DCIT, Cuttack V. Grand Automobiles, Cuttack

ITA 414/CTK/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7557 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B N DASH
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.414/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 DCIT, CIRCLE - 1(1), CUTTACK. VS. M/S. GRAND A UTOMOBILES, LINK ROAD ARUNODAYA MARKET, CUTTACK PAN/GIR NO. AABFG 1696 F (APPELLANT ) .. ( RESPONDENT ) C.O.NO.56/CTK/2015 (ARISING OUT OF ITA NO.414/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 M/S. GRAND AUTOMOBILES, LINK ROAD ARUNODAYA MARKET, CUTTACK VS. DCIT, CIRCLE - 1(1), CUTTACK PAN/GIR NO. AABFG 1696 F (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K.MOHAPATRA, AR REVENUE BY : SHRI B.N.DASH, DR DATE OF HEARING : 21 /11 / 2016 DATE OF PRONOUNCEMENT : 21 /11 / 2016 2 ITA NO.414/CTK/2015 C.O.NO.56/CTK/2015 ASSESSMENT YEAR :2011 - 2012 O R D E R THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 20.7.2015 , FOR THE ASSESSMENT YEAR 2011 - 2012. 2. THE SOLE GROUND TAKEN BY THE REVENUE IN ITS APPEAL IS THAT THE LD CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF CAPITAL EX PENDITURE OF RS.26,67,66 9/ - TOWARDS CONSTRUCTION OF SHE D. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS ARE THAT THE ASSESSEE CONSTRUCTED A NEW SHED FOR THE SERVICE OF 3 WHEELERS WHICH REQUIRES SUBSTANTIAL SPACE FOR PARKING AND REPAIRING. THE BUILDING WAS MADE UP BRICKS AND THE ROOF OF THE STRUCTURE WA S MAD E WITH TRANSPARENT FIBRE SHEET. THE ASSESSING OFFICER TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME. HOWEVER, HE ALLOWED DEPRECIATION @ 10% ON THE SAME TO THE ASSESSEE. 4. ON APPEAL, LD CIT (A) DELETED THE ADDITION ON THE GROUND THAT HO NBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTIC LTD., 293 ITR 432 (MAD) HAS HELD THAT TO ATTRACT EXPLANATION 1 TO SECTION 32 (1) OF THE ACT, THE CONSTRUCTION OF ANY STRUCTURE OR WORK IN RELATION TO AN D BY WAY OF RENOVATION, EXTENSION OR IM PROVEMENT TO A BUILDING TAKEN ON LEASE BY THE ASSESSEE FOR CARRYING ON HIS BUSINESS AND PROFESSION, BUT NOT IN A CASE OF 3 ITA NO.414/CTK/2015 C.O.NO.56/CTK/2015 ASSESSMENT YEAR :2011 - 2012 CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK WHERE SUCH BUILDING IS PUT UP OR CONSTRUCTED FOR THE PURPOSES OF THE BUSINESS OR PROFES SION OF THE ASSESSEE IN LAND TAKEN ON LEASE BY THE ASSESSEE. THE ASSESSEE DID NOT ACQUIRE A CAPITAL ASSET, BUT HAD TO PUT UP A CONSTRUCTION OF THE BUILDING ONLY FOR BUSINESS ADVANTAGE, WITH THE RESULT THAT THE ENTIRE CONSTRUCTION COST WAS ADMISSIBLE AS RE VENUE EXPENDITURE. 5. BEFORE ME LD D.R. RELIED ON THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF UTTAR BHARAT EXCHANGE LTD VS CIT, 55 ITR 550 (P&H) AND SUBMITTED THAT IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT CONSTRUCTION OF TEMPORARY STRUCTURES IN A LEASED PROPERTY WAS A CAPITAL EXPENDITURE SINCE THE STRUCTURE IS AN ENDURING ASSET. HE ALSO RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF RAZA BULAND SUGAR CO. LTD VS CIT, 122 ITR 817 (ALL) WHEREIN, IT WAS HELD THAT THE ASSESSEE RUNNING SUGAR MILL LEASING OUT LAND TO HOUSING BOARD FOR CONSTRUCTION OF STAFF QUARTER FOR FACTORY. THE BUILDING REMAINED PROPERTY OF HOUSING BOARD AND THE ASSESSEE INCURRED PART OF THE EXPENDITURE TOWARDS COST OF CONSTRUCTION AND AN ADVANTA GE OF ENDURING NATURE WAS DERIVED BY THE ASSESSEE EVEN THOUGH THE ASSESSEE WAS NOT THE OWNER. HE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOBIND SUGAR MILLS LTD VS CIT, 232 ITR 319 (SC), WHEREIN, IT WAS HELD THAT EXPENDITURE FO R ACQUISITION OF LEASEHOLD RIGHT IN SUGAR FACTORY WAS CAPITAL EXPENDITURE. 4 ITA NO.414/CTK/2015 C.O.NO.56/CTK/2015 ASSESSMENT YEAR :2011 - 2012 6. ON THE OTHER HAND, LD A.R. OF THE ASSESSEE ARGUED AND SUBMITTED TH A T THE DECISIONS RELIED ON BY LD A.R. ARE MUCH EARLIER TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT VS. MADRAS AUTO SERVICE (P) LTD., 233 ITR 468 (SC) , WHEREIN, IT WAS HELD THAT A BUILDING CONSTRUCTED ON LEASEHOLD LAND DID NOT BELONG TO THE ASSESSEE, THEREFORE, THE EXPENDITURE WAS REVENUE EXPENDITURE. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, I FIND THAT THE ASSESSEE CONSTRUCTED A SHED FOR SERVICE OF 3 WHEELERS ON THE LAND ACQUIRED ON LEASE BY IT. THUS, TEMPORARY SHED CONSTRUCTED BY THE ASSESSEE DID NOT BELONG TO THE ASSE SSEE AS IT WAS CONSTRUCTED ON A LEASEHOLD LAND. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS AUTO SERVICE (P) LTD (SUPRA) APPLIES THE CASE OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF MADRASW AUTO SERVICES (P) LTD (SUPRA), I UPHOLD THE DELETION OF ADDITION OF RS.26,67,669/ - BY THE LD CIT(A) AND REJECT THE GROUND OF APPEAL BY THE REVENUE. 8. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD CIT (A). SINCE, I HAVE CONFIRMED THE ORDER OF THE LD CIT (A), THE CROSS OBJECTION BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND HENCE, DISMISSED. 5 ITA NO.414/CTK/2015 C.O.NO.56/CTK/2015 ASSESSMENT YEAR :2011 - 2012 9. `IN THE RESULT, APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 21/ 11 /2016 IN THE PRESENCE OF PARTIES. ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 21 /11 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : DCIT, CIRCLE - 1(1), CUTTACK 2. THE RESPONDENT /ASSESSSEE: M/S. GRAND AUTOMOBILES, LINK ROAD ARUNODAYA MARKET, CUTTACK 3. THE CIT(A) CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//