ACIT, CHENNAI V. M/s. Landmark, CHENNAI

ITA 274/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51671 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Keywords: Capital asset; Gift; Depreciation; Revenue expenditure; Capital expenditure
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS.273, 274, 275 & 276/MDS/2011 ASSESSMENT YEARS : 2002-03, 2003-04, 2004-05 & 2005 -06 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-XV, CHENNAI. V. M/S. LANDMARK, B-1, APEX PLAZA, NO.3, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. (PAN : AAAFL0180A (APPELLANT) (RESPONDENT) A N D C.O. NOS. 61, 62, 63 & 64/MDS/2011 (IN ITA NOS. 273 TO 276/MDS/2011) ASSESSMENT YEARS : 2002-03, 2003-04, 2004-05 & 2005 -06 M/S. LANDMARK, V. THE ASST. COMMISSIONE R OF B-1, APEX PLAZA, INCOME-TAX, CIRCLE-XV, NO.3, NUNGAMBAKKAM HIGH ROAD, CHENNAI. CHENNAI-600 034. (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : DR. I. VIJAYAKUMAR, CIT-DR ASSESSEE BY : NONE O R D E R PER BENCH: ITA NO. 273/MDS/2011 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-XII, CHENNAI IN ITA NO. 32 9/09-10 DATED 24-11-2010 FOR I.T.A. NOS. 273-276/MDS/2011 & CO 61-64/MDS/2011 2 THE ASSESSMENT YEAR 2002-03, ITA NO. 274/MDS/2011 I S AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEAL S)-XII, CHENNAI IN ITA NO. 330/09-10 DATED 24-11-2010 FOR THE ASSESSMENT YEAR 2003-04, ITA NO. 275/MDS/2011 IS AN APPEAL FILED BY THE REVENUE AGAI NST THE ORDER OF THE LEARNED CIT(APPEALS)-XII, CHENNAI IN ITA NO. 331/09-10 DATE D 24-11-2010 FOR THE ASSESSMENT YEAR 2004-05 AND ITA NO. 276/MDS/2011 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEAL S)-XII, CHENNAI IN ITA NO. 307/09-10 DATED 24-11-2010 FOR THE ASSESSMENT YEAR 2005-06. CO NOS. 61, 62, 63 & 64/MDS/2011 ARE CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE REVENUES APPEALS IN ITA NOS. 273 TO 276/MDS/2011 R ESPECTIVELY. 2. DR. I. VIJAYAKUMAR, LEARNED CIT-DR REPRESENTED O N BEHALF OF THE REVENUE AND NONE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ONLY ISSUE IN THE APPEALS WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN DELETIN G THE ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING THE CLAIM OF REVEN UE EXPENDITURE ON ACCOUNT OF THE AMORTIZATION OF THE AIR CONDITIONING DEPOSIT WH ICH WAS TREATED BY THE ASSESSING OFFICER AS A CAPITAL EXPENDITURE. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS DO ING THE BUSINESS OF RETAIL IN GIFT ARTICLES, BOOKS, STATIONERY, MUSIC ARTICLES, CHILDR ENS CLOTHING ETC. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD PURCHASED A BUILDI NG FROM M/S. MANGAL TIRTH ESTATE LTD. AND AS PER THE AGREEMENT WITH THE BUILDE R, THE BUILDER HAD PURCHASED I.T.A. NOS. 273-276/MDS/2011 & CO 61-64/MDS/2011 3 AND INSTALLED THE NECESSARY CENTRAL AIR-CONDITIONIN G PLANT AND OTHER ACCESSORIES. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS TO PAY THE BUILDER AN AMOUNT OF ` 1,06,67,600/- AS DEPOSIT AND THE SAID AMOUNT WAS TO BE WRITTEN OFF @ 20% PER YEAR OVER A PERIOD OF 5 YEARS. IT WAS FAIRLY AGREE D BY THE LEARNED DR THAT THE CENTRAL AIR-CONDITIONING UNIT WHICH WAS INSTALLED B Y THE BUILDER WAS OWNED BY THE BUILDER AND NOT BY THE ASSESSEE. IT WAS THE SUBMIS SION THAT THE ASSESSEE HAD AMORTIZED THE EXPENDITURE ON ACCOUNT OF THE CENTRAL AIR-CONDITIONING UNIT AND HAD CLAIMED 20% AS REVENUE EXPENDITURE AND THE BALANCE AS DEPOSIT FOR EACH OF THE YEARS. IT WAS THE SUBMISSION THAT THE LEARNED CIT( A) HAD DELETED THE SAME ON THE GROUND THAT CLAUSES 2 AND 4 OF THE AGREEMENT CA TEGORICALLY SAY THAT THE CENTRAL AIR-CONDITIONING PLANT WITH THE EQUIPMENT A ND OTHER ACCESSORIES WOULD BE THE PROPERTY IN THE OWNERSHIP OF THE BUILDER BEING M/S. MANGAL TIRTH ESTATE LTD. OR THEIR NOMINEES. IT WAS THE SUBMISSION THAT THE CEN TRAL AIR-CONDITIONING UNIT GAVE THE ASSESSEE AN ENDURING BENEFIT. IT WAS THE SUBMI SSION THAT THE ORDER OF THE LEARNED CIT(A) IS LIABLE TO BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. 4. WE HAVE CONSIDERED THE SUBMISSIONS. AT THE OUTS ET IT IS CLEARLY TO BE UNDERSTOOD THAT THE ASSESSEE IS NOT THE OWNER OF TH E ASSET BEING THE CENTRAL AIR- CONDITIONING UNIT. THE ASSESSEE CAN IN NO WAY CLAI M OWNERSHIP ON THE CENTRAL AIR- CONDITIONING UNIT IN VIEW OF THE FACT THAT CLAUSES 2 AND 4 OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE BUILDER CLEARLY SPECIF Y THAT THE CENTRAL AIR- CONDITIONING PLANT BELONGS TO IT AND OWNERSHIP OF W HICH REMAINS WITH THE BUILDER. I.T.A. NOS. 273-276/MDS/2011 & CO 61-64/MDS/2011 4 OBVIOUSLY, THE CENTRAL AIR-CONDITIONING PLANT IS PA RT OF THE PLANT AND MACHINERY AND DEPRECIATION WOULD BE ALLOWABLE ON THE SAME. I N SUCH A SITUATION, SECTION 32(1) OF THE INCOME TAX ACT, 1961 WILL COME INTO PL AY AND SECTION 32(1) CLEARLY SAYS THAT THE PLANT AND MACHINERY MUST BE OWNED WHO LLY OR PARTLY BY THE ASSESSEE. HERE, CLEARLY THE ASSESSEE DOES NOT OWN WHOLLY OR PARTLY THE AIR- CONDITIONING PLANT. CAPITAL ASSET IS ALSO DEFINE D IN SECTION 2(14) OF THE ACT TO MEAN PROPERTY OF ANY KIND HELD BY THE ASSESSEE, W HETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION. THE WORD HERE IS HEL D. IN THE PRESENT CASE THE ASSESSEE DOES NOT HOLD UNDER ITS CONTROL THE CENTRA L AIR-CONDITIONING PLANT. THEREFORE, EVEN THE CENTRAL AIR-CONDITIONING PLANT CANNOT BE HELD TO BE THE CAPITAL ASSET OF THE ASSESSEE. 5. NOW THE ONLY QUESTION REMAINS IS WHETHER IT IS A CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE OR NOT. OBVIOUSLY, WHEN EXPENDITUR E IS INCURRED ON THE CAPITAL FIELD, SOME ASSET WILL HAVE TO BE CREATED. EVEN THI S IS NOT THERE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR A NY INTERFERENCE. WE MAY ALSO MENTION HERE THAT THE REVENUE HAS NOT ALLEGED, MUCH LESS SHOWN, THAT THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE BUILDER IS IN ANY WAY A MAKE-BELIEVE AGREEMENT. IN SUCH A SITUATION, WHAT I S APPARENT AS PER THE AGREEMENT MUST BE TAKEN TO BE REAL AND ON THIS COUN T ALSO AS THE EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE ONLY AS PER THE AGREEM ENT ENTERED INTO BETWEEN I.T.A. NOS. 273-276/MDS/2011 & CO 61-64/MDS/2011 5 THE ASSESSEE AND THE BUILDER, THE FINDING OF THE LE ARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. IN THE CIRCUMSTANCES, THE APPEAL S OF THE REVENUE STAND DISMISSED. 6. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE I N SUPPORT OF THE ORDER OF THE LEARNED CIT(A) AND AS WE HAVE DISMISSED THE REVENUE S APPEALS AND UPHELD THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE, THE CRO SS OBJECTIONS FILED BY THE ASSESSEE BECOME INFRUCTUOUS AND ARE DISMISSED AS IN FRUCTUOUS. 7. IN THE RESULT, THE APPEALS OF THE REVENUE AND T HE CROSS OBJECTIONS FILED BY THE ASSESSEE STAND DISMISSED. 8. THE ORDER WAS PRONOUNCED IN THE COURT ON 08-08-2 011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 08 TH AUGUST, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE