THE DCIT, CIRCLE - 2(1), Vijayawada V. M/s Efftronics Systems Pvt.Ltd., Vijayawada

ITA 484/VIZ/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6857 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 25-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 194C; 37

Judgement Text

ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.203/VIZAG/2013 ASSESSMENT YEAR : 2006 - 07 EFFTRONICS SYSTEMS PVT. LTD. VIJAYAWADA VS. ADDL. CIT RANGE-1 VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AAACE 4879Q ITA NO.484/VIZAG/2013 ASSESSMENT YEAR : 2010-11 DCIT CIRCLE-2(1) VIJAYAWADA VS. M/S. EFFTRONICS SYSTEMS PVT. LTD. VIJAYAWADA (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI C. SUBRAHMANYAM, CA REVENUE BY: SHRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 02.07.2014 DATE OF PRONOUNCEMENT : 02.07.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE ARE APPEALS BY THE ASSESSEE AS WELL AS THE D EPARTMENT AGAINST TWO SEPARATE ORDERS OF CIT(A), VIJAYAWADA PERTAININ G TO THE ASSESSMENT YEARS 2006-07 AND 2010-11 RESPECTIVELY. ITA NO.484/VIZAG/2013: 2. THE DEPARTMENT HAS RAISED THE FOLLOWING EFFECTIV E GROUNDS:- 2. WHETHER ON FACTS AND IN CIRCUMSTANCE OF THE CASE TH E LD. CIT(A) IS CORRECT IN DELETING THE DISALLOWANCE U/S 40(A)(IA) TOWARDS TRANSPORTATION CHARGES/FREIGHT AMOUNTING TO RS.2,97 ,557/- BY HOLDING THAT IT IS REIMBURSEMENT OF EXPENSES WITHOUT ANY MA TERIAL EVIDENCE. 3. THE LD. CIT(A) OUGHT TO HAVE SEEN THAT THE PAYME NT TO TRANSPORTATION/FREIGHT IS LIABLE FOR TDS U/S 194C O F THE ACT AS PER THE BOARDS CIRCULAR NO.715, DATED 8.8.1995. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISI ONS OF SECTION 194H DO NOT APPLY TO THE BANK GUARANTEE COMMISSION EVEN THOUGH IT IS ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 2 INCOME TO THE BANK AND THE BANKER WAS ACTING ON BEH ALF OF THE ASSESSEE FOR THE SERVICES RENDERED. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE IN THIS APPEAL ARE, THE ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF MA NUFACTURING OF ELECTRONIC MOVING DISPLAY BOARDS, DATA LOGGERS AND ELECTRONIC SYSTEMS ETC. FOR THE ASSESSMENT YEAR IN DISPUTE IT FILED ITS RET URN OF INCOME ON 14.10.2010 DECLARING TOTAL INCOME OF RS.4,91,60,370/-. THE RE TURN WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT, SUBSEQUENTLY, HOWEVER, ASSES SEES CASE WAS SELECTED FOR SCRUTINY. DURING THE SCRUTINY ASSESSMENT PROCE EDING, THE ASSESSING OFFICER AFTER EXAMINING THE BOOKS OF ACCOUNTS AND O THER DOCUMENTS NOTICED THAT THE ASSESSEE HAS DEBITED CERTAIN EXPENDITURE T OWARDS CARRIAGE INWARD AND OUTWARD. ON VERIFYING THE DETAILS OF CARRIAGE INWARD, IT WAS NOTICED BY HIM THAT ASSESSEE HAD MADE PAYMENTS TOWARDS FREIGHT BUT NOT DEDUCTED TAX IN RESPECT OF THE FOLLOWING PERSONS: M/S. ALFA ELECTRONICS, PUNE - RS. 74,106/- M/S. CHANDRA ELECTRONICS, MUMBAI - RS.2,23,451/- TOTAL - RS.2,97,557/- WHEN THE A.O. ASKED THE ASSESSEE TO EXPLAIN WHY TA X WAS NOT DEDUCTED AT SOURCE ON SUCH PAYMENTS, IT WAS EXPLAIN ED BY THE ASSESSEE THAT THE PAYMENTS WERE MADE ON THE BASIS OF INVOICES WHI CH INCLUDES FREIGHT CHARGES RAISED BY THE VENDOR FOR MATERIALS SUPPLIED . HENCE, TAX IS NOT DEDUCTIBLE. THE ASSESSING OFFICER REJECTING SUCH E XPLANATION OF THE ASSESSEE HELD THAT THE PAYMENTS ATTRACT PROVISIONS OF SECTIO N 194(C) OF THE ACT. SINCE THE ASSESSEE FAILED TO DEDUCT TAX ON SUCH PAYMENT, HE MADE DISALLOWANCE OF RS.2,97,557/- U/S 40(A)(IA) OF THE ACT. FURTHER, T HE ASSESSING OFFICER ON EXAMINING THE PROFIT & LOSS ACCOUNT NOTICED THAT TH E ASSESSEE HAS DEBITED EXPENDITURE AS BANK CHARGES WHICH INCLUDES AN AMOUN T OF RS.14,50,878/- PAID TO ANDHRA BANK AS BANK GUARANTEE CHARGES. WHE N ASKED TO EXPLAIN, THE ASSESSEE STATED THAT BANK WILL UNDERTAKE AND AGREED TO PAY A SUM EQUIVALENT AS PER THE TERMS & CONDITIONS OF THE AGREEMENT TO T HE CONTRACTEE IN CASE OF ANY BREACH OF CONTRACT. AFTER CONSIDERING THE EXPL ANATION OF THE ASSESSEE THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE WAS NOT REQUIRED TO DEPOSIT THE COMPLETE AMOUNT OF GUARANTEE ENTERED INTO BUT T HE BANK WILL UNDERTAKE A ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 3 GUARANTEE TO PAY THE COMPLETE AMOUNT TO THE CONTRAC TEE IN CASE OF ANY BREACH OF CONTRACT FOR WHICH THE BANK WILL LEVY CHA RGES ON THE ASSESSEE. THE ASSESSING OFFICER THEREFORE INFERRED THAT AS CHARGE S FALL WITHIN THE AMBIT OF COMMISSION THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE. AS THE ASSESSEE HAS NOT DEDUCTED ANY TAX ON SUCH PAYMENTS, HE CALLED UPON THE ASSESSEE TO EXPLAIN. IN RESPONSE TO THE QUERY RAIS ED BY THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PAYMENT M ADE BY THE ASSESSEE IS NOTHING BUT INTEREST AND TAX IS NOT DEDUCTIBLE ON I NTEREST PAYABLE TO ANY BANK. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE EX PLANATION OF THE ASSESSEE AND HELD THAT THE PAYMENT MADE TOWARDS BANK CHARGES COMES WITHIN THE PURVIEW OF SECTION 194H OF THE ACT AND ACCORDINGLY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DISALLOWED THE AMOUNT OF RS.14,50,878/- AND ADDED IT TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED OF SUCH ADDITIONS, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE HELD AS UNDER: 5A. FIRST ISSUE IS TRANSPORTATION CHARGES INCLUDED IN THE MATERIAL PURCHASE INVOICES AMOUNTING TO RS.2,97,557/-. AS P ER THE AO TRANSPORTATION CHARGES ARE REQUIRED TO BE SUBJECTED TO TDS UNDER S ECTION 194C AND SINCE THE SAME WAS NOT DONE BY THE APPELLANT, HE MADE THE IMPUGNED DISALLOWANCE UNDER SECTION 40(A)(IA), WHICH IS CONT ESTED. THE SUBMISSION OF THE APPELLANT THAT THE PAYMENTS WERE MADE BASING ON THE INVOICES WHICH INCLUDES FREIGHT CHARGES RAISED BY THE VENDOR FOR M ATERIAL SUPPLY AND HENCE TAX IS NOT DEDUCTIBLE HAD NO EFFECT ON THE A.O. IT TRANSPIRES FROM THE FACTS THAT THE VENDORS WERE NOT THE TRANSPORTERS, BUT THE Y HAVE THEMSELVES PAID SUCH TRANSPORTATION CHARGES COLLECTED FROM THE APPE LLANT TO THE TRANSPORTERS, WHO HAVE DELIVERED THE GOODS. THUS, THE TRANSPORTA TION CHARGES COLLECTED FROM THE APPELLANT WERE NOTHING BUT REIMBURSEMENTS AND THERE WAS NO ELEMENT OF INCOME EMBEDDED IN SUCH PAYMENTS AND HEN CE TDS ON SWUCH PAYMENTS IS NOT APPLICABLE. IN THE CIRCUMSTANCES, THE AO IS DIRECTED TO DELETE THE SAME. 5B. SECOND ISSUE IS BANK GUARANTEE CHARGES DEBITE D TO THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.14,50,878/-. IN FA CT THIS PARTICULAR AMOUNT WAS DEBITED BY THE BANK ITSELF. BUT, THE AO WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 194H WERE APPLICABLE AND HENC E WRITTEN BACK THE SAME IN TERMS OF SECTION 40(A)(IA), WHICH IS CONTESTED. IT MAY BE NOTED HERE THAT WHEN THE AMOUNTS UNDER THE HEAD INTEREST, COMMISSIO N OR ANY OTHER SUM IS PAID OR PAYABLE TO ANY GOVERNMENT, FINANCIAL INSTIT UTE OR TO ANY BANK ETC, ON SUCH PAYMENTS, NO TDS IS APPLICABLE. EVEN OTHERWIS E ALSO, AS RIGHTLY POINTED OUT BY THE AR, BANK GUARANTEE COMMISSION IS NOT LIA BLE TO TDS UNDER SECTION ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 4 194H, AS IT IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT. SINCE PRINCIPAL AGENT RELATIONSHIP IS NECESSARY FOR INVOKING THE PR OVISIONS OF WITHHOLDING TAX FOR COMMISSION PAYMENTS, BANK GUARANTEE COMMISSION PAYABLE TO THE BANK IS NOT SUBJECTED TO WITHHOLDING TAX. THIS IS WHAT THE MUMBAI TRIBUNAL HAS HELD IN THE CASE OF KOTAK SECURITIES LIMITED VS. DY. CIT (TDS) REPORTED IN (2012) 50 SOT 158 (MUMBAI TRIBUNAL). IN THE CIRCUMSTANCES , THE ACTION OF THE AO IS NOT APPRECIATED. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. SO FAR AS FREIGHT CHARGES OF RS.2,97,557/- IS CONCERNED, IT IS THE CLAIM OF THE ASSESSEE FROM THE ASSESSMENT STAGE ITSELF THAT THE INVOICES RAISED IN CLUDE FREIGHT CHARGES RAISED BY THE VENDOR FOR MATERIAL SUPPLIED, HENCE, TAX IS NOT DEDUCTIBLE. FURTHER, IT IS EVIDENT FROM THE ORDER OF THE CIT(A) THAT THE VE NDORS WHO ARE NOT THE TRANSPORTERS HAVE THEMSELVES PAID SUCH TRANSPORTATI ON CHARGES COLLECTED FROM THE ASSESSEE TO THE TRANSPORTERS WHO HAVE DELIVERED THE GOODS. THEREFORE, IT FOLLOWS THAT THE ASSESSEE HAS NOT PAID THE TRANSPOR T CHARGES DIRECTLY TO THE TRANSPORTERS AND FURTHER THE TRANSPORTATION CHARGES COLLECTED FROM THE ASSESSEE WERE NOTHING BUT REIMBURSEMENT. THIS FACT HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. THEREFORE, CONSIDE RING THE FACTUAL ASPECT OF THE ISSUE, IT IS VERY MUCH CLEAR THAT THE PAYMENTS MADE DO NOT COME WITHIN THE PURVIEW OF SECTION 194C OF THE ACT REQUIRING DE DUCTION OF TAX AT SOURCE. SO FAR AS THE ISSUE OF TDS ON BANK GUARANTEE CHARGE S ARE CONCERNED, ON A PERUSAL OF THE ORDER OF THE CIT(A) AND THE DECISION IN CASE OF KOTAK SECURITIES LTD. VS. DCIT 50 SOT 158, WE ARE OF THE VIEW THAT T HE ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISION OF ITAT MUMBAI BE NCH. THE LD. D.R. HAS NOT BROUGHT ANY OTHER CONTRARY DECISION TO OUR NOTI CE. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LD. CIT(A) WHICH IS ACCORDINGLY UPHELD BY DISMISSING TH E GROUNDS RAISED. 6. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISSED. ITA NO.203/VIZAG/2013: 7. THERE IS A DELAY OF 8 DAYS IN FILING THE APPEAL. ASSESSEE HAS FILED A PETITION SEEKING FOR CONDONATION OF DELAY. AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CAUSE OF DELAY, WE ARE INCL INED TO CONDONE THE DELAY ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 5 OF 8 DAYS AND ADMIT THE APPEAL FOR HEARING ON MERIT . THE ONLY ISSUE IN THE AFORESAID APPEAL OF THE ASSESSEE IS IN RESPECT OF D ISALLOWANCE OF AN AMOUNT OF RS.36,87,585/- AS REVENUE EXPENDITURE. 8. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, DURING THE SCRUTINY ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.40,25,442/- AS EXPENDITURE TOWARDS RENOVATION OF PREMISES TAKEN ON LEASE. INITIALLY OUT OF THE AFORE SAID AMOUNT, THE ASSESSEE DEBITED A SUM OF RS.10,14,216/- ONLY TO ITS PROFIT & LOSS ACCOUNT AND THE BALANCE AMOUNT WAS TREATED AS DEFERRED REVENUE EXPE NDITURE. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASS ESSEE FILED A REVISED COMPUTATION OF INCOME CLAIMING THE ENTIRE AMOUNT OF RS.40,25,442/- AS REVENUE EXPENDITURE FOR THE IMPUGNED ASSESSMENT YEA R. STATING THE REASON OF SUCH REVISED COMPUTATION, IT WAS EXPLAINED BY TH E ASSESSEE THAT DUE TO OVERSIGHT THE EXPENDITURE WAS TREATED AS DEFERRED R EVENUE EXPENDITURE WHICH ACTUALLY SHOULD HAVE BEEN CLAIMED AS REVENUE EXPEND ITURE IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. ON EXAMINING THE DETA ILS OF EXPENDITURE, THE ASSESSING OFFICER ACCEPTED EXPENDITURE TO THE TUNE OF RS.3,37,859/- INCURRED TOWARDS PAINTING AND TUBELIGHTS AND DISALLOWED THE BALANCE AMOUNT OF RS.36,87,585/- ON THE BASIS OF PROVISIONS CONTAINED IN EXPLANATION 1 TO SECTION 32(1) OF THE ACT. 9. BEING AGGRIEVED OF SUCH DISALLOWANCE, THE ASSESS EE PREFERRED APPEAL BEFORE THE CIT(A). CIT(A) AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AND EXAMINING THE NATURE OF EXPENDITURE CLAIMED, AL LOWED THE SAME AS REVENUE EXPENDITURE. REVENUE BEING AGGRIEVED OF TH E ORDER PASSED BY THE CIT(A) PREFERRED AN APPEAL BEFORE THE VIZAG BENCH O F THE ITAT. THE ITAT DISPOSED OF THE APPEAL OF THE REVENUE IN ORDER DATE D 18.7.2011 PASSED IN ITA NO.83/VIZAG/2011 PASSED IN ITA NO.83/VIZAG/2011 BY REMITTING THE MATTER TO THE FILE OF THE CIT(A) FOR CONSIDERING AFRESH THE N ATURE OF EXPENDITURE CLAIMED WHETHER CAPITAL OR REVENUE. IN PURSUANCE TO THE DI RECTION OF THE ITAT, CIT(A) TOOK UP THE PROCEEDING AGAIN AND WHILE DECIDING THE ISSUE VIDE THE IMPUGNED ORDER HELD THAT SINCE THE EXPENDITURE INCURRED IS I N THE NATURE OF EXPENDITURE ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 6 MENTIONED IN EXPLANATION 1 TO SECTION 32(1) OF THE ACT, IT IS A CAPITAL EXPENDITURE ELIGIBLE FOR DEPRECIATION. ACCORDINGLY , HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER AND DIRECTED TO ALLOW DEPRECI ATION. 10. THE LD. A.R. SUBMITTED BEFORE US THAT THE ASSES SEE IS RUNNING ITS OFFICE ON A LEASED PREMISES AND ALREADY USING THE FIRST AN D SECOND FLOOR. CONSIDERING THE REQUIREMENT OF SPACE IT HAS TAKEN T HE THIRD FLOOR ALSO IN THE SAME BUILDING ON RENTAL BASIS FOR A PERIOD OF 3 YEA RS WITH AN OPTION TO RENEW IT FOR FURTHER PERIOD ON MUTUAL AGREEMENT. AFTER T AKING POSSESSION OF THE PREMISES, THE MANAGEMENT OF THE COMPANY, LOOKING IN TO THE CONDITION OF THE FLOOR, THOUGHT IT FIT TO IMPROVE THE USAGE OF THE F LOOR EFFECTIVELY TO CATER TO THE BUSINESS NEEDS. BESIDES TO MEET THE INTERNATIONAL STANDARDS REQUIRED FOR SOFTWARE COMPANIES, GAVE FACE LIFT TO THE FLOOR BY UNDERTAKING WORKS LIKE FLOORING, FALSE ROOFING, PARTITION, PAINTAINGS, ETC . IT WAS SUBMITTED THAT THE EXPENDITURE WAS INCURRED MAINLY FOR BUSINESS NEEDS/ AMBIENCE AND TO ACHIEVE MAXIMUM FUNCTIONAL UTILITY OF THE FLOOR TO SUIT BUS INESS OPERATION. FURTHER, SINCE THE PERIOD OF LEASE IS ONLY FOR 3 YEARS, THE EXPENDITURE INCURRED CANNOT BE CONSIDERED TO BE OF ENDURING BENEFIT TO THE ASSE SSEE. THE LD. A.R. SUBMITTED THAT THE NATURE OF EXPENDITURE INCURRED B Y THE ASSESSEE DOES NOT COME WITHIN THE PURVIEW OF THE EXPLANATION 1 TO SEC TION 32(1) OF THE ACT. HENCE, THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IN SUPPORT OF SUCH CONTENTIO N, HE RELIED UPON THE FOLLOWING DECISIONS:- 1. CIT VS. AYESHA HOSPITALS (P) LTD. 292 ITR 266 ( MAD.) 2. THIRU AROORAN SUGARS LTD. VS. DCIT 350 ITR 324 (MAD.) 3. CIT VS. ARMOUR CONSULTANTS PVT. LTD. 85 DTR 361 (MAD.) 11. THE LD. D.R. ON THE OTHER HAND RELYING UPON THE FINDING OF THE ASSESSING OFFICER/CIT(A) SUBMITTED THAT THE NATURE OF EXPENDITURE INCURRED BEING CLEARLY OF THE NATURE ENVISAGED UNDER EXPLANA TION 1 TO SECTION 32(1) OF THE ACT IT HAS TO BE TREATED AS CAPITAL EXPENDITURE . HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE REVENUE AUTHORITIES. ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 7 12. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. AS CAN BE SEEN FROM THE MATERIALS ON RECORD, THE EXPEN DITURE OF RS.40,25,442/- CLAIMED BY THE ASSESSEE ARE UNDER THE FOLLOWING HEA DS: PARTICULARS AMOUNT (RS.) CIVIL WORKS 6,37,161.30 ELECTRICAL WORKS WITH TRANSFORMER 9,03,041.05 FALSE CEILING 5,72,541.81 FLOORING 10,83,087.00 MIRRORS & ALUMINIUM PARTITIONS 4,91,751.50 PAINTINGS 2,10,760.00 TUBE LIGHTS 1,27,099.60 TOTAL 40,25,442.26 13. IT IS FURTHER EVIDENT FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS ACCEPTED THE EXPENDITURE TOWARDS PAINTI NG AMOUNTING TO RS.2,10,760/- AND TUBELIGHTS AMOUNTING TO RS.1,27, 099.60PS. AS REVENUE EXPENDITURE DURING THE ASSESSMENT PROCEEDING. THER EFORE, EVEN THE ASSESSING OFFICER ALSO AGREES THAT THE ENTIRE EXPEN DITURE CLAIMED IS NOT OF CAPITAL NATURE. NOW COMING TO THE BALANCE EXPENDIT URE CLAIMED, THE MAIN REASON FOR DISALLOWING SUCH EXPENDITURE IS, THEY AR E OF THE NATURE AS MENTIONED IN EXPLANATION 1 TO SECTION 32(1) OF THE ACT. HOWEVER, AS CAN BE SEEN FROM THE NATURE OF EXPENDITURE IT IS MAINLY RE LATED TO FLOORING, FALSE CEILING, SOME AMOUNT OF CIVIL WORKS, PARTITIONS, EL ECTRICAL WORKS, ETC. IT IS ALSO A FACT THAT THE ASSESSEE HAS INCURRED THIS EXPENDIT URE TO GIVE A NEW LOOK AND FRESH AMBIENCE OF THE LEASE TAKEN OF THE THIRD FLOO R FOR MAKING IT OF INTERNATIONAL STANDARD. CONSIDERED IN THE AFORESAI D CONTEXT, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED ARE OF THE SAME NATUR E AS ENVISAGED UNDER EXPLANATION 1 TO SECTION 32(1) OF THE ACT. THE HON BLE MADRAS HIGH COURT IN CASE OF CIT VS. AYESHA HOSPITALS (P) LTD. (SUPRA) WHILE CONSIDERING SIMILAR NATURE OF EXPENDITURE OF FLOORING, PARTITIONS, ETC. IN LEASE HOLD PREMISES IN THE CONTEXT OF PROVISION CONTAINED IN EXPLANATION 1 OF SECTION 31(1) OF THE ACT UPHELD THE VIEW OF THE TRIBUNAL THAT THEY ARE IN TH E NATURE OF REVENUE EXPENDITURE. SIMILAR VIEW WAS ALSO EXPRESSED IN TH E OTHER DECISIONS RELIED UPON BY LD. A.R. THEREFORE, CONSIDERING THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN THE PRESENT CASE IN THE LIGHT OF THE VIEW EXPRESSED IN THE JUDICIAL PRECEDENTS REFERRED TO HEREIN ABOVE, WE HO LD THAT THEY ARE NOT IN THE ITA NOS.203 & 484/VIZAG/2013 M/S. EFFTRONICS SYSTEMS P LTD., VIJAYAWADA 8 NATURE OF CAPITAL EXPENDITURE AS IT HAS NOT RESULTE D IN ANY ENDURING BENEFIT TO THE ASSESSEE. ANOTHER CRUCIAL FACTOR WHICH NEEDS T O BE TAKEN NOTE OF, NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAVE DISPUTED THE FACT THAT THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF BUSINES S. BY ASSUMING THAT THEY ARE IN THE NATURE OF EXPENDITURE COMING WITHIN THE PURVIEW OF EXPLANATION 1 TO SECTION 32(1) OF THE ACT, IT HAS BEEN HELD AS A CAPITAL E=XPENDITURE. IN THE AFORESAID VIEW OF THE MATTER SINCE THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THE SAME IS ALLOWABLE AS A REV ENUE EXPENDITURE ATLEAST U/S 37 OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSE SSING OFFICER TO ALLOW THE SAME. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 15. TO SUM UP ASSESSEES APPEAL IN ITA NO.203/VIZAG /2013 IS ALLOWED AND REVENUES APPEAL IN ITA NO.484/VIZAG/2013 IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 2 ND JULY14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND JULY, 2014 COPY TO 1 M/S. EFFTRONICS SYSTEMS PVT. LTD., 40-15-9, BRUND AVAN COLONY, LABBIPET, VIJAYAWADA 2 ADDL. CIT, RANGE-1, VIJAYAWADA 3 THE CIT, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM