M/s. LG Chemical India (P) Ltd., Gurgaon V. ACIT, New Delhi

ITA 331/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82173 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATHUI RAJ MEENA
• Keywords: Earning of tax free income; Question of law; Wholly owned subsidiary; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1); 32; 12

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 331 /DEL/ 2013 (ASSESSMENT YEAR: 2009 - 10 ) LG CHEMICAL INDIA (P) LTD., 3 RD FLOOR, TOWER 10 - B, DLF CYBER CITY, PHASE - II GURGAON PAN:AAACL1995J VS. ACIT CIRCLE - 4(1), ROOM NO.407, C.R. BUILDING, IP ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 181 /DEL/ 2013 (ASSESSMENT YEAR: 2009 - 10 ) DCIT CIRCLE - 4(1), ROOM NO.407, C.R. BUILDING, IP ESTATE, NEW DELHI VS. LG CHEMICAL INDIA (P) LTD., 3 RD FLOOR, TOWER 10 - B, DLF CYBER CITY, PHASE - II GURGAON PAN:AAACL1995J (APPELLANT) (RESPONDENT) APPELLANT BY : SUMANT CHADHA, CA RESPONDENT BY : PRATHUI RAJ MEENA, SR. DR. O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THESE ARE CROSS APPEALS PREFERRED BY THE ASSESSEE COMPANY AND THE REVENUE AGAINST THE ORDER OF THE LD CIT(A), VIII, NEW DELHI DATED 30.10.2012. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS FOLLOWS: - 1. THE CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.63,16,000/ - BEING THE DISALLOWANCE U/S 14A R.W. RULE 8D. 2. THE CIT(A) HAS ERRED IN DISALLOWING THE EXPENDITURE INCURRED ON A.C. DUCTING AMOUNTING TO RS.5,50,000/ - TREATING IT TO BE CAPITAL EXPENDITURE. 3. THE GROUND S RAISED BY THE REVENUE ARE AS FOLLOWS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAD ERRED IN DELETING THE ADDITIONS OF RS.28,82,600/ - TOWARDS RENOVATION OF LEASED HOLD PREMISES ON ACCOUNT OF CAPITAL EXPENDITURE. PAGE 2 OF 8 2. WHETHER ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE EXPLANATION 1 TO SECTION 32 OF THE INCOME - TAX ACT WHICH CLEARLY PROVES THAT THE PURPOSE OF SECTION 32 EVEN IF THE ASSESSEE IS NOT THE OWNER OF THE BUILDING THEN ALSO FOR THE PURPOSE OF ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE IN THE BUILDING, HE WILL BE RELATED AS THE OWNER OF THE BUILDING. 4. APROPOS GROUND NO.1 RELATES TO DISALLOWANCE OF RS.63,16,000/ - U/S 14A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (HEREIN AFTER THE RULES). 5. THE AO NOTED THAT ASSESSEE WAS HOLDING INVESTMENTS OF RS.126.33 CRORES AND THEREFORE HELD THAT INTENTION OF INSERTING RULE 8D IS TO ALLOW THE AO TO ESTIMATE EXPENSES IN SI TUATIONS WHERE NO EXPENSE CAN BE DIRECTLY ATTRIBUTED TO INVESTMENTS WHICH MAY LEAD TO TAX FREE INCOME. BEFORE THE LD CIT(A), THE ASSESSEE CONTENDED THAT THE INVESTMENTS WERE MADE IN ITS WHOLLY OWNED SUBSIDIARY COMPANY M/S. L.G. POLYMERS INDIA PVT. LTD, WHI CH DID NOT EARN AN Y EXEMPT INCOME. IT WAS SUBMITT ED THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. THE LD CIT(A), HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO, OBSERVING AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE FINDINGS OF THE AD AND THE FACTS ON RECORD. A COMPANY CANNOT EARN DIVIDEND WITHOUT ITS EXISTENCE AND MANAGEMENT. INVESTMENT DECISIONS ARE GENERALLY COMPLICATED REQUIRING DAILY ANALYSIS OF MARKET TREND S, RESEARCH AND ANALYSIS. DECISIONS RELATE TO ACQUISITION HOLDING PERIOD AND REDEMPTION OF INVESTMENT AT THE OPPORTUNE TIME. THESE DECISIONS ARE GENERALLY TAKEN IN THE MEETINGS OF BOARD OF DIRECTORS, FOR WHICH ADMINISTRATIVE EXPENSES ARE INCURRED. THE HON 'BLE BOMBAY HIGH COUR T IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81 HAS HELD THAT RULE 8D IS APPLICABLE FROM AY 2008 - 09. RULE 8D CONSIDERS THREE CIRCUMSTANCES UNDER WHICH DISALLOWANCE IS REQUIRED TO BE MADE WHICH ARE AS UNDER: - (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME; (II) SECONDLY, PROPORTIONATE DISALLOWANCE OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AND; (III) THIRDLY, AN AMOUNT EQUAL TO ON E - HALF PERCENT OF THE AVERAGE OF THE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. PAGE 3 OF 8 DISALLOWANCE HAS BEEN MADE BY THE AO IN TERMS OF CLAUSE (III) ON ACCOUNT OF INDIRECT EXPENSES. THE CONTENTION OF THE APPELLANT THAT NO DISALLOWANCE CAN BE MADE SINCE NO EXEMPT INCOME HAS BEEN EARNED DOES NOT HOLD GOOD IN VIEW OF THE DECISION OF THE HON'BLE SPECIAL BENCH OF THE ITAT DELHI IN THE CASE OF M/S CHEMINVEST LTD IN ITA NO. 87/DEL/2008 WHICH HAS CLEARLY HELD THAT DISALLOWANCE U/S 14A HAS TO BE MADE EVEN IF NO EXEMPT INCOME HAS BEEN EARNED BY THE APPELLANT. IN THE INSTANT CASE, SINCE EXPENDITURE HAD BEEN INCURRED BY THE APPELLANT FOR EARNING OF EXEMPT INCOME THEREFORE, THE DISALLOWANCE MADE BY THE AO UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D IS AS PER LAW. THIS GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY THE AFORESAID ORDER OF THE LD CIT(A), THE ASSESSEE IS BEFORE US. 7. THE LD AR RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA LTD AND SUBMITTED THAT SINCE THERE IS NO EXEMPT INCOME, DISALLOWANCE BY APPLYING RULE 8D DOES NOT ARISE. HE ALSO REFERRED TO THE ITA T MUMBAI BENCH IN THE CASE OF J.M. FINANCIAL LTD, (2014 - TIOL - 202 - ITAT - MUM) WHICH HAS FOLLOWED THE JUDGEMENT OF DELHI HIGH COURT IN ORIENTAL STRUCTURE DATED 15.01.2013 (2013 - TIOL - 97 - H.C. DELHI - IT) WHEREIN IT WAS HELD THAT IN RESPECT OF INVESTMENT MADE IN SUBSIDIARY COMPANIES, ON ACCOUNT OF COMMERCIAL EXPEDIENCY NO EXPENSES CAN BE ATTRIBUTABLE FOR DISALLOWANCE U/S 14A READ WITH RULE 8D. HE ALSO REFERRED TO THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF INTERNATIONAL TRAVEL HOUSE (20 14 - TIOL - 402 - ITAT DEL) . LD DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IN THE CASE OF CIT VS. HOL CIM INDIA LTD THE HONBLE DELHI HIGH COURT ITA NO.486/2014 & ITA NO.299/2014 H AS HELD AS FOLLOWS: - 14. ON THE ISSUE WHETHER THE RESPONDENT - ASSESSEE COULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCOME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOWANCE OF EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGAINST THE APPELLANT - REVENUE. NO CONTRARY DECISION OF A HIGH COURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD VS. M/S. LAKHANI MARKETING INCL., ITA NO. 970/2008, DECIDED ON 02.04.2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT VS. HERO CYCLES LIMITED, [2010] 323 ITR 518 AND CIT VS. WINSOME PAGE 4 OF 8 TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX - I VS. CORRTECH ENERGY (P) LTD. [2014] 223 TAXMANN 130 (GUJ). THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPELLA NO.88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, VS. M/S. SHIVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN THE SAID DECISION IT HAS BEEN HELD: 'AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UND ER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14APROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEEN AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISALLOWAN CE OF RS.2,03,752/ - MADE BY THE ASSESSING OFFICER WAS IN ORDER' . 15. INCOME EXEMPT UNDER SECTION 10 IN A PARTICULAR ASSESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LONG TERM CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY TRANSACTION TAX HAS BEEN PAID, BUT A PRIVATE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITAL GAINS TAX. IT IS AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING RIGHT TO M ANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBABILITY. DIVIDEND MAY OR MAY NOT BE DECLARED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNO T INSIST ON PAYMENT OF DIVIDEND. WHEN DECLARED, IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX. 9. THE FACTS OF THE INSTANT CASE ARE IN PARI - MATERIA WITH THE FACTS OF THE AFORESAID CASE, IN AS MUCH AS, NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE FROM THE INVESTMENT MADE IN THE SUBSIDIARY. THEREFORE RESPECTFULLY FOLLOWING THE BINDING PRECEDENT WE HOLD THAT THE LD CIT(A) ERRED IN CO NFIRMING THE ORDER OF THE AO. SO WE DIRECT THE DELETION OF RS.63,16,000/ - ADDED U/S 14A READ RULE 8D. PAGE 5 OF 8 10. GROUND NO.2 OF THE ASSESSEES APPEAL IS REGARDING DISALLOWANCE OF EXPENDITURE INCURRED ON AIR CONDITION DUCTING AND GROUND NO.1 AND 2 OF THE REVENUE S APPEAL IS REGARDING DELETION OF ADDITION OF RS.28,82,000/ - ON ACCOUNT OF RENOVATION OF LEASE HOLD PREMISES. 11. DURING THE YEAR THE ASSESSEE INCURRED EXPENDITURE OF RS.44,18,785/ - ON ACCOUNT OF INTERIOR WORK, CIVIL WORK, PARTITION, CEILINGS, FLOORING, L IGHT FITTING, TELEPHONE LINE SETTING, PAINTING, DUCTING ETC. THE AO FURTHER OBSERVED THAT THE DETAILS SUBMITTED BY THE APPELLANT REVEALED THAT THE EXPENDITURE WAS INCURRED AS ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE F OR ENDURING BENEFIT. IN VIEW OF THE ABOVE FINDINGS , HE THEREFORE DISALLOWED AN EXPENDITURE OF RS.34,32,600/ - OUT OF EXPENSES CLAIMED BY THE APPELLANT AS BEING CAPITAL IN NATURE. 12. ON APPEAL, THE LD CIT(A) HELD THAT THE PERUSAL OF THE DETAILS OF EXPENSES FILED BY THE APPELLA NT SHOW THAT THE EXPENSES HAVE BEEN INCURRED ON RENOVATION AND REPAIRS ON LEASED PREMISES. HE HELD THAT THESE EXPENSES ARE EXPENSES WHICH HAVE BEEN INCURRED DURING THE REGULAR COURSE OF BUSINESS . NO EXPENDITURE OF CAPITAL NATURE IS OBSERVED IN THE EXPENSES . HE CONCLUDED THAT THE AO HAS NOT BROUGHT ANY FACTS ON RECORD TO SHOW THAT THE APPELLANT WAS DERIVING ANY BENEFITS OF ENDURING NATURE BY INCURRING THESE EXPENSES. 13. IN THE LIGHT OF TH E ABOVE, HE CONCLUDED AS UNDER IN THE INSTANT CASE, IT IS OBSERVED THAT THE APPELLANT HAD INCURRED EXPENDITURE ON WALLED PARTITIONS, CEILINGS, FLOORING WORKS, LIGHT FITTINGS, TELEPHONE LINE SETTING, FIRE FIGHTING WORKS, GLASS, AHU DUCTING AND CIVIL WORKS. THE HONBLE HIGH COURT IN THE CASE OF M/S. EXPORT FINANCE LTD. (20 6 (IT4) GJX - 0341 - DEL) HAS HELD THAT EXPENDITURE INCURRED ON PROVIDING WOODEN PARTITION, PAINTING, GLASS WORK ANOTHER REPAIRS TO THE LEASE HOLD PREMISES WAS REVENUE EXPENDITURE. IN THE CASE OF M/S. MODI SPINNING AND WEAVING MILLS LTD. 200 ITR 544 IT HAS BEE N HELD BY THE HONBLE DELHI HIGH COURT THAT REVENUE EXPENDITURE INCURRED ON LEASE HOLD IMPROVEMENT FOR THE PURPOSE OF FACILITATING THE BUSINESS WAS REVENUE IN NATURE. IN THE CASE OF CIT VS. M/S. CITI FINANCIAL CONSUMER FINANCE LTD. 2011 - TIOL - 309 - HC - DEL - IT IT HAS BEEN HELD THAT THE EXPENDITURE INCURRED ON LEASE HOLD IMPROVEMENTS WAS REVENUE EXPENDITURE. IN THE ABOVE CASE THE ASSESSEE HAD INCURRED EXPENDITURE ON LAYING OF CABLES, ELECTRIC CONNECTIONS, SANITARY FITTINGS, PARTITIONS, CIVIL WORK, BRICK WORK, FLO ORING, FALL CEILING ETC. WHICH WAS HELD TO BE IN THE NATURE OF REVENUE EXPENDITURE. IN THE CASE OF M/S. PAGE 6 OF 8 AMWAY INDIA ENTERPRISES VS. DCIT 2009 - TIOL - 17 - ITAT - DEL IT HAS BEEN HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS REPAIRING AND UPGRADATION OF THE PREMISES TAKEN ON LEASE SO AS TO MAKE IT MORE CONDUCIVE TO A BUSINESS ACTIVITIES WAS ALLOWABLE EXPENDITURE. HOWEVER, IN THE ABOVE CASE IT HAS BEEN HELD THAT THE EXPENDITURE INCURRED ON AC UNIT WAS CAPITAL IN NATURE. IN VIEW OF THE DECISIONS DISCUSSE D ABOVE AND ALSO IN VIEW OF THE FACT THAT THE VARIOUS EXPENSES RELATING TO CIVIL WORK, PARTITIONS, CEILING, FLOORING ETC. DO NOT RESULT IN ANY ENDURING BENEFITS TO THE APPELLANT THEREFORE THE DISALLOWANCE MADE BY THE AO IS DELETED EXCEPT THE EXPENDITURE IN CURRED ON AHU DUCTING OF RS.5,50,000/ - WHICH IS IN THE NATURE OF CAPITAL EXPENDITURE. 