M/s.Coastal Resorts(India) Ltd, Cochin V. ACIT, Cochin

ITA 256/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68993 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: P K SASIDHARAN
• Keywords: Revenue expenditure
• Section: 37(1)

Judgement Text

1 ITA NO. 256/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 256/COCH/2013 (ASSESSMENT YEAR 2007-08) M/S COASTAL RESORTS (INDIA) LTD VS THE A.C.I.T., CIR.1(2) CASINO HOTEL KOCHI W/ISLAND, KOCHI-3 PAN : AABCC3161C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K. SASIDHARAN RESPONDENT BY : SMT. LATHA V KUMAR DATE OF HEARING : 23-10-2013 DATE OF PRONOUNCEMENT : 25-10-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)- II, KOCHI DATED 08-03-2013 AND PERTAINS TO ASSESSME NT YEAR 2007-08. 2. SHRI P.K. SASIDHARAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN T HE BUSINESS OF TOURISM. DURING THE COURSE OF ASSESSMENT, THE ASSE SSEE CLAIMED RS.1,85,65,444 AS CURRENT REPAIR ON THE WRITTEN DOW N VALUE OF THE BUILDING CONSTRUCTED ON THE LAND BELONGING TO THE GOVERNMENT . ACCORDING TO THE 2 ITA NO. 256/COCH/2013 LD.REPRESENTATIVE, THE ASSESSEE TOOK THE LAND ON LE ASE FROM GOVERNMENT OF KERALA AND CONSTRUCTED BUILDING FOR THE PURPOSE OF BUSINESS. AFTER THE EXPIRY OF THE LEASE PERIOD, THE GOVERNMENT REFUSED TO EXTEND THE LEASE. THE ASSESSEE FILED WRIT PETITION BEFORE THE HIGH CO URT AND THE HIGH COURT STAYED THE ORDER OF THE STATE GOVERNMENT AND DIRECT ED STATE GOVERNMENT TO MAINTAIN STATUS QUO. ACCORDING TO THE LD.REPRESENT ATIVE, IN FACT, THE STATE GOVERNMENT DIRECTED THE ASSESSEE TO VACATE THE PREM ISES WHILE REFUSING TO EXTEND THE LEASE. DURING THE YEAR UNDER CONSIDERAT ION, THE ORDER OF THE STATE GOVERNMENT REFUSING TO EXTEND THE LEASE AND A SKING THE ASSESSEE TO VACATE THE PREMISES WAS IN EXISTENCE, THEREFORE, TH E WRITTEN DOWN VALUE OF THE BUILDING WAS CLAIMED AS REVENUE EXPENDITURE AS BEING CURRENT REPAIR, IN THE RETURN OF INCOME FILED. SINCE THE ASSESSEE WAS ASKED TO VACATE THE PREMISES BY THE LANDLORD, VIZ. THE STATE GOVERNMENT , AFTER EXPIRY OF THE LEASE PERIOD, ACCORDING TO THE LD.REPRESENTATIVE, T HE COST OF CONSTRUCTION OF THE BUILDING AS ON THE DATE OF ORDER OF THE STATE G OVERNMENT HAS TO BE ALLOWED AS CURRENT REPAIR. 3. WE HEARD SMT. LATHA V KUMAR, THE LD.DR ALSO. 4. NO DOUBT, THE ASSESSEE TOOK THE PREMISES ON LEAS E FROM THE STATE GOVERNMENT AND CONSTRUCTED THE BUILDING FOR RUNNING ITS TOURISM BUSINESS. THEREFORE, THE ASSESSEE HAS NOT CLAIMED THE COST OF CONSTRUCTION OF THE 3 ITA NO. 256/COCH/2013 BUILDING IN THE LEASE PREMISES AS REVENUE EXPENDITU RE. NOW THE ASSESSEE CLAIMS THE WRITTEN DOWN VALUE OF THE COST OF CONSTR UCTION AS CURRENT REPAIR ON THE GROUND THAT THE STATE GOVERNMENT REFUSES TO EXTEND THE LEASE PERIOD AND FORCES THEM TO VACATE THE PREMISES. ON A QUERY FROM THE BENCH, THE REPRESENTATIVE FOR THE ASSESSEE CONFIRMED THAT THE ASSESSEE HAS NOT VACATED THE PREMISES PHYSICALLY AND HE WAS CONTINUI NG IN PHYSICAL POSSESSION OF THE PROPERTY EVEN AFTER THE STATE GOV ERNMENT DIRECTED THEM TO VACATE THE PREMISES. IN FACT, THE ASSESSEE CHAL LENGED THE ORDER OF THE STATE GOVERNMENT AND THE HIGH COURT STAYED THE OPER ATION OF THE ORDER BY ASKING THE PARTIES TO MAINTAIN STATUS QUO. THEREFO RE, EVEN AFTER EXPIRY OF THE LEASE PERIOD, THE ASSESSEE IS CONTINUING IN PHY SICAL POSSESSION OF THE PROPERTY AS A LESSEE. HENCE, THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT CONTINUING IN POSSESSION OF THE PROPERTY AFTER EXPI RY OF THE LEASE PERIOD HAS TO BE CONSTRUED AS HOLDING OVER OF THE PROPERTY AFTER THE LEASE PERIOD. HENCE, THERE IS NO QUESTION OF ALLOWING THE WRITTEN DOWN VALUE OF THE COST OF CONSTRUCTION AS CURRENT REPAIR. 5. CURRENT REPAIR IS AN EXPENDITURE INCURRED BY T HE ASSESSEE FOR THE PURPOSE OF MAINTAINING THE MACHINERY, BUILDING, ETC . USED FOR THE PURPOSE OF BUSINESS. IT IS NOT A CASE OF AN EXPENDITURE IN CURRED FOR THE PURPOSE OF DOING THE BUSINESS. THE ASSESSEE CLAIMS THE WRITTE N DOWN VALUE OF THE COST OF CONSTRUCTION AS CURRENT REPAIR. THIS TRIBU NAL IS OF THE CONSIDERED 4 ITA NO. 256/COCH/2013 OPINION THAT THE COST OF CONSTRUCTION OF THE BUILDI NG OR ITS WRITTEN DOWN VALUE CANNOT BE ALLOWED AS CURRENT REPAIR UNDER T HE EXISTING PROVISIONS OF THE INCOME-TAX ACT. 6. THE LD.REPRESENTATIVE FOR THE ASSESSEE PLACED HI S RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN TVS LEAN LOGIS TICS LTD 293 ITR 432 (MAD). WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADRAS HIGH COURT. THE MADRAS HIGH COURT FOUND THAT EXPLANATIO N 1 TO SECTION 32(1) IS APPLICABLE DEPENDING UPON THE CONSTRUCTION OF ANY S TRUCTURE OR DOING WORK IN RELATION TO RENOVATION OR EXTENSION ON THE IMPRO VEMENT OF THE BUILDING WHICH IS PUT UP IN A PREMISE TAKEN ON LEASE. THE M ADRAS HIGH COURT FOUND THAT EXPLANATION 1 TO SECTION 37(1) IS NOT APPLICAB LE IN A CASE OF CONSTRUCTION OF ANY STRUCTURE OR DOING WORK FOR PUT TING UP OF CONSTRUCTION FOR THE PURPOSE OF BUSINESS. IF THE ASSESSEE INTENDS T O CLAIM THE COST OF CONSTRUCTION OF THE ENTIRE BUILDING, THEN IT HAS TO BE CLAIMED IN THE YEAR IN WHICH THE EXPENDITURE WAS INCURRED. ADMITTEDLY, TH E EXPENDITURE WAS NOT INCURRED DURING THE YEAR UNDER CONSIDERATION. WHAT IS CLAIMED IS THE WRITTEN DOWN VALUE OF THE COST OF CONSTRUCTION AND NOT THE COST OF CONSTRUCTION OF THE ENTIRE BUILDING. THEREFORE, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF TVS LEAN LOGISTICS LTD (SUPRA) MAY NOT BE APPLIC ABLE TO THE FACTS OF THE CASE. 5 ITA NO. 256/COCH/2013 7. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THE SAME IS CONFIRMED AND THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH OCTOBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 25 TH OCTOBER, 2013 PK/- COPY TO: 1. M/S COASTAL RESORTS (INDIA) LTD, CASINO HOTEL, W /ISLAND, KOCHI-3 2. THE A.C.I.T., CIR.1(2), KOCHI 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, 7 TH FLOOR, KERA BHAVAN, KOCHI- 682 011 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH