JAVED AKHTAR, MUMBAI V. ACIT CIR 11(1), MUMBAI

ITA 39/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6586 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 01-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2011
• Court: TRIBUNAL
• Department Lawyers: JKTLP DH LS SHRI PITAMBAR DAS
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 1 VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI JH JH JH JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.39/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2006-07 JAVED AKHTAR 702, SAGAR SAMRAT, GREEN FIELDS, JUHU, MUMBAI 49 VS. ACIT CICLE 11(1) 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI. PAN: - AABPS0224H APPELLANT RESPONDENT VK;DJ VIHY LA[;K /ITA NO.171/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2006-07 ACIT CICLE 11(1) ROOM NO. 439, AAAYAKAR BHAVAN, M.K. MARG, MUMBAI - 20 VS. JAVED AKHTAR JANNISSAR SAMRAT, GREEN FIELD, JUHU MUMBAI 49 PAN: - AAACI 1681G APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI ADITYA R. AJGAONKAR REVENUE BY/ JKTLP DH VKSJ LS SHRI PITAMBAR DAS ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 20.10.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. DATE OF HEARING 01.05.2014 DATE OF PRONOUNCEMENT 07.05.2014 ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 2 2. THE ASSESSEE IS A LYRICIST AND A WELL KNOWN FIL M PERSONALITY. THE ASSESSEE STATED THAT HE OPERATES HIS PROFESSION FROM THE PRE MISES 6 TH AND 7 TH FLOOR, JUHU SAGAR SAMRAT, CO.OP HOUSING SOCIETY LIMITED. THE BU ILDING WAS AN OLD SEVEN STORIED BUILDING HAVING ONE LIFT. SINCE THE LIFT WA S OLD, IT USED TO GET OUT OF ORDER VERY FREQUENTLY, CAUSING SUBSTANTIAL HARSHIP TO THE PERSONS VISITING TO THE ASSESSEE FOR PROFESSIONAL PURPOSES. THE SOCIETY WAS RELUCTANT TO SPEND MOEY TO REPLACE GTHE LIFT. THE ASSESSEE SPENT A SUM OF RS. 17,32,436/- FOR INSTALLATION OF A NEW LIFT IN THE BUILDING. THE SAID AMOUNT WAS CAL IMED BY THE ASSESSEE AS SOCIETY DEVELOPMENT CHARGES IN THE PROFIT & LOSS AC COUNT. THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CLAIM OF THE A SSESSEE OF RS. 17,32,436/- SHOULD NOT BE DISALLOWED. THE ASSESSEE SUBMITTED TH AT THE AMOUNT REPRESENTS THE REPLACEMENT OF THE OLD LIFT BELONGING TO THE S OCIETY AND CIVIL WORK RELEVANT THERETO. THE ASSESSEE OWNS TWO PREMISES NAMELY FL AT NO. 601 AND 701 IN THE SAID SOCIETY. DUE THE FREQUENT BREAK DOWN OF LIFT I N THE BUILDING THE ASSESSEEE AS WELL AS PEOPLE VISITING HIM WERE FACING SUBSTANT IAL HARDSHIP. THIS WAS CAUSING DAMAGE TO HIS PROFESSIONA AS WELL. TO OVERC OME THIS DIFFICULTY THE ASSESSEE OFFERED TO REPLACE THE LIFT OF THE SOCIETY WITH A NEW LIFT. THE SOCIETY ALLOWED HIM TO REPLACE THE LIFT WITH THE CONDITION THAT THE NEW LIFT WOULD BELONG TO THE SOCIETY AND WILL BE ALLOWED FOR USE TO ALL T HE MEMBERS. THUS THE ASSESSEE CONTENDED THAT IN THE INTEREST OF PROFESSION, THE A SSESSEE AGREED TO THIS ARRANGEMENT AND GOT THE NEW LIFT INSTALLED. IT WAS SUBMITTED THAT THE EXPENDITURE WAS FULLY INCURRED FOR SMOOTH FUNCTIONI NG OF ASSESSEES PROFESSION, THEREFORE, IT IS AN ALLOWABLE EXPENDITURE. THE AO D ID NOT ACCEPT THE EXPLANATION AND CONTENTION OF THE ASSESSEE AND HELD THAT THE EL EVATORS INSTALLED WAS AT THE COOPERATIVE HOUSING SOCIETY AND AN ESSENTIAL PART O F THE BUILDING TO BE TREATED A CAPITAL ASSET, AND, THERFORE, IT CANNOT BE COSIDERE D AS REVENUE EXPENDITURE. THE AO FURTHER GOES TO HELD THAT IT CANNOT BE FOUND TO BE TREATED AS CAPITAL EXPENDITURE BECAUSE THE ASSESSEE WAS NOT THE FINAL OWNER OF THE ASSET ON WHICH THE DEPRECIATION IS CLAIMED. THEREFORE, THE EXPENDI TURE DOES NOT QUALIFY TO BE ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 3 DEBITED TO THE P&L ACCOUNT AS IT CANNOT BE MERELY TREATED AS A REVENUE EXPENDITURE. THE ASSESSEE SHOULD HAVE SIMPLY DEBITE D ITS PERSONAL CAPITAL ACCOUNT BY THE SAID SUM. THE AO, THEREFORE, DISALLO WED THE ENTIRE AMOUNT . 3. ON APPEAL, CIT(A) WAS OF THE VIEW THAT SINCE THE ASSESSEE IS HAVING OFFFICE AS WELL AS RESIDENCE IN THE SAID BUILDING, THEREFOR E, IT CANNOT BE HELD THAT THE PURPOSE OF PURCHASE OF ASSET FOR BUSINESS/PROFESSIO NAL PURPOSE ONLY. IN FACT, THE INSTALLATION AND USE OF THE LIFT WAS FOR ASSESSEES AND HIS FAMILYS PERSONAL PURPOSE AS WELL. ACCORDINGLY, THE CIT(A) WAS OF THE VIEW THAT THE LIFT INSTALLED IS DEFINTELY NOT A REVENUE EXPENDITURE BUT IS A CAPITA L ASSET. HOWEVER, THERE ARE INSTANCES WHEN EXPENSES HAVE BEEN CAPITALISED BY VA RIOUS ASSESSEES DUE TO DIFFERENT REASONS. CIT(A) HAS HELD THAT THE INSTALL ATION OF NEW LIFT WAS BOTH FOR THE PURPOSE OF ASSESSEE AND HIS FAMILYS PERSONAL U SE AND USE BY HIS PROFESSIONAL VISITORS. ACCORDINGLY 50% OF THE SOCIE TY DEVELOPMENT CHARGES ARE HELD NOT ALLOWABLE TO THE ASSESSEE EITHER AS REVENU E EXPENSE OR CAPITALIZED COST BEING ON PERSONAL AND NON PROFESSIONAL ACCOUNT. HEN CE CIT(A) ALLOWED 50% OF EXPENDITURE CLAIMED BY THE ASSESSEE TO BE CAPITALIZ ED AND DEPRECIATION AT PRESCRIBED RATE. BOTH ASSESSEE AND REVENUE HAVE CHA LLENGED THE ORDER OF CIT(A). 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL:- (I) LD. CIT(A) HAS ERRED CONFIRMING THE DISALLOWANCE OF THE EXPENDITURE AMOUNTING TO RS. 17,32,436/- CLAIMED BY YOUR APPELL ANT AS SOCIETY DEVELOPMENT CHARGES IN HIS INCOME AND EXPENDITURE A CCOUNT. (II) THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE EXPEND ITURE MADE BY YOUR APPELLANT TO REPLACE THE OLD LIFT OF THE BUILD ING OF THE SOCIETY IN WHICH THE OFFICE PREMISES OF YOUR APPELLANT WERE SI TUATED, AS REVENUE EXPENDITURE OF YOUR APPELLANT. (III) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE GROUND N O. 1& 2 ABOVE, THE LEARNED CIT APPEALS HAS ERRED IN GRANTING DEPRECIAT ION ONLY ON 50% OF THE COST OF THE LIFT AMOUNTING TO RS. 17,32,436/ - 5. REVENUE HAS RAISED FOLLOWING GROUNDS AS UNDER:- ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 4 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI ERRED IN TREATING 50% OF SOCIETY DEVE LOPMENT CHARGES INCURRED ON THE PURCHASE OF A LIFT AS CAPITAL EXPEN DITURE, WHEN THE SAID ASSETS BELONGS TO THE SOCIETY AND NOT TO THE A SSESSEE. (II) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D. 6. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THOUGH THE ASSESSEEE DOES NOT OWN THE LIFT IN QUESTION, HOWEVE R THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR SMOOTH PROFESSIONAL WO RK OF THE ASSESSEE AS THE OLD LIFT WAS NOT WORKING PROPERLY WHICH CAUSED A SUBST ANTIAL HARDSHIP AND DAMAGE TO THE ASSESSEE ON ITS PROFESSIONAL FRONT. THE ASSE SSEEE PURCHASED THE OFFICE IN THE SOCIETY ONLY THREE YEARS BACK AND THE PROPER FU NCTIONING OF THE LIFT IN THE BUILDING WAS THE REQUIREMENT OF THE ASSESSEES PROF ESSION BECAUCE OF A NUMBER OF PERSONS USED TO VISIT THE ASSESEE IN CONNECTION WITH HIS PROFESSION. THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF PR OFESSION OF THE ASSESSEE AND, THEREFORE, IT IS AN ALLOWABLE CLAIM. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF CIT VS. ASSOCIATED CEMENT COMPANIES LTD. (38 TAXMAN 110A)(SC) AND SUBM ITTED THAT THE HONBLE SUPREME COURT HAS OBSERVED THAT THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING AN ADVANTAGE OF ENDURING BEN EFIT, MAY, NONETHELESS, BE ON REVENUE ACCOUNT AND THE COST OF ENDURING BENEFIT MAY BREAK DOWN. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR E NABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFECTIVELY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHE D, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDU RE FOR AN INDEFINITE FUTURE. HE HAS FURTHER CONTENDED THAT AS A RESULT O F EXPENDITURE THE ASSESSEE ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 5 HAS NOT ACQUIRED ANY CAPITAL ASSET BECAUSE THE LIFT DOES NOT FORM PART OF THE CAPITAL STRUCTURE OR ASSET OF THE ASSESSEE. 7. THE LD. AR HAS THEN RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF L.H. SUGAR FACTORY & OIL MILLS (P.) LT D. VS. CIT (4 TAXMAN 5) (SC) AND SUBMITTED THAT IN THE SAID CASE THE ASSESSEE WA S A SUGAR MANUFACTURING COMPANY AND HAS CONTRIBUTED TO THE CONSTRUCTION OF ROAD AROUND THE FACTORY AND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE EXPENDITURE IS IN THE NATURE OF CAPITAL ASSET. THE MATTER WAS TAKEN TO THE SUPREME COURT AND IT WA S