14. THE LD AR, RELIED UPON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AM W AY INDIA ENTERPRISES 346 ITR 341 AND CIT VS. HI PENS 306 ITR 182. HE CONTENDED THAT ALL THE EXPENDITURE BY THE ASSESSEE WAS REVENUE IN NATURE AND THERE WAS NO CREATION OF NEW ASSET. IT WAS SUBMITTED THAT EXPENSES WAS INCURRED TO USE THE OFFICE PREMISES FOR BETTER FUNCTIONING. THE LD DR SUBMITTED THAT THE EXPENDITURE INCURRED IN THE INSTANT CASE IS CAPITAL EXPENDITURE AND THEREFORE CORRECTLY DISALLOWED BY THE AO, BECAUSE THE EXPENDITURE INCURRED BY THE ASSESSEE, RESULTED IN ENDURING BENEFITS TO THE ASSESSEE SO IT IS A CAPITAL EXPENDITURE. 15. HAVING CONSIDERED FACTUAL MATRIX, WE FIND THAT THE BR EAK - UP OF THE EXPENDITURE INCURRED IS AS UNDER: - S. L. NO. DESCRIPTION QTY. RATE AMOUNT 1 REIMBURSEMENT FOR OFFICE INTERIOR WORK 1 CIVIL WORK 1 350,000 350,000 WALL PARTITION 1 445,000 445,000 CEILINGS 1 519,000 519,000 FLOORING WORK 1 650,000 650,000 ELECC/ LIGHTING FITTING 1 850,000 850,000 NETWORKING/ TEL LINE SETTING 1 210,000 210,000 PAINTING WORK (PLASTIC/ DUCO 1 480,000 480,000 AHU DUCTING 1 550,000 5 50,000 FIRE FIGHTING WORKS 1 240,000 240,000 SINAGE BOARD/ SHEET/ETG/GLASS 1 124,785 124,785 TOTAL 44,18,785/ - 16. OUT OF ABOVE AN AMOUNT OF RS.4,80,000/ - IN RESPECT OF PAINTING AND RS.1,24,785/ - IN RESPECT OF SIGN BOARD HAS BEEN ALLOWED BY AO AS REVENUE EXPENDITURE. THE BALANCE RS.38,14,000/ - WAS HELD TO BE CAPITAL EXPENDITURE, WHICH HAS BEEN ALLOWED BY THE LD PAGE 7 OF 8 CIT(A), EXCEPT A SUM OF RS.5,50,000/ - ON DUCTING OF AIR CONDITION. THE NATURE OF EXPENDITURE REVEALS THAT THEY WERE IN RESPECT OF INTERIOR WORK OF AN OFFICE PREMISES. THE SAID OFFICE PREMISE OF THE ASSESSEE IS A LEASED PREMISE . THE LESSOR HAS PROVIDED THE AIR - CONDITIONING . ONLY THE DUCTING WAS CARRIED OUT BY THE ASSESSEE. SO IN THE SAID FACTUAL ASPECT, WE ARE OF THE VIEW THAT NO ASSET WAS CREATED SO AS TO HOLD THE EXPENDITURE TO BE CAPITAL EXPENDITURE. THE HONBLE DELHI HIGH COURT IN THE CASE OF AMWAY 346 ITR 341 AFTER CONSIDERING EXPLANATION 1 TO SECTION 32 CONCLUDED AS UNDE R: - 6. THE FIRST ISSUE, IN OUR OPINION, HAS BEEN CONSIDERED AND DECIDED AGAINST THE REVENUE IN A JUDGMENT DELIVERED BY US PASSED IN ITA NOS.1110/2006 AND 111/2006 TITLED CIT VS. M/S. ASAHI INDIA SAFETY GLASS LTD. 6.1 AS REGARDS THE SECOND ISSUE, WE FIND T HAT IN CIT VS. HI LINE PENS PVT LTD. (2008) 306 ITR 0182, THE COURT WAS CALLED UPON TO INTERPRET THE EXPRESSION REPAIRS OF THE PREMISES. THE COURT HAD THUS TO DETERMINE AS TO WHETHER THE EXPENSES INCURRED ON REPAIRS WERE IN THE NATURE OF REVENUE EXPENDIT URE ITAS 1344/2009 AND 1363/2009 PAGE 3 OF 5 OR, HAD BROUGHT INTO EXISTENCE, AN ASSET, OF ENDURING NATURE. THE COURT CONCLUDED THAT THE EXPENDITURE WAS IN THE NATURE OF REVENUE EXPENDITURE. A DISTINCTION WAS ALSO MADE BETWEEN THE TERMS REPAIRSAND CURRE NT REPAIRS. THE COURT HELD THAT THE TERM REPAIRS WAS WIDER THAN THE EXPRESSION CURRENT REPAIRS AS USED IN SECTION 30(A)(II). 