A. K. Nair & Co., New Delhi V. ITO, New Delhi

ITA 3065/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52859 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Depreciation; Additional evidence; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO.3065/DEL/2010 ASSESSMENT YEAR : 2007-08 A.K. NAIR & CO., C-192, SARVODAYA ENCLAVE, NEW DELHI 110 017. PAN : AAGA5904 R VS. ITO, WARD 37(3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATYAN SETHI, ADVOCATE REVENUE BY : MRS. ANUSHA KHURANA, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 23 RD MARCH, 2010 FOR ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXVIII, NEW DELHI [BRIEFLY THE CIT (A)] HAS ERRED IN BOLDING TH AT BILLS OF EXPENDITURE ON OFFICE INTERIORS OF PREMISES TAKEN ON L EASE WAS ADDITIONAL EVIDENCE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) HAS ERRED IN REJECTING AS AFTER THOUG HT, THE ALTERNATE CONTENTION THAT EXPENDITURE ON OFFICE INTERIORS O F LEASED PREMISES WAS REVENUE EXPENDITURE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) FAILED TO APPRECIATE THAT THE EXPENDITURE ON INTERIORS SUCH AS, OFFICE PARTITION, POP, GRANITE POLI SH OF FLOORS, FILES CABINETS, ETC. THAT WAS ONLY FOR SMOOTH RUNNING OF OFFICE WAS NOTHING BUT REVENUE EXPENDITURE. ITA NO.3065/DEL/2010 2 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) HAS ERRED IN UPHOLDING DISALLOWANCE OF DEPRECIATION OF RS.4,27,000/- IN RESPECT OF EXPENDITUR E ON OFFICE INTERIORS. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE HEARING OF THE APP EAL. 2. THE ASSESSEE IS A FIRM OF CHARTERED ACCOUNTANTS AND DE RIVES PROFESSIONAL INCOME. IT WAS NOTICED BY THE ASSESSING OFFIC ER THAT THE ASSESSEE HAD CLAIMED TOTAL DEPRECIATION AT ` 11,80,330/ - AND FROM DETAILS OF SUCH DEPRECIATION HE FOUND THAT A SUM OF `8 ,54,000/- WAS CLAIMED AS 100% DEPRECIATION ON OFFICE INTERIORS. FU RTHER, EXAMINATION OF DETAILS REVEALED THAT SUCH EXPENDITURES WERE INCURR ED ON RENTED PREMISES WHICH WAS TAKEN ON RENT FROM 1 ST DECEMBER, 2006. KEEPING IN VIEW THE USER OF THE ASSETS FOR LESS THAN 180 DAYS, HE RESTRICTED THE CLAIM OF THE ASSESSEE TO HALF OF THE DEPRECIATION I.E., FOR A SUM OF ` 4,27,000/-. THE SAID AMOUNT WAS ADDED TO THE RETURNE D INCOME OF ` 10,55,980/-. 3. IN THE GROUNDS OF APPEAL FILED BEFORE THE CIT (A) , IT WAS CLAIMED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE IN TERIORS OF THE LEASED PREMISES WAS REVENUE IN NATURE AS NO TANGIBLE CAP ITAL ASSET WAS CREATED BY INCURRING THE SAID EXPENDITURE. THERE FORE, IT WAS CLAIMED THAT THE ENTIRE EXPENDITURE SHOULD HAVE BEE N ALLOWED AS REVENUE EXPENDITURE. ALTERNATIVELY, IT WAS CLAIMED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO GIVE THE REMAINING BENEF IT OF 50% IN THE SUBSEQUENT YEAR. IT WAS PLEADED BEFORE THE CIT (A) TH AT THE WORK CARRIED OUT BY INCURRING SUCH EXPENDITURE WAS IN THE NATURE OF PARTITION WORK FOR CABINS, GLASS DOOR, HANDLES, TABLES, FALSE CEILI NG, POP ON WALLS, GRANITE POLISH ON FLOOR, ETC. THESE EXPENDITURES WERE INCURRED DURING MAY, 2006 AND JULY 2006 WHEN THE PREMISES WAS TAKEN ON RENT. IT WAS SUBMITTED THAT AS THE CONSTRUCTION WORK ON THE OTHER P ORTION OF THE BUILDING WAS NOT COMPLETE, AT THE REQUEST OF THE LAND LORD, THE OFFICE ITA NO.3065/DEL/2010 3 WAS OPENED ON 1 ST DECEMBER, 2006 AND THE RENT WAS PAID TO LANDLORD ONLY FROM THAT PERIOD ONWARDS. ALONG WITH THE SAID SU BMISSION, COPY OF BILLS OF THE CONTRACTORS AND THEIR LEDGER ACCOUNTS WER E ALSO FILED. REFERENCE WAS MADE TO CERTAIN JUDICIAL PRONOUNCEMENT S TO CONTEND THAT AS NO ASSET OF ENDURING NATURE WAS CREATED IN THE LEASED PREMISES, THE EXPENDITURE WERE OF REVENUE IN NATURE A ND THE ENTIRE EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE . LEARNED CIT (A) ON CONSIDERATION OF THESE SUBMISSIONS HAS UPHELD THE A CTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ARGUMENTS NOW B EING RAISED BY THE ASSESSEE THAT THESE EXPENDITURES ARE REVENUE IN NA TURE ARE AFTERTHOUGHT AS THEY WERE NOT RAISED BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS WRONGLY CLAIMED DEPRECIATION FOR THE ENTIRE YEAR EVEN THOUGH THE DEPRECIATION WAS AVAILABLE ONLY FOR SIX MO NTHS. THE ASSESSEE HAS ALSO FAILED TO FILE IN SUPPORT OF ITS CLAIM T HAT THE EXPENDITURE WAS REVENUE IN NATURE. HE REFERRED TO TH E COPY OF TWO BILLS OF THE CONTRACTORS WHICH WERE FILED ALONG WITH THE W RITTEN SUBMISSIONS AND HELD THAT THESE BILLS CONSTITUTE ADDITIONAL EVIDEN CE AND THE ASSESSEE DID NOT FURNISH ANY EXPLANATION IN TERMS OF RULE 46A TO SHOW THAT HOW THIS ADDITIONAL EVIDENCE COULD BE ADMITTED. HE DID NOT ADMIT SUCH EVIDENCE ON THE GROUND THAT THE CONDITIONS LAID DOWN UNDER RULE 46A ARE NOT SATISFIED. LEARNED CIT (A) FURTHER OBSERV ED THAT EVEN THOUGH THOSE BILLS ARE ADMITTED AS ADDITIONAL EVIDENCE , THESE EXPENDITURES HAVING BEEN INCURRED IN THE MONTH OF MA Y AND JULY WHICH PERIOD IS NOT COVERED BY THE TENANCY RIGHTS. THEREFO RE, HE UPHELD THE ACTION OF THE ASSESSING OFFICER. HE ALSO REJECTED THE A LTERNATIVE CLAIM OF THE ASSESSEE ON THE GROUND THAT SUCH DIRECTIONS ARE NO T NECESSARY AND DEPRECIATION HAS TO BE ALLOWED BY THE ASSESSING OFFI CER IF THE REQUIREMENTS OF LAW ARE FULLY SATISFIED. IN THIS MANNE R, LEARNED CIT (A) HAS DISPOSED OF THE APPEAL FILED BY THE ASSESSEE. THE ASSESSE E IS AGGRIEVED, HENCE, HAS RAISED THE AFOREMENTIONED GROUN DS OF APPEAL. ITA NO.3065/DEL/2010 4 4. AFTER NARRATING THE FACTS, IT WAS VEHEMENTLY PLEAD ED BY THE LEARNED AR THAT THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE WERE IN THE NATURE OF REVENUE AND THIS CLAIM OF THE ASSESSEE HAS TO BE ALLOWED IN ACCORDANCE WITH THE LAW. HE SUBMITTED TH AT THOUGH THE ASSESSEE HAS CLAIMED THE SAID EXPENDITURE AS DEPRECIATION, BUT THE CHARACTER OF THESE EXPENDITURES IS REVENUE, THEREFORE, LEARNED CIT (A) WAS WRONG IN NOT ENTERTAINING SUCH CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THE BILLS OF CONTRACTORS SUBMITTED TO LE ARNED CIT (A) WAS NOT ADDITIONAL EVIDENCE AS ALL THESE DETAILS WERE SUBMI TTED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING S. HE REFERRED TO THE COPY OF THESE BILLS WHICH HAS BEEN FIL ED AT PAGE 3 AND 4 OF THE PAPER BOOK AND THE SUBMISSIONS MADE BEFORE THE A SSESSING OFFICER, THE COPY OF WHICH HAS BEEN FILED AT PAGES 5 AND 6 OF THE PAPER BOOK IN WHICH THE ENTIRE FACTS HAVE BEEN CLEARLY STAT ED. IT WAS SUBMITTED TO THE ASSESSING OFFICER THAT ALL THESE EXPENDI TURES WERE IN THE NATURE OF TEMPORARY CONSTRUCTION ON WHICH 100% D EPRECIATION SHOULD BE ALLOWED. HE ALSO DREW OUR ATTENTION TOWARDS THE SUBMISSIONS MADE BEFORE THE CIT (A) COPY OF WHICH IS PLACED AT P AGE 1 AND 2 OF THE PAPER BOOK. THEREFORE, HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE HAS WRONGLY BEEN REJECTED BY THE LEARNED CIT (A) AND IT SHOULD BE ALLOWED TO THE ASSESSEE. 5. ON THE OTHER HAND, RELYING UPON THE ORDER OF ASSESSI NG OFFICER AS WELL AS THE CIT (A), IT IS THE CASE OF THE LEARNED DR THAT LEARNED CIT (A) HAS RIGHTLY UPHELD THE ORDER OF THE ASSESSING OFFICER AS THE ASSETS APPARENTLY HAVE BEEN USED FOR A PERIOD OF LESS THAN 18 0 DAYS, THEREFORE, THE CLAIM OF THE ASSESSEE REGARDING 100% DEP RECIATION COULD NOT BE ADMITTED EITHER BY THE ASSESSING OFFICER O R CIT (A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS A MATTER OF FAC T THAT FOR THE FIRST ITA NO.3065/DEL/2010 5 TIME THE ASSESSEE HAS RAISED THE PLEA OF ENTIRE EXPENDITU RE BEING REVENUE IN NATURE BEFORE THE CIT (A) ONLY. BEFOR E THE ASSESSING OFFICER THE CLAIM OF THE ASSESSEE WAS THAT THE EXPENDITU RES INCURRED BY THE ASSESSEE WERE ON TEMPORARY STRUCTURE ON WHICH THE ASSE SSEE IS ENTITLED FOR 100% DEPRECIATION. EVEN IF FOR THE FI RST TIME A CLAIM HAS BEEN PUT FORWARD BY THE ASSESSEE BEFORE THE CIT (A) THA T THE NATURE OF THESE EXPENDITURE IS REVENUE, IT WOULD HAVE BEEN PROP ER BY THE LEARNED CIT (A) TO CONSIDER SUCH ASPECT AS HE IS NOT DEB ARRED FROM TAKING INTO CONSIDERATION SUCH ASPECT OF THE MATTER WH ICH GOES TO THE ROOT OF THE MATTER PARTICULARLY WHEN ALL THE DETAIL S HAVE BEEN FILED BEFORE HIM. HOWEVER, WE FIND THAT THESE EXPENDITURE S HAVE BEEN SHOWN TO BE INCURRED IN THE MONTH OF MAY TO JULY, 20 06 WHEREAS THE RENT OF THE PREMISES HAD STARTED ONLY W.E.F. 1 ST DECEMBER, 2006. THOUGH IT IS THE CLAIM OF THE ASSESSEE THAT DUE TO PENDI NG OF CONSTRUCTION THE LANDLORD OF THE PREMISES GAVE CONCESSIO N TO THE ASSESSEE TO START RENT ONLY FROM 1 ST DECEMBER, 2006, EVEN THEN, IT HAS TO BE EXAMINED WHETHER THE OWNER OF THE PREMISES HAD AUTHORIZED THE ASSESSEE TO CARRY OUT SUCH AMENDMENTS TO THE STRUCTURE DESP ITE THE FACT THAT NO RENT WAS PAYABLE FOR THAT PERIOD. IT W AS SUBMITTED BY THE LEARNED AR THAT THE ASSESSEE IS A FIRM OF CHARTERED ACCO UNTANTS AND THESE EXPENDITURES INCURRED BY THE ASSESSEE IN RESPECT OF ITS NEW OFFICE GOING TO BE OPENED IN GURGAON. THUS, THE ASSESSE E WAS ALREADY IN THE PROFESSION OF CHARTERED ACCOUNTANT AND THE EXP ENDITURES HAVE BEEN INCURRED IN THE RUNNING COURSE OF THE PROFESSION. THE COPY OF LEASE AGREEMENT HAS NOT BEEN FILED. THERE IS NO MATER IAL ON RECORD TO SUGGEST THAT THERE WAS UNDERSTANDING BETWEEN THE LANDLO RD AND THE ASSESSEE TO MAKE MODIFICATIONS IN THE EXISTING STRUCTURE W ITHOUT ANY LIABILITY TO PAY RENT FOR THAT PERIOD. HOWEVER, KE EPING IN VIEW THE FACT THAT THE ASSESSING OFFICER HIMSELF HAS ALLOWED 50% OF DEP RECIATION ON THESE STRUCTURES AND ALSO KEEPING IN VIEW INTEREST OF JU STICE WE ARE OF THE OPINION THAT THIS ISSUE HAS NOT BEEN PROPERLY APPRE CIATED EITHER BY ITA NO.3065/DEL/2010 6 THE ASSESSING OFFICER OR BY THE CIT (A). THEREFORE, WE CONSIDER IT JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING O FFICER FOR DENOVO CONSIDERATION. THE ASSESSEE WILL BE AT LIBERTY T O ADDUCE ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITUR E INCURRED BY THE ASSESSEE ON THE LEASED PREMISES WERE ALLOWABLE. AFTER GIV ING SUCH OPPORTUNITY TO THE ASSESSEE, THE ASSESSING OFFICER WILL RE- ADJUDICATE THIS ISSUE AS PER PROVISIONS OF LAW. WE DIRECT ACCORDING LY. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL F ILED BY THE ASSESSEE IS TREATED TO BE ALLOWED IN THE MANNER AFORESAID . THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.20 11. SD/- SD/- [A.N. PAHUJA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 14.10.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES