CHARLES SEQUEIRA VAZ, MUMBAI V. I.T.O. 11(1)(1), MUMBAI

ITA 2607/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88635 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, L LL LH HH H INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.2607 & 2608/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEARS-2007-08 & 2008-09 MR. CHARLES SEQUEIRA VAZ, B-12, JOLLY MAKER APARTMENT NO.1, CUFFE PARADE, MUMBAI-400005 PAN:AAAPV5518L VS ITO 11(1)(1), AAYAKAR BHAVAN, NEAR CHURCHGATE, M.K. ROAD, MUMBAI-400020 ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI BHUPENDRA SHAH + * / REVENUE BY : SHRI PREMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 05-03-2015 -.# + ), / DATE OF PRONOUNCEMENT : 18-03-2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDERS DATED 06.02.2012 OF THE CIT( A)-3 MUMBAI, THE ASSESSEES HAD RAISED FOLLOWING GROUNDS OF APPEAL FOR THE ABOVE MENTIONED ASSESSMENT YEARS(AY.S.): IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX [A] ERRED IN CONFIRMING RS.5.31,683/- RE LATING TO AGRICULTURAL INCOME, NET OF EXPENSES, BY WRONGLY TREATING THE SAME AS NO N-AGRICULTURAL INCOME ON THE GROUNDS WHICH ARE NOT SUSTAINABLE. 2.IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX [A] ERRED IN CONFIRMING DISALLOWANCE OF RS.9,39,561/- OUT OF REPAIRS AND MAINTENANCE EXPENSES CARRIED OUT BY THE APPELLA NT IN THE PREMISES OBTAINED BY THE APPELLANT ON LEAVE AND LICENSE BASIS, BY DISREGARDI NG SEVERAL CASE LAWS AND WRITTEN SUBMISSIONS SUBMITTED DURING THE COURSE OF APPEAL. WITHOUT PREJUDICE TO THE ABOVE AND ALTERNATIVELY, 1.IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AN D ALSO IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX [AL ALSO ERRED IN TREATI NG REPAIR EXPENSES AS CAPITAL EXPENDITURE UNDER THE HEAD BUILDING INSTEAD OF PLANT AND MACHINERY AND THAT ALSO WITHOUT ISSUING NOTICE OF ENHANCEMENT AS PER L AW WHILE DEALING WITH DEPRECIATION ALLOWANCE. RELIEF PRAYED: YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE FOLLOW ING PRAYERS BE ALLOWED IN FULL. 1. TO DELETE ADDITION OF RS.5,31,683/- RELATING TO AGRICULTURAL INCOME WHICH WAS WRONGLY TREATED AS NON-AGRICULTURAL INCOME. 2. TO DELETE THE DISALLOWANCE OF RS.9,39,651/- MADE OUT OF REPAIRS AND MAINTENANCE WRONGLY TREATED AS CAPITAL EXPENDITURE. 3. TO QUASH THE ENHANCEMENT MADE WITHOUT PROPER NOT ICE. [D] GENERAL:- THE APPELLANT RESERVE RIGHTS TO ADD ALTER OR DELETE ANY PORTION OF THIS APPEAL BEFORE ITS CONCLUSION. THIS APPEAL IS FILED IN TIME AND MAY PLEASE BE ALLO WED IN FULL. A DETAILED PAPER BOOK ALONG WITH CASE LAWS WILL BE SUBMITTED AT THE TIME OF HEARING. 