HELD THAT THE ROAD WHICH WAS CONSTRUCTED AROUND THE FACTORY BELONGED T O THE U.P. GOVERNMENT AND NOT TO THE ASSESSEE. HOWEVER, UNDOUBTEDLY THE ROADS WERE ADVANTAGEOUS TO THE BUSINESS OF THE ASSESSEE AS THEY FACILITATED THE TR ANSPORT OF SUGARCANE TO THE FACTORY AND THE OUTFLOW OF MANUFACTURED SUGAR FROM THE FACTORY TO THE MARKET CENTERS. THE HONBLE SUPREME COURT HAS OBSERVED THA T THE CONSTRUCTION OF THESE ROADS FACILITATED BUSINESS OPERATIONS OF THE ASSESS EE AND ENABLED THE MANAGEMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS T O BE CARRIED ON MORE EFFICIENTLY AND PROFITABLY. THEREFORE, THE AMOUNT OF RS. 50,000 WAS CONTRIBUTED BY THE ASSESSEE FOR THE PURPOSE OF FACILITATING THE CONDUCT OF THE BUSINESS OF THE ASSESSEE AND MAKING IT MORE EFFICIENT AND PROFITABL E AND IT WAS CLEARLY AN EXPENDITURE ON REVENUE ACCOUNT. THE LD. AR HAS SUBM ITTED THAT THE HONBLE SUPREME COURT HAS ANALYSED THE OBJECT AND PURPOSE O F THE EXPENDITURE AND ITS TRUE NATURE AND HELD THAT THE EXPENDITURE WAS OF REVENUE NATURE. SINCE THE EXPENDITURE INCURRED BY THE ASSESSEE IS FOR THE BEN EFIT OF ITS PROFESSION, THEREFORE, THE SAME IS ALLOWABLE AS REVENUE EXPENDI TURE. THE LD. AR HAS ALSO REFERRED THE SPECIAL BENCH DECISION OF THIS TRIBUNA L IN THE CASE OF AMWAY INDIA ENTERPRISES VS. DCIT (111 ITD 112) (DELHI)(SB) AND SUBMITTED THAT THE SPECIAL BENCH HAS OBSERVED THAT THE CARDINAL RULE IS THAT T HE QUESTION WHETHER A CERTAIN EXPENDITURE IS ON CAPITAL OR REVENUE ACCOUNT, SHOUL D BE DECIDED FROM THE PRACTICAL AND BUSINESS VIEW-POINT AND IN ACCORDANCE WITH SOUND ACCOUNTANCY ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 6 PRINCIPLES AND THIS RULE IS OF SPECIAL SIGNIFICANCE IN DEALING WITH EXPENDITURE ON EXPANSION AND DEVELOPMENT OF BUSINESS. IF THE EXPENDITURE IS RESULTING MERELY IN ACQUISITION OR CREATION OF ASSET WITHOUT THE ASSESS EE BECOMING OWNER THEREOF, IT CANNOT BE SAID THAT THE SAID EXPENDITURE IS A CAPIT AL EXPENDITURE. HE HAS FURTHER CONTENDED THAT IN THE CASE WHERE THE EXPENSES RESUL TING IN THE ADVANTAGE OF AN ENDURING BENEFIT, MAY BE PROPERLY CHARGEABLE TO REV ENUE ACCOUNT IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEES TRADING OPERATIONS OR ENABLING HIM TO MANAGE AND CONDUCT HIS BUSINESS MOR E EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHE D. THUS THE TRUE TEST IS RESULTANT ADVANTAGE WHICH AN ASSESSEE DERIVES FROM AN EXPENDITURE. HAS TO BE SEEN IN A COMMERCIAL SENSE. WHEN THE ASSETS/ADVANTA GE IS PART OF PROFIT EARNING APPARATUS IT IS NOT CAPITAL EXPENDITURE OR AN ADVAN TAGE IN CAPITAL FIELD. THUS THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE EXPEN DITURE HAS BEEN INCURRED BY THE ASSESSEE FOR ADVANTAGE OF FACILITATING THE PROF ESSIONAL ACTIVITY OF THE ASSESSEE AND ENABLING THE ASSESSEE TO MANAGE AND CONDUCT HIS PROFESSION MORE PROFITABLY WITHOUT ANY CHANGE IN THE FIXED CAPITAL OF THE ASSE SSEE AND HENCE, IS ALLOWABLE AS REVENUE EXPENDITURE. 8. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE EXPENDITURE IN QUESTION IS NOT AT ALL A BUSINESS EXPENDITURE. FOR THE PURPOSE OF ALLOWING THE EXPENDITURE THE MANDATORY CONDITION IS THAT THE SAM E SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS INSTALLED THE LIFT IN THE BUILDING BELONGING TO THE SOCIETY AND, THEREFORE, THE QUESTION OF EXCLUSIVE PURPOSE OF BUSINESS OF THE AS SESSEE DOES NOT ARISE. FURTHER, WHEN THE ASSESSEE IS RESIDING IN THE SAME BUILDING ALONG WITH NUMBER OF OTHER RESIDENTS THEN THE EXPENDITURE IN QUESTION IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON OF THE ASSESSEE. THE LD. DR HAS SUBMITTED THAT THE DECISION RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. IN THE CASE OF CI T VS. ASSOCIATED CEMENT COMPANIES LTD. (SUPRA) THE ASSESSEE INCURRED THE EX PENDITURE FOR LAYING OF WATER ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 7 SUPPLY PIPELINE WITHIN ITS PREMISES AND ON THE LAND OUTSIDE THE PREMISES. THE MUNICIPALITY BECAME THE OWNER OF THE PIPELINE, INST ALLATION AND ACCESSORIES AND EXEMPT THE ASSESSEE FROM THE PAYMENT OF MUNICIPAL T AX FOR 15 YEARS. THEREFORE, IN THE SAID CASE BY INCURRING THE SAID EXPENDITURE THE ASSESSEE GOT THE EXEMPTION OF PAYMENT OF MUNICIPAL TAX WHICH WAS OTH ERWISE ALLOWABLE DEDUCTION AND IN LIEU OF THE SAME ONE TIME EXPENDITURE INCURR ED BY THE ASSESSEE WAS ALLOWED BY THE HONBLE SUPREME COURT BEING REVENUE EXPENDITURE. THE LD. DR HAS POINTED THAT IN CASE OF L.H. SUGAR FACTORY & OI L MILLS (P.) LTD. VS. CIT (SUPRA), THE ASSESSEE CONTRIBUTED A SUM OF RS. 50,0 00/- TO A SCHEME OF GOVERNMENT UNDER WHICH THE ROADS WERE TO BE CONSTRU CTED AROUND THE FACTORY OF THE ASSESSEE. THEREFORE, THE EXPENDITURE ON ACCOUNT OF CONTRIBUTION TO THE GOVERNMENT SCHEME WAS MANDATORY IN THE SAID CASE. T HE ASSESSEE ITSELF DID NOT CONSTRUCT THE ROAD AS IT WAS CONSTRUCTED UNDER THE SCHEME OF THE GOVERNMENT. THEREFORE, THESE DECISIONS ARE NOT APPLICABLE IN TH E FACTS OF THE CASE OF THE ASSESSEE. AS REGARDS THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF AMWAY INDIA ENTERPRISES VS. DCIT (SUPRA), THERE WAS NOT DISPUTE ABOUT THE PURPOSE OF EXPENDITURE AND THE ONLY QUESTION WAS R EGARDING THE NATURE OF EXPENDITURE WHETHER REVENUE OR CAPITAL AND THAT TOO IN RESPECT OF EXPENDITURE INCURRED ON SOFTWARE. THE LD. DR HAS RELIED UPON TH E ORDER OF AO AND SUBMITTED THAT WHEN THE EXPENDITURE IS IN THE NATURE OF PERSO NAL EXPENDITURE AND NOT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS O F THE ASSESSEE THEN THE SAME CANNOT BE ALLOWED. THUS THE LD. DR HAS SUBMITTED TH AT THE ENTIRE EXPENDITURE HAS TO BE DISALLOWED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE BUILDING IN QUESTION IS CONSISTING O F 7 FLOORS AND 14 FLATS OUT OF WHICH THE ASSESSEE OWNS TWO FLATS. FROM ONE FLAT TH E ASSESSEE IS DOING HIS PROFESSIONAL WORK AND THE OTHER FLAT IS USED FOR RE SIDENTIAL PURPOSES. IT IS APPARENT FROM THE FACTS THAT THE ASSESSEE HAS INCU RRED THE EXPENSES FOR REPLACEMENT OF THE LIFT DUE TO COMPELLING CIRCUMSTA NCES AS THE ASSESSEE WAS ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 8 FACING INCONVENIENCE AND HARDSHIP IN HIS PROFESSION AL FRONT AS WELL AS RESIDENTIAL AND PRIVATE LIFE DUE TO FREQUENT BREAK DOWN OF THE OLD LIFT IN THE SAID BUILDING. THUS IT IS CLEAR THAT THE ADVANTAGE AND FACILITY O F THE NEW LIFT IS NOT RESTRICTED EXCLUSIVELY FOR THE PROFESSIONAL ACTIVITY OF THE AS SESSEE BUT IT ALSO ENJOYED BY ASSESSEE AS WELL AS FAMILY MEMBERS OF THE ASSESSEE OTHER THAN THE PROFESSIONAL PURPOSE. THOUGH THE LIFT IS ALSO BEING USED BY OTHE R RESIDENTS OF THE BUILDINGS, HOWEVER FOR THE PURPOSE OF CONSIDERING THE ALLOWABI LITY OF EXPENDITURE THE USE OF LIFT BY OTHER RESIDENTS IN THE BUILDING IS NOT SO MATERIAL OR RELEVANT. THE ASSESSEE HAS INCURRED THE EXPENDITURE KEEPING IN VI EW ITS PROFESSIONAL AND FAMILY REQUIREMENTS. FOR ALLOWING THE EXPENDITURE U /S 37 OF THE INCOME TAX ACT, THE MANDATORY CONDITION IS THAT THE EXPENDITURE HAS TO BE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON OF THE ASSESSEE HOWEVER IT SHOULD NOT BE ON THE CAPITAL FIELD. SO FAR AS THE N ATURE OF THE CAPITAL IN QUESTION IS CONCERNED SINCE THE ASSESSEE DOES NOT ACQUIRE AN Y ADVANTAGE IN THE CAPITAL ACCOUNT OR ANY NEW ASSET FOR ITS PROFESSIONAL PURPO SE AND THE LIFT IN QUESTION IS NOT AN APPARATUS OF GENERATING THE PROFESSIONAL INC OME, THEREFORE, WE ARE OF THE VIEW THAT IT CANNOT BE CONSIDERED AS AN EXPENDITURE OF CAPITAL NATURE AS IT DOES NOT CREATE ANY NEW ASSET BELONGING TO THE ASSESSEE. THE CIT(A) HAVING CONSIDERED THIS FACT THAT THE ASSESSEE IS HAVING RE SIDENCE AS WELL AS OFFICE IN THE SAME PREMISES AND THE LIFT IS INSTALLED FOR THE PU RPOSE AND INTEREST OF HIS PROFESSION AS WELL AS NON PROFESSIONAL AND FAMILY MEMBERS PERSONAL CONVENIENCE, THEREFORE, THE WHOLE EXPENDITURE IS N OT FOUND TO BE INCURRED EXCLUSIVE FOR THE PURPOSE OF PROFESSION OF THE ASSE SSEE. THE CONCLUDING PART OF CIT(A) ORDER IN PARA 2.5 AND 2.5.1 IS AS UNDER:- 2.5 FACTS AND MATERIAL ON RECORD ARE CONSIDERED. I T IS SEEN THAT APPELLANT HAS RESIDED IN THE SAID BUILDING FOR A NU MBER OF YEARS ON THE TOP FLOOR. THE PREMISES USED AS OFFICE HAVE BEEN BO UGHT IN THE YEAR 2001 AND 2003. IN THE SUBMISSION MADE BEFORE AO AS WELL, IT IS APPARENT THAT THE BREAKING DOWN OF THE OLD LIFT WAS CAUSING HARDSHIP TO APPELLANT AS WELL AS PEOPLE VISITING HIM. THOUGH STATED THAT THE LIFT INSTALLED IS FOR THE PURPOSE AND INTEREST OF HIS PR OFESSION ONLY, IT IS ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 9 SEEN THAT THE LIFT INSTALLED WOULD BENEFIT APPELLAN T HIMSELF AND HIS FAMILY MEMBERS IN THEIR PERSONAL CAPACITY AND OTHER MEMBERS OF THE SOCIETY AS WELL. IT THEREFORE, CANNOT BE HELD THAT THE PURPOSE OF PURCHASE OF THE ASSET WAS FOR BUSINESS/PROFESSIONAL PURPOSE ONLY. IN FACT, THE INSTALLATION AND USE OF THE LIFT WAS FOR APPELLANT'S AND HIS FAMILY'S PERSONAL PURPOSE AS WELL. THE SOCIETY'S LE TTER ALSO INDICATES THAT SUBSTANTIAL HARDSHIP WAS CAUSED TO APPELLANT A ND HIS VISITORS. 2.5.1 THE LIFT INSTALLED IS DEFINITELY NOT A REVENUE EXPE NDITURE BUT IS A CAPITAL ASSET. HOWEVER, THERE ARE INSTANCES WHEN EX PENSES HAVE BEEN CAPITALIZED BY VARIOUS ASSESSEE'S DUE TO DIFFERENT REASONS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE INSTALLATION OF NEW LIFT WAS BOTH FOR THE PURPOSE OF APPELLANT AND HIS FAMILY'S PERSONAL USE AND USE BY HIS PROFESSIONAL VISITORS. 50% OF THE SOCIETY DEVELOPMENT CHARGES ARE HELD NOT ALLOWABLE TO APPELLANT EITHER AS REVENUE EXPENSE NOR CAPITALIZED COST BEING ON PERSONAL AND NON PROF ESSIONAL ACCOUNT. THE REMAINING 50% OF THE EXPENDITURE CLAIMED BY APPELLANT AS SOCIETY DEVELOPMENT CHARGES ARE TO BE CAPITALIZED AND DEPRE CIATION ALLOWED AT PRESCRIBED RATE. AO IS DIRECTED TO RECALCULATE T HE SAME WHILE GIVING EFFECT TO THIS ORDER. 10 . WE DO AGREE WITH THE VIEW OF THE CIT(A) TO THE EXT ENT THAT 50% OF THE EXPENDITURE TO BE CONSIDERED FOR PROFESSIONAL PURPO SE. HOWEVER SINCE THE EXPENDITURE IN QUESTION DOES NOT CREATE A NEW ASSET OR BRING ANY ADVANTAGE IN THE CAPITAL ACCOUNT OF THE ASSESSEE, THEREFORE, IT CANNOT BE TREATED AS CAPITAL IN NATURE. AS WE HAVE ALREADY OBSERVED THAT THE EXPEND ITURE HAS BEEN INCURRED IN THE COMPELLING CIRCUMSTANCES TO REMOVE THE INCONVEN IENCE AND HARDSHIP FACED BY THE ASSESSEE IN ITS PROFESSIONAL WORK AS WELL AS NON PROFESSIONAL LIFE AND THE ADVANTAGE OF THE SAID EXPENDITURE IS TO FACILITATE THE ASSESSEES PROFESSIONAL ACTIVITY TO BE CARRIED OUT MORE EFFICIENTLY AND PRO FITABLY. THEREFORE, 50% OF THE TOTAL EXPENDITURE WHICH IS CONSIDERED TO BE FOR THE PROFESSIONAL PURPOSE IS ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY THE IMP UGNED ORDER OF CIT(A) IS MODIFIED TO THAT EXTENT. ITA NO.39/MUM/2011 ITA NO.171/MUM/2011 10 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN PART WHEREAS THAT BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 7 - 05-2014 SD/- SD/- ( RAJENDRA ) ( VIJAY PAL RAO ) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 7 -05-2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI