M/s. Cadensworth (India) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2838/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8097 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2838/MDS./2016 / ASSESSMENT YEAR : 2012-13 M/S.CADENSWORTH (INDIA) LTD . GUINDY HOUSE, 95,MOUNT ROAD, GUINDY, CHENNAI 600 032. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), CHENNAI-34. PAN AABCC 9872 E ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT D.R / DATE OF HEARING : 28 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1,CHENNAI DATED 05.07.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. ITA NO.2838/16 :- 2 -: 2. THE ONLY ISSUE FOR OUR CONSIDERATION IS WITH RE GARD TO DEPRECIATION ON TEMPORARY STRUCTURES TO THE TUNE OF ` 5,34,199/-. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE H AD INCURRED EXPENDITURE TOWARDS TEMPORARY STRUCTURES IN THE LEA SED PREMISES DURING THE SECOND HALF OF THE FINANCIAL YEAR 2011-1 2. THESE TEMPORARY STRUCTURES ARE GLASS PARTITIONS, MODULAR STORAGE, W ORK STATION. THE ASSESSEE CLAIMED THE ENTIRE EXPENDITURE AS 100% DEP RECIATION (DEPRECIATION OF ` 5,34,199/- WAS CLAIMED ON THE TOTAL ADDITIONS OF 11,87,108/0_ AS IT WAS PUT TO USE FOR LESS THAN 180 DAYS) AS THERE WAS NO BENEFIT OF ENDURING NATURE. THE AO RESTRICTED TH E CLAIM TO 10% AGAINST THE CLAIM OF THE ASSESSEE AT 100% AD DISALL OWED ` 5,34,199/-. AGGRIEVED WITH THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT( A) CONFIRMED THE ACTION OF THE LD. ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF M/S.CHOLAMANDALAM DISTRIBUTIO SERVICES LTD. , VS. THE ACIT, IN ITA NOS.1952& 1953/MDS./2016 DATED 05.10.2016 WHERE IN THE TRIBUNAL HELD AS UNDER:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IN THIS CASE THE ASSESSEE CARRIE D OUT THE ITA NO.2838/16 :- 3 -: RENOVATION WORK WHICH INCLUDES FALSE CEILING, FLOOR ING, INTERIOR WORKS, ELECTRICAL WORKS, CARPETS, PARTITIONS, WOODE N STRUCTURES ETC. IN VARIOUS RENTAL PREMISES SO AS TO MAKE THE PREMIS ES HABITABLE AND THE ASSESSEE CANNOT EXTEND OR ANY IMPROVEMENT T O THE LEASED PREMISES SO AS TO HOLD IT AS AN EXPENDITURE BROUGHT BENEFIT TO THE ASSESSEE WHICH IS ENDURING NATURE. FURTHER, IT IS NOTED THAT IN THE CASE OF M/S.RIALTO ENTERPRISES PVT LTD., VS. JCIT IN ITA NO.803/MDS./2016 FOR ASSESSMENT YEAR 2008-09 VIDE O RDER DATED 11.08.2016, THE TRIBUNAL OBSERVED THAT EXPENDITURE INCURRED BY THE ASSESSEE ON PAINTING, RELAYING OF DAMAGED FLOOR S, PARTITIONS ETC. IN LEASEHOLD PREMISES IS ALLOWABLE AS REVENUE IN NATURE. FURTHER, THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AYESHA HOSPITALS (P) LTD. REPORTED IN 292 ITR 266(MAD.) OB SERVED THE SAME. FURTHER, THE JURISDICTIONAL HIGH COURT IN T HE CASE OF THIRU AROORAN SUGARS LTD VS. DCIT REPORTED IN [2013] 350 ITR 324 (MAD) HELD AS UNDER:- 3. LEARNED COUNSEL APPEARING FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THIS COURT REPORTED IN CIT V. AYESHA HOSPITALS P. LTD. [2007] 292 ITR 266 (MAD), WHEREIN IN RESPECT OF THE CLAIM MADE FOR THE ASSESSMENT YEAR 1991-92, THE ASSESSEE CLAIMED THE AMOUNTS SPENT ON PAINTING, RELAYING OF THE DAMAGED FLOORS, PARTITIONS, ETC., A S REVENUE EXPENDITURE. ON AN APPEAL BEFORE THIS COURT BY THE REVENUE, IT WAS POINTED OUT THAT THE ASSESSEE INCURRED EXPENDITURE FOR RELAYING OF THE DAMAGED FLOORS, PAINTING AND PARTITION IN RESPECT O F ITA NO.2838/16 :- 4 -: THE LEASED PROPERTY. REFERRING TO THE DECISION OF THE APEX COURT REPORTED IN CIT V. MADRAS AUTO SERVICE P. LTD. [1998] 233 ITR 468 (SC), THIS COURT POINTED OUT THAT THE EXPENDITURE INCURRED IN RESPECT OF THE MAINTENANCE OF THE LEASED PREMISES WAS DEDUCTIBLE AS REVENUE EXPENDITURE. 4. AS REGARDS THE CONTENTION TAKEN BY THE REVENUE P LACING RELIANCE ON EXPLANATION 1 TO SECTION 32(1)(II) OF T HE INCOME-TAX ACT, WHICH WAS INSERTED WITH EFFECT FROM APRIL 1, 1 988, THIS COURT POINTED OUT THAT THE EXPLANATION IS AN EXCEPT IONAL ONE WHICH PERMITS DEPRECIATION IN CASES WHERE THE ASSES SEE DOES NOT OWN A BUILDING, IN RESPECT OF WHICH THE ASSESSE E INCURS CAPITAL EXPENDITURE ON THE CONSTRUCTION OF ANY STRU CTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO THE B UILDING. 5. APPLYING THE ABOVE SAID DECISION OF THIS COURT T O THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE TEMPORARY STRUCT URE BY MEANS OF FALSE CEILING AND OFFICE RENOVATION HAD NO T RESULTED IN ANY CAPITAL EXPENDITURE. THE BENEFIT OF THE ABOVE S AID DECISION OF THIS COURT HENCE, APPLIES TO THE FACTS OF THE CA SE. ACCORDINGLY, THE QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE AND THE TAX CASE (APPEAL) STANDS ALLOWED. NO COSTS. IN VIEW OF THE BINDING DECISIONS OF THE JURISDICTIO NAL HIGH COURT, WE ARE INCLINED TO HOLD THAT THE EXPENDITURE INCURRED BY T HE ASSESSEE FOR RENOVATING THE EXISTING LEASED PREMISES IS ONLY IN THE FIELD O F REVENUE AND IT CANNOT BE SAID THAT THE EXPENDITURE WAS IN NATURE OF CAPITAL FIELD. MORE SO, ALL THE ITA NO.2838/16 :- 5 -: JUDGMENTS CITED BY THE LD.A.R WERE DECIDED IN FAVOU R OF THE ASSESSEE HOLDING THAT EXPENDITURE INCURRED IN LEASED PREMISES WITHO UT EXTENDING THE AREA OF CONSTRUCTION, THE SAID EXPENDITURE IS REVENUE IN NA TURE. ACCORDINGLY, THE APPEALS OF ASSESSEE IN BOTH THE ASSESSMENT YEARS AR E ALLOWED. 5. IN VIEW OF THE ORDER OF TRIBUNAL, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR 100% DEPRECIATION IN R ESPECT OF GLASS PARTITIONS, MODULAR STORAGE, WORK STATION, ETC. IN THE LEASED PREMISES AS THEY ARE TEMPORARY STRUCTURES. ACCORDINGLY, WE ALLOW THE APPEAL OF ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF