JCIT (OSD) CC 39, MUMBAI V. URBAN INFRASTRUCTURE VENTURE CAPITAL LTD, MUMBAI

ITA 4934/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2244 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 37(1); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER / I .T.A. NO .4745/M/2012 ( / ASSESSMENT YEAR :2009 - 10 M/S. URBAN INFRASTRUCTURE VENTURE CAPITAL LTD., 121/123, FREE PRESS HOUSE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI - 400 021 / VS. THE JCIT, CENTRAL CIRCLE - 39, AAYAKAR BHAVAN, G.F. MUMBAI - 400 021 / I .T.A. NO . 4934 /M/2012 ( / ASSESSMENT YEAR : 2009 - 10 THE JCIT, CENTRAL CIRCLE - 39, AAYAKAR BHAVAN, G.F. MUMBAI - 400 021 / VS. M/S. URBAN INFRASTRUCTURE VENTURE CAPITAL LTD., 121/123, FREE PRESS HOUSE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI - 400 021 ./ ./ PAN/GIR NO. : AAACU 8061E ( / APPELLANT ) .. ( / RESPONDENT ) / A SSESSEE BY: SHRI NITESH JOSHI / DEPARTMENT BY: SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 0 2 . 1 2 .2015 / DATE OF PRONOUNCEMENT : 0 2 .12 .2015 / O R D E R PER N.K. BILLAIYA, AM: ITA. NO S . 4745 & 4934/M/12 2 TH ESE ARE CROSS APPEAL S BY THE ASSESSEE AND THE REVENUE AGAINST THE VERY SAME ORDER OF THE LD. CIT(A) - 41 , MUMBAI D ATED 07.05. 2012 PERTAINING TO ASSESSMENT YEAR 200 9 - 1 0. AS BOTH THESE APPEALS WERE HEARD TOGETHER AND THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 4745/M/2012 ASSESSEES APPEAL 2. THE ASSESSEE HAS RAISED 3 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO . 1 RELATES TO THE TREATMENT OF RS. 77,33,115/ - INCURRED BY THE ASSESSEE FOR BUSINESS PURPOSES ON TEMPORARY REPAIRS AND MAINTENANCE OF THE LEASED PREMISES AS CAPITAL EXPENDITURE . THE ASSESSEE IS AGGRIEVED BY THIS TREATMENT. 3. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 81,63,805/ - UNDER THE HEAD REPAIRS & MAINTENANCE TO THE BUILDING. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS IN RESPECT OF THESE EX PENSES. THE ASSESSEE FILED THE COMPLETE DETAILS. ON PERUSAL OF THE DETAILS, THE AO FOUND THAT THE EXPENSES OF RS. 77,33,115/ - WERE INCURRED ON RENOVATION OF ITS OFFICE PREMISES. THE DETAILS OF SUCH EXPENSES ARE AS UNDER: OFFICE RENOVATION AND CARPENT RY WORK (OFFICE RENOVATION, FALSE CEILING, INTERIOR, CIVIL WORK, SHUTTERS, VARIOUS STORAGE CABINETS, ETC. RS. 33,39,907/ - VOICE AND DATA STRUCTURE CABLING COMPONENTS RS. 5,14,132/ - SUPPLY OF ELECTRICAL ITEMS RS. 20,33,886/ - ITA. NO S . 4745 & 4934/M/12 3 INSTALLATION AND COMMISSIONING RS. 1,72,837/ - MATERIALS FOR OFFICE WORK RS. 3,25,143/ - 3.1. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM AS REVENUE EXPENDITURE AND THE ASSESSEE WAS ALSO SHOW CAUSE TO EXPLAIN WHY THE SAME SHOULD NOT BE TREATED AS CAPITAL EXPENDITUR E ELIGIBLE FOR DEPRECIATION AS PER PROVISIONS OF THE LAW. 3.2. THE ASSESSEE FILED A DETAILED REPLY IN SUPPORT OF ITS CLAIM OF REVENUE EXPENDITURE BUT THE SAME DID NOT FIND ANY FAVOUR WITH THE AO. DRAWING SUPPORT FROM THE FINDINGS GIVEN IN RESPECT OF SIM ILAR EXPENDITURE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y. 2008 - 09, THE AO PROCEEDED TO TREAT THE EXPENSES OF RS. 77,33,115/ - AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION AS PER PROVISIONS OF THE LAW. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE AO HAS D RAWN SUPPORT FROM THE FINDINGS GIVEN IN A.Y. 2008 - 09 IN WHICH YEAR THE MATTER TRAVELL ED UPTO THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 21.5.2014 IN ITA NO. 8397/M/2011 HAS HELD THAT SUCH EXPENSES BEING OF REVENUE IN NATURE, THEREFORE, THE SAME VIEW SHOULD BE TAKEN DURING THE YEAR UNDER CONSIDERATION ALSO. 6. PER CONTRA, THE LD. D EPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE LD. CIT(A). 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE NATURE OF THE EXPENDITURES HAVE BEEN MENTIONED ELSEWHERE. ON ITA. NO S . 4745 & 4934/M/12 4 IDENTICAL/SIMILAR NATURE OF EXPENDITURES WERE CONSIDE RED BY THE TRIBUNAL IN A.Y. 2008 - 09 (SUPRA). AT PARA - 4 OF ITS ORDER AND AFTER RELYING UPON THE DECISION S IN THE CASE OF HEDE CONSULTANCY PVT. LTD 258 ITR 380 (BOM) ,TALATHI AND PNTHAKY ASSOCIATES PVT. LTD. 343 ITR 309 AND CIT VS OXFORD UNIVERSITY PRESS 10 8 ITR 166 (BOM), THE TRIBUNAL FINALLY HELD THAT THESE EXPENDITURES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE REPAIR/RENOVATION WORK CARRIED OUT AT THE PREMISES WHICH WERE NOT OWNED BY THE ASSESSEE BUT WERE TAKEN ON LEASE , T HE E XPENDITURE INCURRED AS CAN BE SEEN FROM THE DETAILS FURNISHED HAS NOT CREATED ANY CAPITAL ASSET NOR IT HAS GIVEN THE BENEFIT OF ENDURING NATURE. THE TRIBUNAL FINALLY H E LD THE EXPENDITURES TO BE OF REVENUE IN NATURE AT PARA - 7.5, THE TRIBUNAL ALSO HELD TH AT EXPLANATION - 1 TO SEC. 32(1) IS NOT AT ALL APPLICABLE BECAUSE THE PRE - CONDITION TO INVOKE THE PROVISION OF EXPLANATION - 1 AFTER SECOND PROVISO TO SEC. 32(1)(III) IS THAT EXPENDITURE ITSELF SHOULD BE CAPITAL IN NATURE AND IF ITS NATURE IS REVENUE, THEN THE SAID PROVISIONS ARE NOT APPLICABLE. THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7.1. A PERUSAL OF THE EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION SHOWS THAT THESE ARE SIMILAR IN KIND, THEREFORE, RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2008 - 09 (SUPRA), WE DIRECT THE AO TO TREAT THE EXPENDITURE AS REVENUE. THE AO IS FURTHER DIRECTED TO WITHDRAW THE DEPRECIATION ALLOWED. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 8. GROUND NO. 2 RELATES TO THE CLAIM OF DEPRECIATION ON THE AMOUNT TREATED AS CAPITAL EXPENDITURE IN A.Y. 2008 - 09. ITA. NO S . 4745 & 4934/M/12 5 9. SINCE THE TRIBUNAL HAS SUBSEQUENTLY HELD THAT THE EXPENDITURES WERE OF REVENUE IN NATURE THEREFORE, THIS GRIEVANCE OF THE ASSESSEE BECOMES OTIOSE. 10. GROUND NO. 3 RELATES TO THE LEVY OF INTEREST U/S. 234C OF THE ACT. LEVY OF INTEREST IS MANDATORY BUT INTEREST U/S. 234C HAS TO BE LEVIED ON THE RETURNED INCOME OF THE ASSESSEE AS PER PROVISIONS OF THE LAW. THE AO IS DIRECTED TO CHARGE INTEREST ACCORDINGL Y ON THE RETURNED INCOME OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 4934/M/2012 REVENUES APPEAL 12. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN HOLDING PAYMENT OF RS. 45.20 LAKHS PAID BY THE ASSESSEE TO THE CRICKET CLUB OF INDIA AS REVENUE EXPENDITURE. 13. THIS ISSUE IS NO MORE RES INTEGRA. THE HONBLE SUPREME COURT IN THE CASE OF UNITED GLASS MFG. CO. LTD. IN CIVIL APPEAL NO. 6447 ALONGWITH 6448 AND 6449 OF 2012 HAD , INTER ALIA , CONSIDERED THE FOLLOWING QUESTION: WHETHER CLUB MEMBERSHIP FEE FOR EMPLOYEES INCURRED BY THE ASSESSEE IS A BUSINESS EXPENSE AND LIABLE TO BE DEDUCTED U/S. 37(1) OF THE INCOME TAX ACT, 1961? AND THE HONBLE SUPREME COURT ANSWERED IT AS FOLLOWS: AS FAR AS QUESTION NO. 2 IS CONCERNED, WE FIND THAT A SERIES OF JUDGEMENTS HAVE BEEN PASSED BY HIGH COURTS HOLDING THAT CLUB MEMBERSHIP FEES FOR EMPLOYEES INCURRED BY THE ASSESSEE IS BUSINESS EXPENSE U/S. 37 OF THE I.T. ACT, 1961. ITA. NO S . 4745 & 4934/M/12 6 WE ALSO FIND THAT NONE OF THE DECISIONS HAVE BEEN CHALLENGED IN THIS COURT. EVEN OTHERWISE, WE ARE OF THE VIEW THAT IT IS A PURE BUSINESS EXPENSE. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE HONBLE SUPREM E COURT, APPEAL FILED BY THE REVENUE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE A PPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 2 ND DECEMBER , 2015 SD/ - SD/ - ( PAWAN SINGH ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 ND DECEMBER , 2015 . . ./ RJ , SR. PS / 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. REGISTRAR) , / ITAT, MUMBAI