6.2 IN CIT VS. ESCORTS FINANCE LTD (2006) 205 CTR (DELHI) 574, WHICH IS AN EARLIER JUDGEMENT OF THIS COURT, THE COURT WAS CAL LED UPON TO DECIDE AS TO WHETHER THE EXPENSES INCURRED ON IMPROVEMENT OF LEASEHOLD PREMISES, WERE IN THE NATURE OF REVENUE EXPENDITURE, AS CONTENDED BY THE ASSESSEE . THE COURT SUSTAINED THE CONTENTION OF THE ASSESSEE AND ALLOWED THE DEDUCTION CLAIMED UNDER SECTION 37(1) OF THE IT ACT. THE COURT NOTICED THE DICTA OF THE JUDGEMENTS O THE BOMABY HIGH COURT IN THE CASE OF CIT VS.DAVID MILLS LTD. (INCOME TAX REFERENCE NO.17/1950 DECIDED BY CHAGLA C.J. AND TENDOLKAR, J ON 10.10.1950) AND MENOR MILLS LTD. VS/ CIT (INCOME TAX REFERENCE NO.36/1950 DECIDED BY THE SAME BENCH, ON 30.03.1951) WHEREIN, IT HAS BEEN OBSERVED THAT IN ASCERTAINING WHETHER AN EXPENDITURE INCURRED IS MADE ON REVENUE ACCOUNT OR OTHERWISE ONE WOULD HAVE TO BEAR IN MIND THE NATURE OF THE EXPENDITU RE, THAT IS, WAS IT INCURRED FOR MAINTENANCE OR PRESERVATION OF AN ASSET OR WAS IT EXPENDED OTHERWISE. IT THUS CONCLUDED THA6 IF THE EXPENDITURE INCURRED IS MADE ON REVENUE ACCOUNT OR OTHERWISE ONE WOULD HAVE TO BEAR IN MIND THE NATURE OF THE EXPENDITURE, THAT IS, WAS IT INCURRED FOR MAINTENANCE OR PRESERVATION OF AN ASSET OR WAS IT EXPENDED OTHERWISE. IT THUS CONCLUDED THAT IF THE EXPENDITURE WAS OF THE FORMER KIND IT WOULD BE IN THE NATURE OF A REVENUE EXPENDITURE. IN THE VERY SAME JUDGEMENT, THE OBSERVATIONS MADE IN GULAMHUSSEIN EBRAHIM MATCHESWALLA VS. CIT ITAS 1344/2009 AND 1363/2009 PAGE 4 OF 5 (1974) 97 ITR 24 (BOM) WERE ALSO NOTICED WHEREBY, THE COURT REJECTED THE SUBMISSION THAT IT IS THE AMOUNT SPENT ON REPA IRS WHICH WOULD DETERMINE THE NATURE OF THE EXPENDITURE. PAGE 8 OF 8 6.3 THEREFORE, HAVING REGARD TO THE PRINCIPLES LAID DOWN IN THE AFOREMENTIONED JUDGMENT AND THE NATURE OF THE EXPENSES IN ISSUE, WE ARE OF THE VIEW THAT THE REVENUES APPEAL, ON THIS ISSUE, AS WELL WOULD HAVE TO BE REJECTED. 17. IN THE LIGHT OF THE RATIO LAID BY THE JURISDICTIONAL HIGH COURT, WE CONCLUDE THAT EXPENDITURE INCURRED AND CLAIM ED WAS FOR CARRYING OUT INTERIOR OF A LEASED PREMISE ON THE FACTS OF THE CASE IS REVENUE EXPENDITURE. AS SUC H THE GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THE GROUND RAISED BY THE REVENUE IS REJECTED. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 5 . 1 2 . 2014. - S D / - - S D / - ( S. V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 5 / 1 2 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI