE CINEMA THEATRES WHERE THE BUSINES S OF EXHIBITION OF FILMS IS GOING ON. THE ASSESSEE INCU RRED EXPENDITURE ON REPAIR OF THE THEATRE COMPLEX SUCH A S CHANGE OF MARBLE FLOORING, EARTH FILLING WORK, UNDERGROUND SUMP REPAIR, DRAINAGE AND CABLE WORKS, FIXING OF WALL PA PERS, DUST OPENING, CARPENTRY AND BUILDING REPAIR, FALSE CEILI NG, PEST CONTROL CHARGES, HOUSE KEEPING MATERIAL, THEATRE CL EANING CHARGES, BANDOBUST CHARGES RE-FIXING OF CHAIRS ETC. SIMILARLY, THE ASSESSEE ALSO INCURRED EXPENDITURE I N REPAIRING THE CANTEEN COMPOUND WALL, WATER ROOFING OF CEILING, THEATRE PATCH UP WORK, INTERIOR PAINTING, CLEANING MATERIAL, PAYMENT TO TEMPORARY STAFFS, MAINTENANCE OF ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 5 GENERATOR AND OTHER OFFICE EQUIPMENTS ETC. THE ASS ESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEED INGS FOUND THAT THE ASSESSEE UNDERTOOK THE MAJOR RENOVAT ION AND MODERNIZATION OF THE THEATRE COMPLEX THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE TREA TED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER FURTHER FOUND THAT EVEN THOUGH THE THEATRE WAS NOT DEMOLISHED, T HERE WAS A REPLACEMENT IN CHAIRS, LANDSCAPING, FALSE CEILING ETC. WHICH HAS GIVEN A FACE LIFT TO THE THEATRE ON ACCOUNT OF WHICH THE ASSESSEE IS GETTING ENDURING BENEFIT. THE ASSESSIN G OFFICER ALSO FOUND THAT THE ASSESSEE IS ENTITLED TO USE THE CINEMA THEATRE DURING THE LEASE PERIOD FOR ITS BUSINESS. THE ASSESSING OFFICER REFERRING TO EXPLANATION 1 TO SEC .32 OF IT ACT FOUND THAT THE ASSESSEE HAS INCURRED THE CAPITA L EXPENDITURE, THEREFORE IT IS ENTITLED FOR DEPRECIAT ION AT THE RATE OF 10%. ACCORDINGLY, THE ASSESSING OFFICER DI SALLOWED THE CLAIM OF THE ASSESSEE AND ALLOWED DEPRECIATION @ 10%. THE QUESTION NOW ARISES FOR CONSIDERATION IS, WHEN THE ASSESSEE HAS INCURRED EXPENDITURE ON REPAIR OF THE CINEMA THEATRE TAKEN ON LEASE, WHETHER THE ASSESSEE IS ENT ITLED FOR DEDUCTION OF THE EXPENDITURE INCURRED ON SUCH REPAI R AS REVENUE EXPENDITURE OR IT HAS TO BE TREATED AS CAPI TAL EXPENDITURE, IN VIEW OF EXPLANATION 1 TO SEC.32 OF THE IT ACT. WE HAVE CAREFULLY GONE THROUGH THE EXPLANATION 1 TO SEC.32 OF THE IT ACT WHICH READS AS FOLLOWS: '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 PURPOSE OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO , ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 6 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.' 5. THIS EXPLANATION TO SEC.32 WAS INTRODUCED IN THE STATUTE BOOK BY TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 W.E.F. 1.4.1988 . BY INTRODUCTION OF THIS EXPLANATION, THE LEGISLATURE I NTENDED TO GIVE DEPRECIATION ON THE CAPITAL EXPENDITURE INCURR ED BY THE ASSESSEE IN RELATION TO RENOVATION, EXTENSION OR IM PROVEMENT TO THE BUILDING IN WHICH THE ASSESSEE CARRIED ON TH E BUSINESS AS LESSEE. 6. LET US NOW EXAMINE THE LEGISLATIVE HISTORY OF INTRODUCTION OF EXPLANATION 1 TO SEC.32 OF THE IT A CT. THE PARLIAMENT BY TAXATION LAWS (AMENDMENT) ACT, 1970 W .E.F. 1.4.1971 INTRODUCED SUB SEC.(1A) TO SEC.32. BY SEC .32(1A), THE PARLIAMENT INTENDED TO GRANT SOME BENEFIT ON TH E CAPITAL EXPENDITURE INCURRED BY A TENANT IN THE LEASED PREM ISES. THEREFORE, IT IS OBVIOUS THAT BEFORE INTRODUCTION O F SEC.32(1A) W.E.F. 1.4.1971 BY TAXATION LAWS (AMENDMENT) ACT, 1 970, THE ASSESSEE WHO TAKES THE BUSINESS PREMISES ON LEA SE WAS NOT ENTITLED TO ANY DEPRECIATION ON THE CAPITAL EXP ENDITURE. IN OTHER WORDS, BEFORE 1.4.1971, THE ASSESSEES WHO INCURRED CAPITAL EXPENDITURE ON LEASED PREMISES WERE NOT ENT ITLED TO ANY BENEFIT AT ALL. THEREFORE, BY REMOVING LEGAL RE STRICTIONS IN RESPECT OF CAPITAL EXPENDITURE INCURRED BY THE ASSE SSEE WHO TAKES THE BUSINESS PREMISES ON LEASE, THE PARLIAMEN T INTENDED TO GIVE DEPRECIATION ON THE CAPITAL EXPEND ITURE. ON CLOSE READING OF SEC.32(1A) AND THE CIRCUMSTANCE S UNDER WHICH IT WAS INTRODUCED IN THE STATUTE BOOK, IT IS VERY CLEAR THAT IN CASE THE REVENUE EXPENDITURE WAS INCURRED B Y THE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 7 ASSESSEE ON THE PREMISES TAKEN ON LEASE THE QUESTIO N OF ALLOWING ANY DEPRECIATION U/S. 32(1A) WOULD NOT ARI SE FOR CONSIDERATION. IN OTHER WORDS, SEC.32(1A) INTRODUC ED BY PARLIAMENT W.E.F. 1.4.1971 BY TAXATION LAWS (AMENDM ENT) ACT, 1970 WOULD NOT BE APPLICABLE IN CASE THE ASSES SEE INCURRED REVENUE EXPENDITURE ON THE LEASED PREMISES . 7. HOWEVER, THIS SEC.32(1A) INTRODUCED BY TAXATION LAWS (AMENDMENT) ACT, 1970 WAS OMITTED AND EXPLANATION 1 TO SEC. 32 WAS INTRODUCED BY TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 W.E.F. 1.4.1988 . THIS WAS DONE WHEN THE CONCEPT OF DEPRECIATION ON INDIVI DUAL ASSET WAS CHANGED TO DEPRECIATION ON THE BLOCK OF A SSETS. WHEN THE PARLIAMENT INTRODUCED DEPRECIATION ON BLOC K OF ASSETS, WHICH IS A NEW CONCEPT SEC.32(1A) WAS DELET ED AND IDENTICAL PROVISION WAS INCORPORATED IN EXPLANATION 1 TO SEC.32 OF THE IT ACT. THEREFORE, THE POSITION OF L AW AS IT REMAINS AFTER INTRODUCTION OF SEC.32(1A) W.E.F. 1.4 .1971 CONTINUED TO BE THE SAME IN RESPECT OF REVENUE EXPE NDITURE INCURRED BY ASSESSEE ON THE PREMISES TAKEN ON LEASE . IN OTHER WORDS, THE CONCEPT OF ALLOWING DEPRECIATION O N THE CAPITAL EXPENDITURE IN RELATION TO RENOVATION, EXTE NSION OR IMPROVEMENT OF THE PREMISES TAKEN ON LEASE CONTINUE D TO BE THE SAME W.E.F. 1.4.1971. THEREFORE, WHENEVER THE ASSESSEE INCURRED THE EXPENDITURE, IN THE PROCESS OF EARNING PROFIT WHILE CARRYING ON THE BUSINESS IN THE LEASED PREMIS ES, THE EXPENDITURE HAS TO BE TREATED AS REVENUE EXPENDITUR E AND EITHER SECTION 32(1A) OR EXPLANATION 1 TO SEC.32 WO ULD NOT COME IN THE WAY OF ALLOWING THE SAME AS REVENUE EXPENDITURE. HOWEVER, WHEN THE ASSESSEE INCURRED T HE EXPENDITURE WHICH IS OF CAPITAL IN NATURE, THEN THE PARLIAMENT GIVES A BENEFIT TO SUCH ASSESSEE FOR CLA IMING THE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 8 DEPRECIATION ON SUCH CAPITAL EXPENDITURE IN RELATIO N TO RENOVATION, EXTENSION OR IMPROVEMENT W.E.F. 1.4.197 1 U/S. 32(1A) AND UNDER THE EXPLANATION 1 TO SEC.32 W.E.F. 1.4.1988. THEREFORE, THIS IS A BENEFIT CONFERRED O N THE ASSESSEE WHO TOOK THE PREMISES ON LEASE AND INCURRE D EXPENDITURE IN THE CAPITAL FIELD. HOWEVER, AS EXPL AINED EARLIER, IN CASE, THE EXPENDITURE FALLS IN THE REVE NUE FIELD, THE ASSESSEE IS ENTITLED TO CLAIM THE SAME AS REVENUE EXPENDITURE IRRESPECTIVE OF SEC.32(1A) OR EXPLANATI ON 1 TO SEC. 32 OF THE ACT. THIS WAS SO EXPLAINED BY THE C BDT IN ITS CIRCULAR. 8. BY KEEPING THIS LEGISLATIVE HISTORY AND INTENT I N MIND, LET US NOW EXAMINE THE CLAIM OF THE ASSESSEE IN THE CASE BEFORE US. THE ASSESSEE INCURRED EXPENDITURE FOR T HE ASSESSMENT 2003-04 FOR EARTH FILLING, UNDER GROUND SLUMP REPAIR, CABLE WORKS, WALL PAPER FIXING, DUST OPENIN G REPAIR, CARPENTRY AND PLUMBING REPAIR, FALSE CEILING REPAIR , REPLACING OF DAMAGED CHAIRS BESIDES CHANGING MARBLE FLOORING. THE ASSESSEE ALSO INCURRED EXPENDITURE ON CANTEEN REPAI RING, PEST CONTROL, HOUSE KEEPING MATERIAL, THEATRE CLEAN ING, BANDOBUST, RE-FIXING OF CHAIRS ETC. FOR THE ASSESS MENT YEAR 2005-06, THE ASSESSEE INCURRED EXPENDITURE FOR REPA IRING, RENOVATION OF CANTEEN, CHANGE OF FLOORING, WATER PR OOFING FOR CEILING, THEATRE PATCH WORK, EXTERIOR PAINTING, SAL ARY TO TEMPORARY STAFF, CLEANING MATERIAL, ELECTRICITY, MA INTENANCE OF GENERATORS AND OFFICE EQUIPMENTS. LIKEWISE, FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE HAS INCURRED EXPENDITURE FOR FIXING ALUMINUM PANELS, SCRAMBLE WO RKS, WALL PAPER CHARGES AND ALSO PAID CONSULTANCY CHARGE S. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSES SEE INCURRED THESE EXPENDITURES ON THE LEASED PREMISES CAN IT BE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 9 ALLOWED AS REVENUE EXPENDITURE WHILE COMPUTING THE TOTAL INCOME. WE FIND THAT SEC.30(A)(I) DEALS WITH SUC H A SITUATION. FOR THE PURPOSE OF CONVENIENCE WE ARE REPRODUCING THE SEC.30 OF THE IT ACT WHICH READS AS FOLLOWS: 'SEC.30: IN RESPECT OF RENT, RATES, TAXES, REPAIRS AND INSURANCE FOR PREMISES, USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED: A) WHERE THE PREMISES ARE OCCUPIED BY THE ASSESSEE I) AS A TENANT, THE RENT PAID FOR SUCH PREMISES, AND FURTHER IF HE HAS UNDERTAKEN TO BEAR THE COST OF REPAIRS TO THE PREMISES, THE AMOUNT PAID ON ACCOUNT OF SUCH REPAIRS; II) OTHERWISE THAN AS A TENANT, THE AMOUNT PAID BY HIM ON ACCOUNT OF CURRENT REPAIRS TO THE PREMISES; B) ANY SUMS PAID ON ACCOUNT OF LAND REVENUE, LOCAL RATES OR MUNICIPAL TAXES; C) THE AMOUNT OF ANY PREMIUM PAID IN RESPECT OF INSURANCE AGAINST RISK OF DAMAGE OR DESTRUCTION OF THE PREMISES; EXPLANATION: FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE AMOUNT PAID ON ACCOUNT OF THE COST OF REPAIRS REFERRED TO IN SUB CLAUSE (I ), AND THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS REFERRED TO IN SUB CLAUSE (II) OF CLAUSE (A ), SHALL NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE.' 9. IN VIEW OF THIS SPECIFIC PROVISIONS IN THE I T A CT WHENEVER THE ASSESSEE INCURRED EXPENDITURE FOR REPA IRING THE PREMISES TAKEN ON LEASE IT HAS TO BE ALLOWED U/ S 30(A)(I). HOWEVER, THE AMOUNT INCURRED BY THE ASSESSEE OTHERW ISE THAN AS A TENANT IN RESPECT OF CURRENT REPAIRS H AS TO BE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 10 ALLOWED U/S 30(A)(II). BY EXPLANATION, THE LEGISLA TURE CLARIFIED THAT ANY EXPENDITURE WHICH IS IN THE NATU RE OF CAPITAL EXPENDITURE CANNOT BE INCLUDED WHILE ALLOWI NG THE SAME U/S 32(A)(I) AND 32(A)(II). THEREFORE, IT IS VERY CLEAR THAT WHENEVER THE ASSESSEE INCURRED EXPENDITURE FOR REPA IR AND MAINTENANCE OF A BUILDING TAKEN ON LEASE FOR CARRYI NG ON ITS BUSINESS ACTIVITY, IT HAS TO BE ALLOWED U/S 30(A)(I ) PROVIDED THE SAME DOES NOT FALLS IN THE CAPITAL FIELD. IN C ASE, THE EXPENDITURE WAS IN THE CAPITAL FIELD THEN SUCH AN A SSESSEE IS ENTITLED FOR DEPRECIATION EITHER U/S 32(1A) OR UNDE R EXPLANATION 1 TO SEC.32 W.E.F. 1.4.1971. BEFORE 1. 4.1971, THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE HA S TO BE TOTALLY DISALLOWED AND SUCH ASSESSEE WAS NOT ELIGIB LE TO CLAIM DEPRECIATION. 10. WE FIND THAT AN IDENTICAL FACT WAS EXAMINED BY THIS TRIBUNAL IN THE CASE OF P.S.B. VS. INSPECTING ASSIS TANT COMMISSIONER (1941) 35 ITD PAGE 9 (TM) (DELHI). IN THE CASE BEFORE DELHI BENCH OF THIS TRIBUNAL IN P.S.B. (SUPR A) THE ASSESSEE COMPANY TOOK ON LEASE PREMISES FOR CARRYIN G ON ITS BUSINESS ACTIVITY. THE ASSESSEE INCURRED CERTAIN EXPENDITURE ON DEMOLITION OF WALLS PROVIDING GIRDER S, REPAIRS OF FLOORING, REPAIRS OF TOILETS PROVIDING AND FIXIN G OF POWER POINT, TELEPHONE POINTS INTERCOM POINTS, PAINTING A ND POLISHING ETC AND CLAIMED THE EXPENDITURE AS REVENU E EXPENDITURE. THIS TRIBUNAL BY A MAJORITY OPINION F OUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE COULD NOT BE SAID TO BE OF ENDURING NATURE. THIS TRIBUNAL FOUND THAT THE ASSESSEE IS NEITHER THE OWNER OF THE BUILDING NOR T HE FITTING AND FIXTURES OF THE BUILDING AND AFTER THE EXPIRY O F LEASE PERIOD, THE ENTIRE BUILDING WOULD BE HANDED OVER BA CK TO THE LESSOR. THIS TRIBUNAL HAS ALSO TAKEN INTO CONSIDER ATION ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 11 SEC.32(1A) OF THE ACT AND SEC.30(A)(I) AND SEC.30(A )(II) AND FOUND THAT A TENANT IS ENTITLED FOR DEDUCTION OF TH E AMOUNT SPENT ON ACCOUNT OF REPAIRS TO THE PREMISES. THIS TRIBUNAL HEAVILY PLACED RELIANCE ON THE JUDGEMENT OF DELHI H IGH COURT IN THE CASE OF INSTALMENT SUPPLY P. LTD. VS. CIT (1 984) 149 ITR 52 (DELHI) IN CIT VS. ARAISH EXHIBITION SERVIC E (1980) 3 TAXMAN 378 AND THE JUDGEMENT OF APEX COURT IN CIT V S. KALYANJI MAVJI & CO. (1980) 122 ITR 49. 11. IN VIEW OF THIS DECISION OF THE TRIBUNAL BY MAJ ORITY OPINION, EVEN AFTER INTRODUCTION OF SEC.32(1A) OR E XPLANATION 1 TO SEC.32, THE ASSESSEE IS ENTITLED TO CLAIM THE EXPENDITURE ON REPAIR/MAINTENANCE OF PREMISES TAKEN ON LEASE U/ S 30(A)(I) IN RESPECT OF EXPENDITURE INCURRED IN THE PROCESS OF EARNING THE PROFIT. 12. WE FIND THE DELHI HIGH COURT RECENTLY HAD AN OC CASION TO CONSIDER AN IDENTICAL ISSUE IN THE CASE OF CIT V S. HI LINE PENS (P) LTD., 306 ITR 182. IN THE CASE BEFORE THE DELHI HIGH COURT THE ASSESSEE HAS CLAIMED EXPENDITURE U/S 30(A )(I) OF THE ACT, IN RESPECT OF AMOUNT INCURRED ON THE LEASE PREMISES. THE ASSESSEE BEFORE THE DELHI HIGH COURT INCURRED THE EXPENDITURE TOWARDS FALSE CEILING, FIX ING TILES, REPLACING GLASSES, WOODWORKS PARTITION, REPLACEMENT OF ELECTRICAL WIRING, EARTHING, REPLACEMENT OF GI PIPE S ETC. THE DELHI HIGH COURT AFTER CONSIDERING ITS EARLIER JUDG EMENT IN INSTALMENT SUPPLY (P) LTD. (SUPRA) AND JUDGEMENT OF THE APEX COURT IN CIT VS. SARAVANA SPINNING MILLS P. LT D 293 ITR 201 AND IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT 224 ITR 414 FOUND THAT THE ASSESSEES CLAIM HAS TO BE ALLOWED U/S 30(A) (I). THE DELHI HIGH COURT FURTHE R OBSERVED THAT THE QUESTION OF DISALLOWING SUCH EXPENDITURE A ND ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 12 RELEGATING THE ASSESSEE TO CLAIM DEPRECIATION U/S 3 2 DOES NOT ARISE. IN FACT, HIS LORDSHIP HON'BLE MR. JUNED BADAR DURREZ AHMED SPEAKING FOR THE DIVISION BENCH HAS OB SERVED AS FOLLOWS: 'AFTER HAVING CONSIDERED THE ARGUMENTS ADVANCED BY LEARNED COUNSEL FOR THE PARTIES AND EXAMINED THE DECISIONS CITED BY THEM, WE ARE OF THE VIEW THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S 30(A)(I) HAS BEEN RIGHTLY ALLOWED BY THE TRIBUNAL. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE REVENUE RELATE TO CURRENT REPAIRS. THERE IS A CLEAR DISTINCTION BETWEEN THE EXPRESSION REPAIRS AND EXPRESSION CURRENT REPAIRS. IT IS OBVIOUS THAT THE WORD REPAIRS IS MUCH WIDER THAN THE EXPRESSION CURRENT REPAIRS. THIS FACT HAS ALSO BEEN TAKEN NOTE OF THE SUPREME COURT IN THE CASE OF SARAVANA SPINNING MILLS (P) LTD. (2007) 293 ITR 201. THE EXPRESSION CURRENT REPAIRS IS MUCH MORE RESTRICTED THAN THE WORD REPAIRS BECAUSE THE LATTER IS QUALIFIED BY THE WORD CURRENT. WHAT THE ASSESSEE HAS DONE IN THE PRESENT CASE HAS BEEN CONSTRUED TO BE REPAIRS BY THE TRIBUNAL AS A FINDING OF FACT. IT HAS NOT BROUGHT ABOUT ANY NEW ASSET AND MORE IMPORTANTLY IT WAS NOT THE INTENTION OF THE ASSESSEE TO BRING ABOUT ANY NEW CAPITAL ASSET. THE EXPENSES THAT WERE INCURRED BY THE ASSESSEE WERE TOWARDS REPAIRING THE PREMISES TAKEN ON LEASE SO AS TO MAKE IT MORE CONDUCIVE TO ITS BUSINESS ACTIVITY. SUCH EXPENSES WOULD CLEARLY FALL WITHIN THE EXPRESSION OF REPAIRS TO THE PREMISES AS APPEARING IN SECTION 30(A)(I). THE LEGISLATURE HAS MADE A DISTINCTION BETWEEN EXPENSES INCURRED BY A TENANT FOR REPAIRS OF THE PREMISES AND EXPENSES INCURRED BY A PERSON WHO IS NOT A TENANT TOWARDS CURRENT REPAIRS TO THE PREMISES. THE DISTINCTION HAS TO BE GIVEN MEANING. PERHAPS THE LOGIC BEHIND THE DISTINCTION WAS THAT A TENANT WOULD, BY THE VERY NATURE OF HIS STATUS AS A TENANT, NOT UNDERTAKE EXPENDITURE AS WOULD ENDURE BEYOND HIS LIKELY PERIOD OF TENANCY OR CREATE A NEW ASSET. WHEREAS, AN OWNER MAY UNDERTAKE EXPENDITURES SO AS TO EVEN BRING ABOUT NEW ASSETS OF CAPITAL ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 13 NATURE. IT WAS, THEREFORE NECESSARY TO QUALIFY THE EXPENDITURE ON REPAIRS. THE DEDUCTION WAS, THEREFORE, LIMITED TO EXPENDITURE ON CURRENT REPAIRS ONLY. IT FOLLOWS, THEREFORE, THAT THE COS T OF REPAIRS THAT HAVE BEEN INCURRED BY BOOKS OF ACCOUNT TENANT IN RESPECT OF SUCH PREMISES WOULD HAVE TO BE ALLOWED U/S 30(A) (I). THE QUESTION OF DISALLOWING SUCH EXPENDITURE AND RELEGATING THE ASSESSEE TO CLAIM DEPRECIATION U/S 32 DOES NOT ARISE. THE ASSESSEE HAS NOT CLAIMED DEPRECIATION. IT HAS CLAIMED DEDUCTION UNDER SECTION 30(A) (I). ONCE THE ASSESSEES CLAIM FALLS WITHIN THAT PROVISION THERE IS NO QUESTION OF CONSIDERING THE QUESTION OF APPLICABILITY OF SECTIO N 32. CONSEQUENTLY, THE QUESTION THAT HAS BEEN FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS DISMISSED.' 13. IN VIEW OF THIS JUDGEMENT OF DELHI HIGH COURT, IN OUR OPINION, THE CLAIM OF THE ASSESSEE HAS TO BE ALLOWE D U/S 30(A) (I). EVEN OTHERWISE, IT HAS TO BE ALLOWED U/ S 37(1) SINCE EXPENDITURE WAS INCURRED EXCLUSIVELY FOR PURP OSE OF BUSINESS. 14. AFTER INCURRING THE EXPENDITURE THE ASSESSEE HA S NOT OBTAINED ANY NEW ENDURING BENEFIT. NO CAPITAL ASSE T CAME INTO EXISTENCE. THE ASSESSEE CONTINUED TO EXHIBIT F EATURE FILMS IN THE VERY SAME PREMISES PROBABLY WITH A LIT TLE MORE PROFIT. ADMITTEDLY THE SEATING CAPACITY WAS NOT IN CREASED AFTER THE EXPENDITURE. HOWEVER, IT MAY BE LITTLE M ORE ATTRACTIVE AND COMFORTABLE FOR CINE GOERS. THEREFO RE, THE EXPENDITURE INCURRED BY THE ASSESSEE IS ONLY FOR CA RRYING ON THE BUSINESS OF EXHIBITING FEATURE FILMS. THEREFOR E, THE EXPENDITURE INCURRED BY THE ASSESSEE WAS AN INTEGRA L PART OF PROFIT EARNING PROCESS. THEREFORE, IT IS NOT CORREC T TO SAY THAT THE ASSESSEE HAS OBTAINED ANY ENDURING BENEFIT BECA USE OF ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 14 THIS EXPENDITURE. THE ASSESSEE CAN USE THE PREMISE S TAKEN ON LEASE ONLY DURING THE LEASE PERIOD AS FOUND BY T HE ASSESSING OFFICER. AFTER EXPIRY OF THE LEASE PERIO D, THE ASSESSEE HAS TO LEAVE THE ENTIRE THING AS IT IS AND HANDOVER THE SAME TO THE LESSOR. THE NATURE OF WORK UNDERTA KEN BY THE ASSESSEE IS TO CARRY ON THE BUSINESS AND NOT TO OBTAIN ANY ASSET. FURTHERMORE, AS ALREADY OBSERVED, NO C APITAL ASSET OF ENDURING NATURE CAME INTO EXISTENCE. IN O THER WORDS, THE ASSESSEE HAS NOT ACQUIRED ANY ASSET/ INC OME EARNING APPARATUS. IT IS WELL SETTLED PRINCIPLES O F LAW THAT THE EXPENDITURE INCURRED FOR ACQUISITION OF AN ASSE T IS CAPITAL EXPENDITURE AND EXPENDITURE INCURRED IN THE PROCESS OF EARNING PROFIT IS REVENUE EXPENDITURE. IN THE C ASE BEFORE US, THE ASSESSEE INCURRED THE EXPENDITURE IN ORDER TO ATTRACT MORE CUSTOMERS AND MAKE THE CUSTOMERS COMFORTABLE. THEREFORE, IT IS OBVIOUS THAT THAT THE ASSESSEE HAS TO INCUR THE EXPENDITURE, IN ORDER TO CARRY ON THE BUSINESS AND IN THE PROCESS OF EARNING PROFIT AND, THEREFORE, THE EXPEN DITURE IS OF REVENUE IN NATURE. 15. WE FIND THE KARNATAKA HIGH COURT IN CIT VS. REX TALKIES (1984) 148 ITR 560 HAD AN OCCASION TO CONSI DER AN IDENTICAL ISSUE. IN THE CASE BEFORE THE KARNATAKA HIGH COURT, THE ASSESSEE FIRM WAS A TENANT OF A CINEMA T HEATRE. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RENOVATED THE THEATRE AND INCURRED THE EXP ENDITURE FOR ADDITION AND ALTERATION TO FURNITURE POLISHING, CHAIR BRACKETS, CEMENT FLOORING, WAGES FOR FIXING CHAIRS, PLASTER OF PARIS FOR CEILING AND WALLS, ETC. THE KARNATAKA HI GH COURT AFTER REFERRING TO THE JUDGEMENT OF THE APEX COURT IN EMPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 FOUND THAT T HE EXPENDITURE INCURRED BY THE ASSESSEE FOR RENOVATING THE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 15 CINEMA THEATRE LIKE REPAIRS TO CEILING, REPAIR AND POLISHING OF FURNITURE, REPAIRS TO FITTINGS, ETC., WAS FOR THE P URPOSE OF RUNNING THE CINEMA SHOWS IN THE THEATRE AS A TENANT AND TO PRESERVE AND MAINTAIN THE THEATRE IN FIT CONDITION AND MAKE IT MORE ATTRACTIVE AND COMFORTABLE. THE KARNATAKA HIGH COURT OBSERVED THAT WHAT WAS SPENT BY THE ASSESSEE WAS ONLY FOR THE BUSINESS OF THE ASSESSEE TO RUN MORE E FFECTIVELY AND PROFITABLY LEAVING THE FIXED ASSETS UNTOUCHED. THE KARNATAKA HIGH COURT FURTHER OBSERVED THAT SECTION 32(1A) OF THE ACT IS A SPECIAL PROVISION ENACTED FOR THE B ENEFIT OF LESSEES PROVIDING FOR DEPRECIATION ON THE STRUCTURE OR WORK PUT UP BY THEM IN THE LEASEHOLD PREMISES WHICH, IN THE NORMAL COURSE, THEY ARE NOT ENTITLED TO, SINCE THEY ARE NOT THE OWNERS. ULTIMATELY, THE KARNATAKA HIGH COURT H ELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN RENOVAT ING THE CINEMA THEATRE HAS TO BE ALLOWED AS REVENUE EXPENDI TURE. 16. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGEME NT OF THE APEX COURT IN THE CASE OF EMPIRE JUTE CO. LTD. (SUPRA). IN THE CASE BEFORE THE APEX COURT, THE ASSESSEE COM PANY WAS CARRYING ON THE BUSINESS OF MANUFACTURING OF JU TE AND WAS A MEMBER OF INDIAN JUTE MILLS ASSOCIATION. THE ASSESSEE ENTERED INTO A WORKING TIME AGREEMENT WITH OTHER MEMBERS RESTRICTING THE NUMBER OF WORKING HOURS PER WEEK FOR WHICH THE MILLS ARE ENTITLED TO WORK THEIR LOOM S. THE QUESTION AROSE FOR CONSIDERATION BEFORE THE APEX CO URT WAS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE FO R PURCHASE OF LOOMS HOURS WAS IN THE NATURE OF CAPITA L EXPENDITURE OR REVENUE EXPENDITURE. THE APEX COURT AFTER CONSIDERING THE ENTIRE RELEVANT PROVISIONS OF THE I NCOME-TAX ACT FOUND THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE FOR PURCHASE OF LOOM HOURS REPRESENTED REVENUE EXPENDIT URE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 16 AND WAS ALLOWABLE AS DEDUCTION U/S. 10(2)(XV) OF TH E INCOME- TAX ACT, 1922. IN FACT, THE APEX COURT OBSERVED AS FOLLOWS: ' . THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFIT, MAY, NONE THE LESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. BUT EVEN IF THIS TEST WERE APPLIED IN THE PRESENT CASE, IT DOES NOT YIELD A CONCLUSION IN FAVOUR OF THE REVENUE. HERE, BY PURCHASE OF LOOM HOURS NO NEW ASSET HAS BEEN CREATED. THERE IS NO ADDITION TO OR EXPANSION OF THE PROFIT-MAKING APPARATUS OF THE ASSESSEE. THE INCOME-EARNING MACHINE REMAINS WHAT IT WAS PRIOR TO THE PURCHASE OF LOOM HOURS. THE ASSESSEE IS MERELY ENABLED TO OPERATE THE PROFIT MAKING STRUCTURE FOR A LONGER NUMBER OF HOURS. AND THIS ADVANTAGE IS CLEARLY NOT OF AN ENDURING NATURE. IT IS LIMITED IN ITS DURATION TO S IX MONTHS AND, MOREOVER, THE ADDITIONAL WORKING HOURS PER WEEK TRANSFERRED TO THE ASSESSEE HAVE TO BE UTILISED DURING THE WEEK AND CANNOT BE CARRIED FORWARD TO THE NEXT WEEK. IT IS, THEREFORE, NOT POSSIBLE TO SAY THAT ANY ADVANTAGE OF ENDURING BENEFIT IN THE CAPITAL FIELD WAS ACQUIRED BY THE ASSESSEE IN PURCHASING LOOM HOURS AND ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 17 THE TEST OF ENDURING BENEFIT CANNOT HELP THE REVENUE.' 17. IN VIEW OF THE ABOVE OBSERVATIONS OF THE APEX C OURT, THE TEST OF ENDURING BENEFIT IS NOT CERTAIN OR CONC LUSIVE. EVEN IF THIS TEST IS APPLIED, AS OBSERVED BY THE AP EX COURT, THE EXPENDITURE INCURRED BY THE ASSESSEE IS ONLY IN THE PROCESS OF EARNING PROFIT AND NOT TO ACQUIRE ANY CA PITAL ASSET. AS A RESULT OF THE EXPENDITURE INCURRED BY THE ASSESSEE, THE CINEMA THEATRE REMAINS A CINEMA THEAT RE AND THE SEATING CAPACITY DOES NOT INCREASE. THE ASSESS EE MIGHT HAVE CARRIED ON THE BUSINESS IN A PROFITABLE MANNER . THEREFORE, THE EXPENDITURE INCURRED FACILITATED THE ASSESSEE TO CARRY ON ITS BUSINESS OF EXHIBITION OF FILMS EFF ECTIVELY AND MORE PROFITABLY. MOREOVER, THE ASSESSEE HAS NOT OBT AINED ANY ADVANTAGE IN THE CAPITAL FILED. THEREFORE, IN OUR OPINION, IN VIEW OF THIS JUDGEMENT OF THE APEX COURT, THE EX PENDITURE INCURRED BY THE ASSESSEE HAS TO BE TREATED AS REVEN UE IN NATURE. 18. WE FIND THAT THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF REGAL THEATRE VS. CIT, (1966) 59 ITR 449, H AD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. IN THE CA SE BEFORE THE PUNJAB & HARYANA HIGH COURT THE ASSESSEE TAKEN A CINEMA THEATRE ON LEASE AND INCURRED EXPENDITURE FO R PANELING OF THE WALLS AND REPAIR THE STAIRCASE AND RESTAURANT. THE ALSO REPAIRED THE LAWN, BOOKING OF FICE, VISITORS STAND, ETC., AND CLAIMED THE EXPENDITURE A S REVENUE EXPENDITURE. THE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING THE CASE-LAWS ON THE SUBJECT FOUND THAT THE ASSESSEE INCURRED THE EXPENDITURE IN ORDER TO CARRY ON HIS BUSINESS. THE BUSINESS OF THE ASSESSEE BEING A SHO W OF CINEMA, THE ASSESSEE HAS TO INCUR THE EXPENDITURE I N ORDER ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 18 TO ATTRACT CUSTOMERS. THE HIGH COURT FURTHER OBSERV ED THAT IT WAS ESSENTIAL TO KEEP THE BUILDING IN A TIP-TOP CON DITION SO AS TO ATTRACT THE CUSTOMERS TO COME TO THE CINEMA T HEATRE. ACCORDINGLY IT WAS HELD THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE WAS REVENUE IN NATURE. THIS JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT WAS CONSIDERED BY ANOTH ER BENCH OF THE VERY SAME HIGH COURT IN THE CASE OF SI LVER SCREEN ENTERPRISES VS. CIT (1972) 85 ITR 578. IN T HIS CASE THE ASSESSEE TOOK A CINEMA HOUSE ON LEASE. THE ASS ESSEE INCURRED THE EXPENDITURE FOR REPAIRING CHAIRS, SANI TARY FITTINGS, ELECTRICITY FITTINGS, ETC. THE PUNJAB & HARYANA HIGH COURT HELD THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE WAS IN THE NATURE OF CAPITAL EXPENDITURE. REFERRIN G TO ITS EARLIER DECISION IN THE CASE OF REGAL THEATRE (SUPR A), THE HIGH COURT FOUND THAT THE FACTS OF THAT CASE WERE DISTINGUISHABLE. HOWEVER, THE FACT REMAINS THAT TH E JUDGEMENT OF THE APEX COURT IN THE CASE OF EMPIRE J UTE CO. LTD. (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE P UNJAB & HARYANA HIGH COURT. SINCE THE JUDGEMENT IN THE CAS E OF EMPIRE JUTE CO. LTD. (SUPRA) WAS NOT CONSIDERED BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SILVER S CREEN ENTERPRISES (SUPRA), THIS JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT, IN OUR OPINION, MAY NOT BE APPL ICABLE IN THIS CASE. THE KARNATAKA HIGH COURT IN THE CASE OF REX TALKIES (SUPRA) CONSIDERED THIS ISSUE AND THE JUDGE MENT OF THE APEX COURT IN THE CASE OF EMPIRE JUTE CO. LTD. (SUPRA) AND HELD THAT IDENTICAL EXPENDITURE WAS REVENUE IN NATURE. THEREFORE, IN OUR OPINION, THE KARNATAKA HIGH COURT IN THE CASE OF REX TALKIES (SUPRA) HAS TAKEN NOTICE OF THE JUDGEMENT OF THE APEX COURT IN THE CASE OF EMPIRE J UTE CO. LTD. WOULD BE APPLICABLE TO THE FACTS OF THIS CASE. ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 19 19. WE FIND THE GUJARAT HIGH COURT HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE IN THE CASE OF CIT VS. LAXMI TALKIES (2005) 275 ITR 125. IN THE CASE BEFORE THE GUJARAT HIGH COURT, THE ASSESSEE INCURRED EXPENDITURE FOR RENOVATION AND REPAIR OF THE CINEMA THEATRE AND ALS O ON ACCOUNT OF STAMP DUTY, INTEREST, ETC. THE ASSESSEE HAS INCURRED EXPENDITURE IN REPLACING THE FLOORING, STA IRCASE AND FIXED NEW TILES. OLD WOODEN STAIRCASE WAS REMOVED AND REPLACED BY A CONCRETE STAIRCASE. THE SCREEN HAS B EEN REPLACED AND CEMENT PLASTERING HAS BEEN DONE. THE GUJARAT HIGH COURT AFTER CONSIDERING THE ABOVE FACTUAL ASPE CTS AND THE JUDGEMENT OF THE APEX COURT IN THE CASE OF EMPI RE JUTE CO. LTD. (SUPRA) FOUND THAT THE EXPENDITURE INCURRE D BY THE ASSESSEE IS REVENUE IN NATURE. THEREFORE, IT HAS T O BE ALLOWED AS REVENUE EXPENDITURE. 20. WE FIND THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF ESCORTS LTD. VS. ACIT (2007) 104 ITD 427 HAD AN OCC ASION TO CONSIDER AN IDENTICAL SITUATION. IN THE CASE BEFOR E THE DELHI BENCH OF THIS TRIBUNAL, THE ASSESSEE INCURRED EXPEN DITURE OF RS.93,61,605/- FOR RENOVATING THE OFFICE BUILDING W HICH WAS TAKEN ON LEASE. THE ASSESSEE CARRIED OUT THE WORK RELATING TO STRUCTURAL STEEL REINFORCEMENT. THIS STRUCTURAL REINFORCEMENT WORK WAS IN THE NATURE OF ENDURING NA TURE. THEREFORE, IT WAS HELD TO BE A CAPITAL EXPENDITURE. IN RESPECT OF OTHER EXPENDITURE SUCH AS PAYMENT FOR INTERNAL FURNISHING, PAINTING AND POLISHING WORK, DISMANTLIN G OF OLD FALSE CEILING, FEES FOR INTERNAL DESIGN, LIFT, ETC. , WAS FOUND TO BE SPENT FOR MAKING THE WORK PLACE SUITABLE AND COM FORTABLE SO AS TO CARRY ON THE BUSINESS EFFECTIVELY AND PROF ITABLY. THE TRIBUNAL OBSERVED THAT THIS EXPENDITURE WAS CERTAIN LY NOT ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 20 INCURRED FOR ACQUIRING ANY ASSET OR ADDITION OF END URING NATURE. THEREFORE, THIS TRIBUNAL HELD THAT THE AMO UNT SPENT BY THE ASSESSEE FOR REPAIR AND RENOVATION CANNOT BE CONSIDERED AS CAPITAL IN NATURE AND, THEREFORE, IT IS OUTSIDE THE PURVIEW OF EXPLANATION (1) TO SECTION 32(1) OF THE ACT. 21. IN THIS CASE ALSO IT IS NOT THE CASE OF THE REV ENUE THAT THE ASSESSEE INCURRED ANY EXPENDITURE WITH REGARD T O REINFORCEMENT OF THE STRUCTURE OF THE BUILDING. AD MITTEDLY THE EXPENDITURE INCURRED BY THE ASSESSEE WITH REGAR D TO CHANGE OF MARBLE FLOORING, EARTH FILLING, UNDER GRO UND SLUMP REPAIR, DRAINAGE AND CABLE WORK, WALL PAPER FIXING, CEILING REPAIR, REPLACEMENT OF DAMAGED CHAIRS AND REFIXING OF CHAIRS AND PAID CONSULTANCY CHARGES ALSO FOR CARRYING ON THE FALSE CEILING REPAIR. AS FOUND BY THE DELHI BENCH OF THI S TRIBUNAL, THESE EXPENDITURES ARE ONLY FOR THE PURPOSE OF CARR YING ON THE BUSINESS IN AN EFFECTIVE AND PROFITABLE MANNER. THE ASSESSEE HAS NOT ACQUIRED/OBTAINED ANY ASSET/INCOME EARNING APPARATUS AS A RESULT OF THIS EXPENDITURE. THEREFORE, AS HELD BY THE DELHI BENCH OF THIS TRIBU NAL IN THE CASE OF ESCORTS LTD., THE EXPENDITURE INCURRED BY T HE ASSESSEE HAS TO BE TREATED AS REVENUE EXPENDITURE. ADMITTEDLY, THE ASSESSEE HAS NOT CARRIED OUT ANY WO RK IN CONNECTION WITH THE STRUCTURE OF THE BUILDING. 22. WE FIND THAT THE APEX COURT HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE IN THE CASE OF CIT VS. KALYANJI MAVJI & CO. (1980) 122 ITR 49. IN THE CASE BEFORE THE APEX COURT THE ASSESSEE INCURRED THE EXPENDITURE ON PAYM ENT OF SURFACE RENT, MINIMUM ROYALTY AND ON ACCOUNT OF SAL ARY FOR THE WATCH AND WARD AND CLAIMED IT AS A BUSINESS EXPENDITURE. THE ASSESSEE HAS ALSO INCURRED EXPEND ITURE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 21 FOR RENOVATING THE BUILDING, RECONDITIONING OF MACH INERY AND CLEARING OF DEBRIS. THE ASSESSEE CLAIMED THE EXPEN DITURE AS REVENUE EXPENDITURE. THE APEX COURT AFTER REFERRIN G TO EARLIER DECISION IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD. VS. CIT (1955) 27 ITR 34 FOUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS IN THE PROCESS OF PROF IT EARNING. THEREFORE, IT HAS TO BE ALLOWED AS REVENU E EXPENDITURE. 23. IN VIEW OF THE ABOVE CASE LAWS, IT IS OBVIOUS T HAT WHENEVER AN EXPENDITURE WAS INCURRED IN THE PROCESS OF EARNING OF PROFIT IT HAS TO BE ALLOWED AS REVENUE E XPENDITURE. IN SUCH A CASE THE EXPENDITURE INCURRED BY THE ASSE SSEE WOULD BE OUTSIDE THE PURVIEW OF EXPLANATION (1) TO SECTION 32 OF THE ACT. IN THE CASE BEFORE US, IT IS NOT IN DISPUTE THAT THE EXPENDITURE WAS INCURRED FOR EARTH FILLING, REP AIR OF CHAIRS, REPLACEMENT OF DAMAGED CHAIRS, REPAIR OF UNDERGROUND SLUMP, DRAINAGE AND CABLE WORK, WALL PA PER FIXING, DUST OPENING REPAIR, CARPENTRY AND PLUMBING , REPAIR OF FALSE CEILING, ETC. THE ASSESSEE HAS ALSO CHANG ED THE MARBLE FLOORING, INCURRED EXPENDITURE ON CLEANING M ATERIAL, PAYMENT TO TEMPORARY EMPLOYEES, WATCH AND WARD, ETC . EVEN THOUGH THE EXISTING FLOORING WAS CHANGED IT MA Y FALL IN THE REVENUE FIELD. HOWEVER, THE CIT(A) HIMSELF CON FIRMED THE EXPENDITURE WITH REGARD TO CHANGE OF MARBLE FLOORIN G AS CAPITAL EXPENDITURE. HOWEVER, HE ALLOWED THE OTHER EXPENSES AS REVENUE EXPENDITURE. THE ASSESSEE HAS ALSO PAID CONSULTANCY CHARGES. IT IS PERTINENT TO NOTE T HAT WHEN THE ASSESSEE HAS REPAIRED THE FALSE CEILING OF THE CINEMA THEATRE, HE HAS TO ENSURE THE SOUND PROOF IN SIDE T HE THEATRE BUILDING. THEREFORE, HE HAS TO NECESSARILY CONSULT A CONSULTANT AND THERE IS NOTHING WRONG IN PAYING THE ITA NOS.250 TO 252/2010 M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD ========================= 22 CONSULTANCY CHARGES FOR SUCH REPAIRS. FALSE CEILIN G WAS REPAIRED WITHOUT ALTERING THE STRUCTURE OF THE BUIL DING. THE ASSESSEE HAS ALSO INCURRED EXPENDITURE IN PURCHASIN G CLEANING MATERIAL, PROJECTOR MAINTENANCE, PAYMENT O F CHARGES TO TEMPORARY STAFF, ETC. THESE EXPENSES AR E ONLY FOR THE PURPOSE OF CARRYING ON OF THE BUSINESS AND DOES NOT BRING ANY CAPITAL ASSET INTO EXISTENCE. THEREFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY ALLOWED THE SAME AS REVENUE EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THE O RDER OF LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED . 24. IN THE RESULT, ALL THE APPEALS OF THE REVENUE S TAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JUNE, 20 10. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/-/- (N.R.S. GANESAN) JUDICIAL MEMBER HYDERABAD, DATED THIS 30TH DAY OF JUNE, 2010 TPRAO COPY FORWARDED TO: 1. THE DY. CIT, CIRCLE 13(1), HYDERABAD 2. M/S CHAYA LAKSHMI CREATIONS (P) LTD., HYDERABAD PLOT NO.265H, ROAD NO.10, JUBILEE HILLS, HYDERABAD 3. CIT(A)- II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. THE D.R., A BENCH, ITAT, HYDERABAD.