HAFELE INDIA P.LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 4821/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75639 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 26-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: BRIJMOHAN POORANMAL AGRAWAL
• Keywords: Depreciation; Revenue expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . . , . . , BEFORE SHRI B R MITTAL, JM & SHRI B R BASKARAN , A M ./I.T.A. NO. 4821/MUM/2012 ( ' ' ' ' ' '' ' / ASSESSMENT YEAR : 2009-10) HAFELE INDIA P LTD OFF NO.3 BLDG A BETA 1- THINKTECHOCAMPUS OFF JVLR OPP KANJURMARG STATION KANJURMARG (E) MUMBAI 42I / VS. THE DY COMMR OF INCOME TAX RANGE8(2), MUMBAI ./PAN : AABCH2726A ( % /APPELLANT ) ( &'% / RESPONDENT ) % ( / APPELLANT BY : SHRI BRIJMOHAN POORANMAL AGRAWAL &'% ( / RESPONDENT BY : SHRI K RAVIKIRAN ( + /DATE OF HEARING : 18.02.2014 ( + / DATE OF PRONOUNCEMENT : 21FEB 2014 / O R D E R PER B R BASKARAN, AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 12.6.2012 PASSED BY THE LD CIT(A)-17, MUMBAI AND I T RELATES TO THE AY 2009-10. HAFELE INDIA P LTD 2 2. THE EFFECTIVE GROUND URGED BY THE ASSESSEE RELAT ES TO THE DISALLOWANCE OF PART OF DEPRECIATION CLAIMED BY THE ASSESSEE ON LEASE HOLD PREMISES. 3. THE FACTS RELATING TO THE SAME ARE STATED IN BRI EF. THE ASSESSEE TOOK OFFICER PREMISES ON LEASE IN BANGALORE, MUMBAI AND DELHI. THE LEASE PERIOD WAS IN THE RANGE OF 33 TO 36 MONTHS. I T INCURRED EXPENDITURE ON RENOVATION OF THE OFFICE PREMISES AN D ALSO INCURRED EXPENDITURE ON FURNITURE AND FITTINGS AND PLUMBING. THE ASSESSEE TREATED THE SAME AS DEFERRED REVENUE EXPENDITURE IN ITS BOOKS OF ACCOUNT AND WROTE OFF THE SAME OVER THE PERIOD OF L EASE. HOWEVER, SUCH WRITE OFF WAS CLAIMED AS DEPRECIATION IN THE INCOME TAX RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE RATE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE ABOVE CITED EXPENDITURE WAS MORE THAN THE PRESCRIBED RATE OF 10 %. ACCORDINGLY THE AO RESTRICTED THE DEPRECIATION TO THE STATUTORI LY PRESCRIBED RATE, WHICH RESULTED IN A DISALLOWANCE OF RS.5,79,181/-, OUT OF THE DEPRECIATION CLAIM OF RS 8,39,818/-. IN THE APPEL LATE PROCEEDINGS, THE LD CIT(A) CONFIRMED THE ADDITION BY FOLLOWING HIS P REDECESSORS DECISION RENDERED IN THE ASSESSEES OWN CASE FOR AY 2006-07. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE CAME FOR CONSIDERATION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.6806/MUM/2010 RELATIN G TO THE AY 2006- 07 AND THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE AO FOR CONSIDERING THE SAME AFRESH BY TAKING INTO ACCOUNT ALL THE MATERIALS. HE FURTHER SUBMITTED THAT THE SAID DECISION WAS FOL LOWED BY ANOTHER CO- ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OW N CASE ITA HAFELE INDIA P LTD 3 NO.4159/M/2012 RELATING TO AY 2008-09. ACCORDINGL Y, HE SUBMITTED THAT THE IMPUGNED ISSUE MAY ALSO BE SET ASIDE TO TH E FILE OF THE AO WITH SIMILAR DIRECTIONS. 5. THE LD DR ALSO SUBMITTED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNALS, REFERRED BY THE LD A R AND ACCORDINGLY DID NOT OBJECT FOR SETTING ASIDE THE ISSUE TO THE FILE OF THE AO. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE RECORD. WE NOTICE THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ASSESSESS OWN CASE IN ITA NO. 6805/M/2010 RELATING TO AY 2006-07 HAS C ONSIDERED AN IDENTICAL ISSUE AND SET ASIDE THE SAME TO THE FILE OF THE AO. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE OPERATIVE PORTION OF THE SAID ORDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS INCURRED THE E XPENDITURE OF RS. 96,68,604/- ON RENOVATION/IMPROVEMENT OF THE TH REE PREMISES TAKEN ON LEASE AT BANGALORE, MUMBAI AND DE LHI RESPECTIVELY. THE ASSESSEE HAS CLAIMED DEPRECIATIO N ON THIS EXPENDITURE BY SPREADING OVER THIS EXPENDITURE TO T HE PERIOD OF LEASE. THUS, THE ASSESSEE HAS CLAIMED RS 36,25,726/ - AS DEPRECIATION WHICH THE AO FOUND AS EXCESS IN COMPAR ISON TO THE RATE OF DEPRECIATION PROVIDED UNDER THE SCHEDULE. T HERE IS NO DISPUTE THAT THIS EXPENDITURE IS INCURRED FOR RENOV ATION AND IMPROVEMENT OF THE PREMISES TAKEN ON LEASE AND MAKI NG THE SAME FIT FOR THE USE OF THE ASSESSEES BUSINESS AND THEREFORE THE SAID EXPENDITURE DOES NOT FALL UNDER THE CURRENT RE PAIRS U/S 31 OF THE INCOME TAX ACT. HOWEVER, THE SAID EXPENDITURE D OES NOT BRING INTO EXISTENCE ANY NEW ASSET. THUS, THE ALLOW ABILITY OF THE EXPENDITURE IN QUESTION CAN BE CONSIDERED ONLY U/S 37 OF THE I T ACT. SINCE THE ASSESSEE HAS NOT PRODUCED BEFORE US THE RELEVANT LEASE AGREEMENT TO SHOW THE TERMS AND CONDITIONS OF THE LEASE AND THE CONSEQUENTIAL EFFECT OF EXPIRY OF LEASE ON THE HUGE EXPENDITURE INCURRED BY THE ASSESSEE ON THE LEASE H OLD PREMISES WHICH ARE TAKEN FOR A SHORT PERIOD OF 33 TO 36 MONT HS. WE FURTHER NOTE THAT THE LEASE AGREEMENTS WERE ALSO NO T EXAMINED HAFELE INDIA P LTD 4 BY THE AUTHORITIES BELOW. THOUGH THE ASSESSEE HAS I NCLUDED THE SAID EXPENDITURE IN THE BLOCK OF ASSETS HOWEVER, IN VIEW OF THE FACT THAT THE PREMISES IN QUESTION WERE TAKEN ON LE ASE FOR A SHORT PERIOD OF TIME AND THEREFORE PRIMA FACIE THE SAID E XPENDITURE CANNOT BE TREATED AS THE EXPENDITURE INCURRED FOR C REATING ANY ASSET OR TAKING ANY ENDURING BENEFIT OUT OF IT. SIN CE THE ASSESSEE HAS NOT PRODUCED THE ALL RELEVANT RECORD EITHER BEF ORE US OR BEFORE THE AUTHORITIES BELOW, THEREFORE, IN THE INT EREST OF JUSTICE WE SET ASIDE THE ISSUE TO THE RECORD OF THE AO TO R E-EXAMINE THE ISSUE IN THE LIGHT OF TERMS AND CONDITIONS OF THE L EASE AGREEMENTS TO BE PRODUCED BY THE ASSESSEE. AS ALREADY STATED, THE ABOVE SAID DECISION WAS FOLL OWED IN THE ASSESSEES OWN CASE IN ITA NO.4159/M/2012 RELATING TO THE ASSESSMENT YEAR 2008-09 BY ANOTHER CO-ORDINATE BENCH. THUS WE NOTICE THAT A PARTICULAR VIEW IS TAKEN BY THE CO-ORDINATE BENCHES ON THE ISSUE BEFORE US AND ACCORDINGLY, BY FOLLOWING THE SAME, WE SET A SIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FI LE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRE SH IN THE LIGHT OF DISCUSSIONS MADE IN THE ORDERS PASSED BY THE TRIBUN AL IN THE ASSESSEES OWN CASE FOR EARLIER YEARS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. / '/ ( 2( 45 ( ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEB 2014 . ( : 21 FEB 2014 ( SD/- SD/- ( B RMITTAL) ( B R BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; : 21 ST FEB 2014 .../ RAJ , SR. PS HAFELE INDIA P LTD 5 ( &> ?> ( &> ?> ( &> ?> ( &> ?>/ COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &'% / THE RESPONDENT. 3. @() / THE CIT(A)- 4. @ / CIT 5. > &, , / DR, ITAT, MUMBAI 6. ' / GUARD FILE. / BY ORDER, '> & //TRUE COPY// / // / ( DY./ASSTT. 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