2 ITA NO. 2607 & 2608/M/2012 MR. CHARLES SEQUEIRA VAZ ITA/2608/MUM/2012-AY.2008-09: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED A.O. ERRED IN ADDING RS. 6,31,391/- RELATING TO AGRICULTURAL INCOME BY WRONG LY TREATING THE SAME AS NON AGRICULTURAL INCOME ON THE GROUNDS WHICH ARE NOT SUSTAINABLE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND A LSO IN LAW, THE LEARNED CIT(A) ALSO ERRED IN CONFIRMING THE ABOVE SAID ADDITION BY DISREGARDING SEVERAL CASE LAWS AND WRITTEN SUBMISSIONS SUBMITTED DURING THE COURSE OF APPEAL. RELIEF PRAYED: YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE FOLLOW ING PRAYERS BE ALLOWED IN FULL. 1. TO DELETE ADDITION OF RS.6,31,391/- RELATING TO AGRICULTURAL INCOME WHICH WAS WRONGLY TREATED AS NON-AGRICULTURAL INCOME. [D] GENERAL:- THE APPELLANT RESERVE RIGHTS TO ADD ALTER OR DELETE ANY PORTION OF THIS APPEAL BEFORE ITS CONCLUSION. THIS APPEAL IS FILED IN TIME AND MAY PLEASE BE ALLO WED IN FULL. A DETAILED PAPER BOOK ALONG WITH CASE LAWS WILL BE SUBMITTED AT THE TIME OF HEARING. ITA/2607/MUM/2012-AY.2007-08: ASSESSEE,AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF SOUND RECORDING STUDIO WHICH CONDUCTED BUSINESS OF THE MUSIC PRODUCTION, MUSIC COMPOSING,V OICE COORDINATION,PRODUCING VOICES FOR ADVERTISING FILMS AND TELEFILMS.HE FILED HIS RETURN OF INCOME ON 31-10- 2007,DECLARING TOTAL LOSS OF RS. 2.97 LACS.ASSESSIN G OFFICER(AO)COMPLETED THE ASSESSMENT,U/S.143 (3) OF THE ACT ON 21-12-2009,DETERMINING THE INCOME OF THE AT RS.12,26,870/-. 2. FIRST GROUND OF APPEAL IS ABOUT AGRICULTURE INCOME. DURING ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN AGRICULTURAL TURNOVER O F RS.10.17 LACS, THAT HE HAD DEBITED EXPENDITURE OF RS.6.07 LACS AND HAD SHOWN NET AGRICULTURAL INCO ME AT RS. 4.10 LACS. ON VERIFICATION OF THE LAND RECORDS, THE AO FOUND THAT THE LAND WAS MARKED AS N ON-AGRICULTURAL LAND.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES.THE ASSESSEE, VIDE HIS LETTER DT. 8-12-2009 EXPLAINED THAT AS PER SECT ION 2 (1A) OF THE ACT AGRICULTURAL INCOME MEANT ANY INCOME DERIVED FROM LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES,THAT HE HAD CULTIVATED NURSERY PLANTS ON THE LAND THAT WAS SITU ATED INDIA AND WAS USED FOR AGRICULTURAL PURPOSES.THE AO HELD THAT THE LAND BEING USED FOR A GRICULTURAL OPERATIONS WOULD MEAN THAT EFFORTS HAD BEEN MADE TO GROW CROP, TO SPROUT OUT OF THE LA ND, THAT NURSERY ACTIVITY ON A LAND WHICH WAS NOT AN AGRICULTURE LAND COULD NOT BE CONSIDERED AS AGRICULTURAL ACTIVITY, THAT GROSS RECEIPTS DERIVED FROM SUCH ACTIVITY COULD NOT BE TREATED AS AGRICULT URAL INCOME.ACCORDINGLY,THE ENTIRE RECEIPT SHOWN UNDER THE HEAD AGRICULTURAL INCOME AMOUNTING TO RS.10.17 LACS AS INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY.(FAA).BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE OWN PLOTS OF LAND CLOSED TO KARJAT,THAT THE MAJOR PORTION OF THE LAND WAS USED FOR NURSERY BUSINESS, THAT AGRICULTURAL ACTIVITY ON THE PLOT WAS CARRIED ON LIKE SOWING OF SEEDS, PL ANTING, WATERING AND PUTTING MANURE ETC., THAT FARM GETS IT WATER REQUIREMENTS FROM AN ADJUSTING W ELL, THAT THE ASSESSEE WOULD GROW MOTHER PLANTS FROM THE SAPLING SEEDS, THAT WHEN THE MOTHER PLANT WAS SUBSTANTIALLY GROWN THE CUTTINGS WERE TAKEN FROM THE MOTHER, PLANT AND WERE PUT EITH ER IN PLASTIC BAGS/EARTHEN POTS FILLED WITH SOIL, THAT SAME WERE CALLED SAPLINGS, THAT THE LAND RECOR D DID NOT MEAN THAT LAND COULD NOT BE USED FOR AGRICULTURAL PURPOSES, THAT THE ASSESSEE CARRIED OU T THE SAID AGRICULTURAL ACTIVITIES FROM SO MANY YEARS AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTM ENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER THE FAA HELD THAT AS PER THE LAND REVENUE RECORDS THE LAND WAS NON-AGRIC ULTURAL LAND, THAT AS PER THE PROVISIONS OF 3 ITA NO. 2607 & 2608/M/2012 MR. CHARLES SEQUEIRA VAZ SECTION 2(1A) OF THE ACT, AGRICULTURAL INCOME WOULD MEAN ANY INCOME DERIVED FROM LAND SITUATED IN INDIA WERE USED FOR AGRICULTURAL PURPOSES, THAT THE LAND UNDER CONSIDERATION WAS NON- AGRICULTURAL LAND, THAT NO AGRICULTURAL INCOME COUL D BE DERIVED FROM THE AGRICULTURAL LAND, THAT THE ASSESSEE WAS GROWING MOTHER PLANT FROM SAPLING SEED S WHICH WERE PUT IN PLASTIC BAGS EARTHEN PLOTS,THAT THE INCOME GENERATED FROM SALE PROCEEDS OF SAPLING WAS NOT THE INCOME DERIVED FROM AGRICULTURAL LAND, THAT THE ACTIVITIES PERFORMED BY THE ASSESSEE AT HIS FARM COULD NOT BE TREATED AS INCOME FROM AGRICULTURAL ACTIVITY,THAT THE DETAILS FURNISHED BY THE ASSESSEE GIVING NUMBER OF SAPLING PLANTS SHOWN THAT THOSE ACTIVITY COULD NOT FALL WITHIN THE DEFINITION OF AGRICULTURAL INCOME, THAT THE AO WAS RIGHT IN HOLDING THAT RECEIPTS FROM SALE OF NURSERY PLANTS/SAPLING PLANTS COULD NOT BE TREATED AS AGRICULTURAL INCOME.FINALLY HE HELD T HAT NET PROFIT OF RS. 4.10 LACS WAS TO BE TREATED AS INCOME FROM OTHER SOURCES. 4 .BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED T HAT THE ASSESSEE WAS EARNING AGRICULTURAL INCOME (AI),THAT THERE WAS NO NEED TO HAVE AGRICUL TURAL LAND FOR EARNING AI,THAT THE ASSESSEE WAS HAVING NURSERY,THAT INCOME ARISING OUT OF THE NURSE RY WAS SHOWN AI,BY HIM IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER APPEAL,THAT THE ASS ESSEE HAD TO SOW PLANTS IN LAND AND TRANSFER THEM IN PLASTIC BAGS.HE REFERRED TO THE CASES OF RE ENA PANDA(47SOT533),BALWANT SINGH (54TTJ 560),SUDISHA FARM NURSERY(88ITD638),SOUNDARYA NURSE RY(241ITR530),JUGAL KISHOR (269 ITR133).DEPARTMENTAL REPRESENTATIVE(DR) STATED THAT LAND IN QUESTION WAS NOT AGRICULTURAL LAND AS PER THE LAND RECORDS,THAT THE ASSESSEE WAS CUTTI NG MOTHER PLANT TO GROW OTHER PLANTS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE BASIS OF DISPUTE BETWEEN THE ASSESSEE AND THE AO IS THAT WHETHER THE INCOME DERIVED FROM THE NURSERY WAS EXEMPT UNDER THE PROVISIONS OF THE ACT.WE FIND THAT IN THE MATTER OF JUGAL KISHOR(SUPRA)THE HONBLE ALLAHABAD COURT HAD HELD AS UNDER: THE WORDS AGRICULTURE AND AGRICULTURAL PURPOSES HAVE NOT THEMSELVES BEEN DEFINED IN THE INCOME-TAX ACT. IN CIT V. RAJA BEJOY KUMAR SAHAS RO Y [1957] 32 ITR 466 , THE SUPREME COURT HAS LAID DOWN THAT THE PRIMARY SENSE IN WHICH THE TERM AGRICULTURESHOULD BE UNDERSTOOD, IS ITS ROOT MEANING AGER ASSESSEE FIELD +CULTURA ASSESSEE CULTIVATION; THAT IS TO SAY, FIELD CULTIVATION OR CULTIVATION OF THE GROUNDS IN THE SE NSE OF TILLING OF LAND, SOWING OF SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE LAND. THESE ARE BASIC OPERATIONS AND DEMAND THE EXPENDITURE OF HUMAN LABOUR AND SKILL UPON THE LAND ITSELF AND FUR THER THEY ARE ALL DIRECTED TO MAKE THE CROP SPROUT OUT OF THE LAND. AFTER THE CROP SPROUTS FROM THE LAND, THERE ARE SUBSEQUENT OPERATIONS WHICH HAVE TO BE RESORTED TO BY AGRICULTURISTS FOR THE EF FICIENT PRODUCTION OF THE CROP, SUCH AS WEEDING, DIGGING THE SOIL AROUND THE GROWTH, REMOVAL OF UNDE SIRABLE GROWTHS, PRESERVATION OF THE CROP FROM INSECTS AND PESTS AND FROM DEPREDATION BY CATTLE, T ENDING, PRUNING, CUTTING, ETC. BOTH THE BASIC AND THE SUBSEQUENT OPERATIONS TOGETHER FORM THE INTEGRA TED ACTIVITY OF THE AGRICULTURIST. THE PERFORMANCE OF THE SUBSEQUENT OPERATIONS ON THE PRO DUCTS OF THE LAND WOULD NOT BE ENOUGH TO INVEST THE SUBSEQUENT OPERATIONS WITH AGRICULTURAL CHARACTER. THEY SHOULD BE IN CONJUNCTION WITH AND IN CONTINUATION OF THE BASIC OPERATION WHICH IS THE SINE QUA NON OF AN AGRICULTURAL OPERATION. WITHOUT IT, THE SUBSEQUENT OPERATIONS DO NOT ACQUIR E THE CHARACTER OF AGRICULTURAL OPERATIONS. THE NATURE OF THE PRODUCE RAISED HAS NO RELEVANCE TO TH E CHARACTER OF AGRICULTURAL OPERATIONS. IN THAT MATTER THE ASSESSEE OWNED A PLANT NURSERY W HERE HE GREW ORNAMENTAL AND DECORATIVE PLANTS WHICH HE SOLD AND DERIVED INCOME THEREFROM. THE ASS ESSEE CLAIMED THAT THIS WAS AGRICULTURAL INCOME AS HE PERFORMED AGRICULTURAL OPERATIONS. THE FAA HELD THAT THAT THE INCOME WAS AGRICULTURAL INCOME.THE TRIBUNAL HELD THAT THE AO S HOULD BRING ON RECORD THE NATURE OF THE OPERATIONS, VIZ., PRIMARY AS WELL AS SECONDARY ON T HE SPECIFIC LAND AREA AND THEREAFTER APPLY THE LAW. ON FURTHER APPEAL TO THE HIGH COURT HELD THAT THERE WAS NO ILLEGALITY IN THE ORDER OF THE TRIBUNAL. THE TRIBUNAL HAD MERELY REMANDED THE MATT ER TO THE AO FOR FRESH INQUIRY AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE AND TO PASS A FRESH ORDER IN ACCORDANCE WITH THE DECISIONS OF THE SUPREME COURT AND THE COURT,THAT NO EXCEPTION C OULD BE TAKEN TO SUCH A DIRECTION. IN THE MATTER OF SOUNDARYA NURSERY(SUPRA),IT WAS FO UND THAT THE ASSESSEE WAS CARRYING ON BUSINESS OF A NURSERY AND VARIOUS TYPES OF FRUIT PLANTS, FLO WER PLANTS, VEGETABLE PLANTS AND SEEDLINGS WERE GROWN. THE ASSESSEE'S ACTIVITIES WERE TO PREPARE SE EDLINGS ON SCIENTIFIC BASIS, GROW PLANTS ON 4 ITA NO. 2607 & 2608/M/2012 MR. CHARLES SEQUEIRA VAZ PREPARED BEDS AND AFTER SEVERAL OPERATIONS CARRIED OUT ON THE LAND,VIZ.,CUTTING, GOOTYING AND INARCHING, THEY WERE TRANSPLANTED IN SUITABLE CONTA INERS INCLUDING POTS AND KEPT IN THE GREEN HOUSES OR IN SHADE AND THEN SOLD.THE ASSESSEE CLAIM ED THAT THE INCOME DERIVED FROM THE SALE OF PLANTS GROWN IN POTS AND SALE OF SEEDS CONSTITUTED AGRICULTURAL INCOME. THE TRIBUNAL UPHELD THE CONTENTIONS. ON A REFERENCE,THE HONBLE MADRAS HIGH COURT HELD AS UNDER: ALL THE PRODUCTS OF THE LAND WHICH HAVE SOME UTILI TY EITHER FOR SOME CONSUMPTION OR FOR TRADE OR COMMERCE IF THEY ARE BASED ON LAND WOULD BE AGRICUL TURAL PRODUCTS. IF THE PLANTS SOLD IN POTS WERE THE RESULT OF BASIC OPERATIONS ON THE LAND EXPENDIN G HUMAN SKILL AND LABOUR THEREON AND IF AFTER PERFORMANCE OF THE BASIC OPERATIONS ON LAND THE RES ULTANT PRODUCT GROWN OR SUCH PART THEREOF WAS SUITABLE FOR BEING NURTURED IN A POT WITH WATER OR BY PLACING THEM IN THE GREEN HOUSE OR IN SHADE OR AFTER PERFORMING SEVERAL OPERATIONS SUCH AS WEED ING, WATERING, MANURING, ETC., AND ARE MADE READY FOR SALE, ALL THESE OPERATIONS ARE AGRICULTUR AL OPERATIONS AND THE PLANTS ARE PRODUCTS OF AGRICULTURE. FROM THE ABOVE IT IS CLEAR THAT THE WORD HAS NOT BE EN DEFINED IN THE ACT AS SUCH.BUT,THE INCLUSIVE DEFINITION OF AGRICULTURAL INCOME IN SECTION 2(1A) OF THE ACT IS EXHAUSTIVE AND IT REFERS TO THREE KINDS OF INCOME :SECTION 2(1A)(A) REFERS TO ANY REN T OR REVENUE DERIVED FROM AGRICULTURAL LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULT URAL PURPOSES.SECTION 2 (1A)(B)(I) REFERS TO INCOME DERIVED FROM SUCH LAND BY AGRICULTURE. SECTI ON 2(1A)(B)(II) REFERS TO ANY INCOME DERIVED FROM SUCH LAND BY THE PERFORMANCE OF A CULTIVATOR O R RECEIVER OF RENT-IN-KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET.COURTS AR E OF THE VIEW THAT AN INCOME CAN BECOME AGRICULTURAL INCOME ONLY IF SUCH INCOME IS DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND WHEN SUCH LAND IS PUT TO AGRICULTURAL USE,THAT WHEN LAND IS USED FOR AGRICULTURAL PURPOSE, DIFFERENT TYPES OF OPERATIONS CAN BE CARRIED ON SUCH LAND,THAT TWO OPERATIONS WHICH ARE RELEVANT ARE BASIC OPERATIONS AND SUBSEQUENT OPERATIONS,THAT BASIC OPE RATIONS INVOLVE CULTIVATION OF THE LAND LIKE TILLING THE LAND, SOWING THE SEEDS, PLANTING AND SI MILAR OPERATIONS WHICH CAN BE TERMED AS BASIC OPERATIONS WARRANTING AND DEMANDING HUMAN LABOUR AN D THE SKILL UPON THE LAND ITSELF WHICH IS A DIRECT LINK TO MAKE THE CROP SPROUT FROM THE LAND,T HAT AFTER THE CROP SPROUTS FROM THE LAND, SUBSEQUENT OPERATIONS HAVE TO BE CARRIED OUT BY AGR ICULTURISTS FOR THE EFFICIENT PRODUCTION OF CROP SUCH AS REMOVING WEEDS, CLEANING AND LOOSENING THE SOIL AROUND THE CROP, PRESERVATION OF CROPS FROM INSECTS AND PESTS, ETC., THAT BOTH THE BASIC A ND SUBSEQUENT OPERATIONS TOGETHER FORM THE INTEGRATED ACTIVITY OF AN AGRICULTURIST.IN SHORT,IN ORDER TO CALL BASIC AND SUBSEQUENT ACTIVITY AN INTEGRATED ACTIVITY OF A FARMER,THE SUBSEQUENT ACTI VITY SHOULD BE IN CONJUNCTION WITH OR IN CONTINUATION OF THE BASIC OPERATION, I.E., PREPARAT ION OF LAND AND SOWING SEEDS OR SUCH SIMILAR ACTIVITY.THUS,THE TERM AGRICULTURE HAS TO BE UNDE RSTOOD AS COMPRISING ALL PRODUCTS OF THE LAND WHICH HAVE SOME UTILITY EITHER FOR CONSUMPTION OR F OR TRADE AND COMMERCE. WE FIND THAT WHILE DECIDING THE ISSUE THE AO AND TH E FAA HAVE MAINLY CONCENTRATED ON THE LAND RECORDS.IN THEIR ORDERS THERE IS NOT ADEQUATE DISCU SSION ABOUT THE PRIMARY AND BASIC OPERATION CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER A PPEAL.THE FAA HAS HELD THAT THE ASSESSEE WAS GROWING MOTHER PLANT FROM SAPLING SEEDS WHICH WERE PUT IN PLASTIC BAGS EARTHEN PLOTS.HE HAS NOT DISCUSSED ALL THE OPERATIONS CARRIED OUT BY THE ASS ESSEE.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THE MATTER NEEDS FURTHER VERIFICATION, SO,IN THE INTEREST OF JUSTICE,WE ARE REMANDING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJ UDICATION.HE IS DIRECTED TO AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 6. NEXT GROUND OF APPEAL IS ADDITION OF RS. 9.39 LACS ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENDITURE INCURRED IN THE SOUND RECORDING STUDIO IN THE RENTED PREMISES.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOW N PROFESSIONAL INCOME AT RS.22,04,404/- AND NET LOSS OF RS.9,95,754/-IN THE PROPRIETARY CON CERN OF M/S. GLOBE MUSIC PRODUCTION & CONSULTANCY,THAT HE HAD CLAIMED CERTAIN EXPENDITURE IN THAT REGARD AND OUT OF WHICH EXPENDITURE OF RS.9,35,651/-HAD BEEN INCURRED TOWAR DS COST OF SOUND RECORDING STUDIO.THE AO HELD THAT THE ASSESSEE BY HIS OWN SUB MISSIONS HAD STATED THAT IT WAS AN EXPENDITURE ON MAKING SOUND RECORDING STUDI O AND THEREFORE WAS A CAPITAL 5 ITA NO. 2607 & 2608/M/2012 MR. CHARLES SEQUEIRA VAZ EXPENDITURE. BEFORE HIM THE ASSESSEE CLAIMED THAT T HE REPAIRS & MAINTENANCE SHOULD BE ALLOWED AS REVENUE EXPENDITURE. HOWEVER,THE AO NOTE D THAT THE ASSESSEE HAD IN FACT CONSTRUCTED A HIGH END SOUND RECORDING TECHNICAL ST UDIO WHICH WAS NOTHING BUT A PLANT,THAT IT WAS OF NO CONSEQUENCE WHETHER PLANT I NSTALLED WAS IN HIS OWN PREMISES OR IN A RENTAL PREMISES,THAT PLANT WAS A CAPITAL ASSET.AC CORDINGLY,HE TREATED THE SAME AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION @ 15% ON THE S AME. 7. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA.IT WAS ARGUED THAT HE HAD TAKEN THE PREMISES ON RENT ON LE AVE & LICENCE AGREEMENT,THAT THE TERM OF LICENCE PERIOD WAS 11 MONTHS,THAT THE OWNER HAD ASKED TO VACATE THE PREMISES ON THE END OF 11 MONTHS I.E. BY 31-01-07,THAT HE WAS N OT ABLE TO FIND SUITABLE LOCATION FOR ANOTHER PREMISES,THAT FINALLY THE AGREEMENT WAS FUR THER EXTENDED UPTO OCTOBER, 2008,THAT AFTER THAT THE ASSESSEE HAD VACATED THE S AID PREMISES,THAT THE EXPENDITURE CLAIMED OF REPAIRS & MAINTENANCE ON TENANTED PREMIS ES COULD NOT BE TREATED AS CAPITAL EXPENDITURE,THAT HE HAD FURNISHED ALL THE DETAILS B EFORE THE AO.THE ASSESSEE HAD MADE BIFURCATION OF THE EXPENDITURE INTO REVENUE AND CAP ITAL EXPENDITURE. HE HAD CAPITALISED NEW ASSET TO THE TUNE OF RS.3,92,787/-W HICH WAS DISCLOS -ED IN THE SCHEDULE OF FIXED ASSETS AND BALANCE AMOUNT OF RS. 9,39,651/- W AS DEBITED TO P & L A/C.,THAT THE AO DID NOT CONSIDER THE FACTS THAT THE ASSESSEE HAD VACATED TH E PREMISES ON MARCH,2009,TAHT NO NEW ASSET OR BENEFIT OF ENDURING NATURE CAME INTO EXISTENCE I N THE ASSESSEE'S HANDS,THAT THE EXPENDITURE INCURRED ON REPAIRS & MAINTENANCE IN TE NANTED PREMISES WAS A REVENUE EXPENDITURE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER THE FAA HELD THAT THE ASSESSEE HAD DEBITED EXPENDITURE OF R S. 9,39,651/- TO P & L A/C. TOWARDS REPAIRS & MAINTENANCE EXPENSES OF STUDIO,THAT THE DETAILS O F EXPENDITURE INCURRED SHOWED THAT THE EXPENDITURE WAS INCURRED TOWARDS MATERIAL PURCHASE FOR ERECTING AND CONSTRUCTING OF RECORDING STUDIO WHICH ALSO INCLUDED LABOUR CHARGES PAYMENT,T HAT THE EXPENDITURE PERTAINED TO PURCHASE OF BUILDING MATERIAL, HARDWARE, PIPES, ETC . ELECTRICAL, FURNITURE FITTINGS,THAT EXPENDITURE WAS INCURRED FOR CONSTRUCTION OF STUDIO ,THAT THE EXPENDITURE WAS FOR CREATION OF NEW ASSET AND HE DERIVED BENEFIT OF ENDURING NATURE ,THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOUND RECORDING FOR WHICH HE REQUIRED A RECORDING STUDIO,THAT ASSETS BUILT UP WERE OF ENDURING NATURE AND THEREFORE,HAD TO BE CAPITALIZED ,THAT THE EXPENDITURE INCURRED FOR PERMANENT STRUCTURE OF SOUND RECORDING STUDIO HAD B EEN RIGHTLY TREATED AS CAPITAL EXPENDITURE. HE FURTHER HELD THAT DEPRECIATION SHOULD BE ALLOWED AT THE RATE AS APPLICABLE TO BUILDING AND NOT @ 15% ELIGIBLE FOR PLANT. 8. BEFORE US,THE AR ARGUED THAT THE ASSESSEE WAS HIRED THE PREMISES,THAT NOT BEING THE OWNER HE HAD INCURRED EXPENDITURE THAT WAS OF REVEN UE NATURE,THAT IT WAS INITIALLY HIRED FOR ELEVEN MONTHS,THAT THE NATURE OF HIS BUSI NESS COMPELLED HIM TO INCUR THE EXPENDITURE,THAT EXPENDITURE WAS NOT UNREASONABLE.H E RELIED UPON THE CASES OF AYESHA HOSPITALS(292 ITR 266-MAD.),DR.A.M.SINGHVI(212CTR1- RAJ.),JUST DIAL PVT.LTD. OF MUMBAI TRIBUNAL(ITA/ 3200/MUM/2010-AY. 2006-07,DATE D 28.02. 2014).THE DR SUPPORTED THE ORDER OF THE FAA. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.13 .31LAKHS FOR THE PREMISES TAKEN OF RENT AND HAD CLAIMED THAT OUT OF THE SAID EXPENDITU RE,EXPENSES TO THE TUNE OF RS.9.39 LAKHS WERE OF REVENUE NATURE,THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE LANDLORD,THAT INITIALLY AGREEMENT WAS FOR ELEVEN MO NTHS AND LATER ON IT WAS RENEWED BY BOTH THE PARTIES.WE FIND THAT THE AO OR THE FAA HAVE NOT ANALYSED THE TERMS AND CONDITIONS OF THE AGREEMENT WHILE DECIDING THE ISSU E.WE FIND THAT IN THE CASE OF JUST DIAL(SUPRA)THE TRIBUNAL HAD REFERRED TO A PARTICULA R CLAUSE OF THE AGREEMENT AND ONLY 6 ITA NO. 2607 & 2608/M/2012 MR. CHARLES SEQUEIRA VAZ THEN HAD DECIDED THE ISSUE.THE ASSESSEE HIMSELF HAD TREATED EXPENDITURE OF RS.3. LAKHS ,AS CAPITAL EXPENDITURE.IT IS NOT KNOWN AS TO WHAT WAS THE DIFFERENCE BETWEEN THE EXPENSES TREATED BY THE ASSESSEE AS CAPITAL EXP ENSES AND REVENUE EXPENSES.THE FAA HAS NOT ANALYSED THE MATERIAL MADE AVAILABLE TO THE AO AND HIM.IN OUR OPINION,PURCHASE OF MATERIAL FOR ERECTING AND CONST RUCTING OF RECORDING STUDIO IN ITSELF CANNOT BE A DECIDING FACTOR TO DECIDE THE CONTROVERSY OF CAPI TAL OR REVENUE EXPENDITURE.IN OUR OPINION,THE MATTER NEEDS FURTHER VERIFICATION.THEREFORE,IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO TO DECIDE THE ISSUE AF RESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING THE ASSESSEE AND AFTER CONSIDERING THE AGRE EMENT ENTERED IN TO BY THE ASSESSEE WITH THE LAND LORD AND AFTER CONSIDERING THE NATURE OF THE V ARIOUS EXPENSES.GROUND NO.2 IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. ITA/2608/MUM/2012-AY.2008-09: 10. ONLY EFFECTIVE GROUND OF APPEAL FOR THE YEAR UNDER CONSIDERATION IS ABOUT AI AND THE AMOUNT INVOLVED IS RS.6.31 LAKHS.FACTS AND CIRCUMST ANCES OF THE MATTER FOR THE YEAR ARE IDENTICAL TO THE FACTS OF LAST AY.,THEREFORE,FOLLOW ING THE ORDER FOR THE PRECEDING YEAR,WE ARE REMITTING THE MATTER TO THE FILE OF THE AO FOR FRES H ADJUDICATION.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR BOTH THE AY.S.STAND PARTLY ALLOWED. 9): '() ; < + 7 SA 8): = + ) >?. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH, MARCH,2015 . 8 + -.# A B' 18 EKPZ , 201 5 . + 7 C SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, B' /DATE:18.03 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) D #) D #) D #) D #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ E F , 4. THE CONCERNED CIT / E F 5. DR C BENCH, ITAT, MUMBAI / G7 &)' L LL LH HH H , . . . 6. GUARD FILE/ 7 9 ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, H / > DY./ASST. REGISTRAR , /ITAT, MUMBAI