ACIT, New Delhi V. M/s. G4S Securities Services India Ltd., Gurgaon

ITA 5008/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97931 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-09-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CIRCUMST; READ AS UNDER ON FACTS
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:C NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A .NO. 5008/DEL/2010 (ASSESSMENT YEAR-2002-03) ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE HAS BEEN PREFERRED AGAIN ST THE ORDER OF THE CIT(A)-XV, NEW DELHI DATED 16.06.2010 PASSED IN APPEAL NO. 69/2009-10 FOR A.Y. 2002-03. 2. THE GROUNDS IN REGARD TO SOLE ISSUE RAISED BY TH E REVENUE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8, 62,70,077/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITAL EXPEN DITURE. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, ACIT, CIRCLE 12(1), NEW DELHI. VS G4S SECURITIES SERVICES INDIA LTD., PANCHVATI, 82A, SECTOR-18, GURGAON. AAACG1625Q APPELLANT BY SHRI A.K. SAROHA, CIT DR RESPONDENT BY SHRI AJAY VOHRA, SR. ADV. SHRI ANSHUL SACHAR, ADV. DATE OF HEARING 21.09.2015 DATE OF PRONOUNCEMENT 23.11.2015 ITA NO. 5008/D/2010 2 1961 (FOR SHORT THE ACT) ON 31.3.2005 AT AN INCOME OF RS. 8,78,79,991/- AFTER DISALLOWING AN AMOUNT OF RS. 8, 62,70,077/- BEING TREATED AS CAPITAL EXPENDITURE BY THE ASSESSING OFF ICER ON ACCOUNT OF CONSTRUCTION OF BUILDING ON RENTED PREMISE AS AGAIN ST CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. THE ASSESSEE PREF ERRED AN APPEAL BEARING NO. 95/2005-06 BEFORE THE CIT(A) WHICH WAS DISMISSED ON 29.08.2005 ON THIS GROUND BUT THE CIT(A) ALLOWED DE PRECIATION AS ALTERNATIVELY CLAIMED BY THE ASSESSEE. EMPTY HANDE D ASSESSEE PREFERRED AN APPEAL BEFORE ITAT ITA NO. 4315/DEL/20 05 WHICH WAS DECIDED ON 31.3.2008 SETTING ASIDE THE ISSUE AFRESH FOR VERIFICATION TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE ASP ECT THAT THE PREMISES INCLUDING NEW BUILDING WAS TAKEN ON RENT WHICH IS L OWER THAN THE MARKET RENT FOR SIMILAR PREMISES. THE TRIBUNAL ALS O DIRECTED THE ASSESSING OFFICER IF UPON VERIFICATION, IT IS MADE OUT THAT THE ASSESSEE COMPANY RECEIVED THE BENEFIT BY WAY OF INCURRING TH E LOWER RENT PAYMENT, THEN THE CLAIM OF THE ASSESSING OFFICER TH AT IF UPON VERIFICATION, IT IS MADE OUT THAT THE ASSESSEE COMP ANY RECEIVED THE BENEFIT BY WAY OF INCURRING THE LOWER RENT PAYMENT, THEN THE CLAIM OF THE ASSESSEE COMPANY FOR DEDUCTION OF THE COST OF C ONSTRUCTION OVER AND ABOVE THE AMOUNT REIMBURSED/RECOVERED FROM THE LESSOR SHALL BE ALLOWED AS REVENUE EXPENDITURE DEDUCTIBLE UNDER THE COVER OF SECTION 37(1) OF THE ACT. 4. DURING THE PROCEEDINGS IN PURSUANT TO THE TRIBUN AL ORDER (SUPRA). THE ASSESSING OFFICER DID NOT PAID ANY HE AL OF ATTENTION TOWARDS DIRECTIONS IN PARA 14 OF THE SAID ORDER AND DISMISSED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE ITSE LF CAPITALIZED THE AMOUNT AND ON WHICH ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION. THE ASSESSING OFFICER IN THIS CRYPTIC AND VERY BRIEF OR DER DID NOT BOTHER TO CONDUCT ANY ENQUIRY AS PER DIRECTIONS OF THE TRIBUN AL AND MERELY ITA NO. 5008/D/2010 3 MENTIONED THAT AS PER EXPLANATION 1 TO SECTION 32(1 ) OF THE ACT THIS EXPENDITURE WAS TO BE CAPITALIZED AND CLAIM OF THE ASSESSEE IS NOT TAXABLE UNDER THIS PROVISION. THE ASSESSEE AGAIN C ARRIED THE MATTER BEFORE CIT(A) AND THE CLAIM OF THE ASSESSEE WAS ALL OWED. NOW THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE GROUND AS REPRODUCED ABOVE. 5. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFO RE US. AT THE OUTSET, WE NOTE THAT THE ASSESSING OFFICER DID NOT DECIDE THE ISSUE AS PER DIRECTIONS OF THE TRIBUNAL ORDER (SUPRA) PARE 1 4. HOWEVER, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWIN G OBSERVATIONS AND FINDINGS: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , THE FINDINGS OF THE AO AND THE FACTS ON RECORD. THE HON BLE ITAT VIDE ORDER DATED 31.03.2008 WHILE ALLOWING THE APPEAL OF THE APPELLANT HAS OBSERVED AS UNDER: IN VIEW OF THE AFORESAID AUTHORITATIVE PRONOUNCEMENT OF THE HON'BLE SUPREME COURT, A PROPOSITION WHICH CAN BE DEDUCED IS THAT AN EXPENDI TURE INCURRED IN PLACE OF A REVENUE EXPENDITURE SHOULD B E CONSIDERED AS A REVENUE EXPENDITURE ALONE. IN OTHER WORDS, THOUGH PERCEPTIBLY THE EXPENDITURE RESULTED IN CREATION OF A CAPITAL ASSET YET THE EXPENDITURE THE REOF CANNOT BE CLASSIFIED AS CAPITAL EXPENDITURE FOR THE SAID REASON ALONE BUT THE NATURE OF THE ADVANTAGE WHICH THE ASSESSEE OBTAINS IN THE GIVEN SITUATION HAS TO BE EVALUATED IN A COMMERCIAL SENSE. THEREFORE, THE MOO T QUESTION IS AS TO WHAT ADVANTAGE THE PRESENT APPELL ANT OBTAINED BY UNDERTAKING CONSTRUCTION OF THE NEW BUILDING WHICH BELONGED TO SOMEBODY ELSE. OSTENSIBL Y, AS CONTENDED BY THE APPELLANT, IT SECURED A LEASE O F THE BUILDING AT A MONTHLY RENT WHICH WAS LOWER THAN THE MARKET RENT FOR SIMILAR PREMISES. THE SAVING IN EXPENDITURE IN THE MONTHLY RENTALS REFLECTED SAVING IN A REVENUE EXPENDITURE AND THEREFORE ANY EXPENDITURE M ET IN SUBSTITUTION OF SUCH SAVINGS IS TO BE VIEWED AS A REVENUE EXPENDITURE IN TERMS OF THE PARITY OF REASO NING ITA NO. 5008/D/2010 4 ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE CASE OF MADRAS AUTO SERVICE P. LTD. (SUPRA). IN VIEW OF THE AFORESAID DISCUSSION, IT THUS BECOME S CLEAR THAT EXPENDITURE ON CONSTRUCTION OF BUILDING, WHOSE OWNERSHIP DID NOT VEST IN THE ASSESSEE, BUT IN THE LESSOR AND WHICH HAS BEEN CONSTRUCTED NOT FOR THE PURPOSE OF ACQUISITION OF A CAPITAL ASSET BUT WITH THE PURPOSE OF RUNNING A BUSINESS MORE PROFITABLY AND IS IN SUBSTITUTION OF A REVENUE EXPENDITURE, IS TO BE ALL OWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IN SO F AR AS THE ANSWER TO THE PRESENT CONTROVERSY IS CONCERNED, IN PRINCIPLE, WE FIND AMPLE FORCE IN THE CLAIM OF THE ASSESSEE. SO HOWEVER, IN ORDER TO HOLD SUCH AN EXPENDITURE AS QUALIFYING TO BE REVENUE IN NATURE, A CONDITION PRECEDENT WHICH HAS BEEN EXPLAINED BY THE HON'BLE SUPREME COURT IS THAT THE INCURRENCE OF THE EXPENDITURE SHOULD HAVE RESULTED IN THE BENEFIT OF REDUCED REVENUE EXPENDITURE. IN THE PRESENT CASE TH E POINT CANVASSED BY THE ASSESSEE IS THAT THE PREMISE S INCLUDING THE NEW BUILDING, WAS TAKEN ON LEASE ON A MONTHLY RENT WHICH IS LOWER THAN THE MARKET RENT FO R SIMILAR SUITABLE PREMISES. WE HAVE PERUSED THE WRIT TEN SUBMISSIONS OF THE ASSESSEE IN THIS REGARD BEFORE T HE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(APPEALS) AND FIND SUCH AN AVERMENT BORNE OUT OF ON THE RECORD. T HE ASSESSEE HAS ALSO SUPPORTED ITS PLEA ON THE BASIS O F A CERTIFICATE FROM A PROPERTY DEALER WHO HAS CONFIRME D THAT THE MARKET RENT AS PREVAILING IN THE VICINITY OF THE PROPERTY IN QUESTION WAS HIGHER THAN THAT PAID BY T HE ASSESSEE. SO HOWEVER, WE FIND THAT THERE IS NO FIND ING BY EITHER OF THE AUTHORITIES ON THIS PLEA OF THE AS SESSEE. UNDERSTANDABLY, SINCE THE STAND OF THE ASSESSEE WAS NOT ACCEPTED IN PRINCIPLE, THEREFORE NEITHER OF THE AUTHORITIES BELOW HAVE EXAMINED THIS ASPECT. WE. THEREFORE, FIND IT EXPEDIENT TO SET ASIDE THE ORDER OF THE CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO VER IFY THIS ASPECT. UPON VERIFICATION, IF IT IS MADE OUT THAT THE ASSESSEE RECEIVED BENEFIT BY WAV OF INCURRING LOWER RENT PAYMENTS, THAN THE CLAIM OF THE ASSESSEE FOR DEDUCT ION OF THE COST OF CONSTRUCTION OVER AND ABOVE THE AMOUNT REIMBURSED/RECOVERED FROM THE LESSOR SHALL BE ALLOWED AS REVENUE EXPENDITURE DEDUCTIBLE UNDER THE COVER OF ITA NO. 5008/D/2010 5 SECTION 37(1) WHILE COMPUTING THE TOTAL INCOME OF T HE ASSESSEE. PERUSAL OF THE DIRECTIONS OF THE HONBLE ITAT AS QUO TED ABOVE SHOW THAT THE HONBLE ITAT HAS HELD THAT THE EXPENDITURE INCURRED BY THE APPELLANT ON CONSTRUCTI ON ON THE RENTED PREMISES WAS REVENUE EXPENDITURE DEDUCTABLE U/S 37(1) OF THE I.T. ACT. THE HONBLE IT AT DIRECTED THE AO TO VERIFY THAT IF THE APPELLANT HAD RECEIVED BENEFIT BY INCURRING LOWER RENT PAYMENT TH EN THE CLAIM OF THE APPELLANT FOR DEDUCTION OF THE COS T OF CONSTRUCTION ABOVE THE AMOUNT REIMBURSED FROM THE LESSOR SHOULD BE ALLOWED AS REVENUE EXPENDITURE U/S 37(1). THE CASE WAS THUS REMANDED BACK TO THE AO FO R VERIFICATION ON THE ISSUE AS MENTIONED ABOVE. ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 254 WA S PASSED BY THE AO ON 03.04.2009. THE FINDINGS GIVEN B Y THE AO ARE AS UNDER: THE ISSUE INVOLVED IN THIS CASE IS AS TO WHETHER T HE EXPENDITURE INCURRED BY THE ASSESSEE FOR CONSTRUCTI ON OF LEASEHOLD BUILDING IS CAPITAL OR REVENUE EXPENDITUR E. THE ASSESSEE HAD HIMSELF CAPITALIZED THE AMOUNT IN ITS BOOKS OF ACCOUNTS AND HAD ALSO NOT CLAIMED THIS AS REVENUE EXPENDITURE IN THE ORIGINAL RETURN OF INCOM E. AS PER EXPLANATION 1 OF SECTION32(1). AS SUCH ASSESSMENT IS COMPLETED AFTER DISALLOWING THE AMOUN T OF RS. 86270077/- PERUSAL OF THE FINDINGS OF THE AO MENTIONED ABOVE SHOWS THAT THE AO DID NOT FOLLOW THE DIRECTIONS OF T HE HONBLE ITAT, SINCE THERE WAS NO FINDING REGARDING T HE DIRECTIONS OF THE HONBLE ITAT TO EXAMINE WHETHER TH E APPELLANT HAD INCURRED LOWER RENT. THE ISSUE WAS REMANDED BACK TO THE AO TO SUBMIT HIS REPORT ON THE DIRECTIONS GIVEN BY THE HONBLE ITAT. IN HIS REMAND REPORT THE AO HAS OBSERVED THAT THE SUBMISSION OF T HE APPELLANT WAS CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. THE REMAND REPORT OF THE ASSESSING OFFI CER IS AS UNDER: THE REPORT ON THE SAME WAS SENT TO YOUR GOODSELF VIDE THIS OFFICE LETTER NO. 80 DATED 30.04.10. IN CONTINUTATION OF THE SAME, IT IS SUBMITTED THAT HE SUBMISSION SOF THE ASSESSEE WERE CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. THE ONLY BASIS ON WHICH THE ASSESSEE HAS RELIED TO PROVE THAT THE MARKET RENT O F THE PROPERTY T WAS MUCH HIGHER (I.E. RS. 23/- PER SQ. F T.) IS ITA NO. 5008/D/2010 6 THE QUOTATION OF THE ALLEGED PROPERTY DEALER FROM GURGAON BY THE NAME OF AND STYLE OF M/S SMS PROPERT IES (P) LTD. IN THIS CONNECTION, IT IS SUBMITTED THAT E H MARKET RENT ALWAYS TAKEN ON THE BASIS OF PREVAILING DEMAND AND SUPPLY OF THE PREMISE ALONGWITH THE LOCATIONAL ADVANTAGES/ DISADVANTAGES OF THE PROPERTY. YOUR GOODSELF WILL APPRECIATE THAT THE QUOTATION OF M/S SMS PROPERTIES (P) LTD. WAS UPDATED ON 16.03.05 . HOW CAN A REAL ESTATE AGENCY QUOTE RENTALS OF THE F .Y. 1999-2000 IN F.Y. 2005-06. THIS ITSELF SHOWS THE MANIPULATION OF THE PART OF THE ASSESSEE AS THE ASS ESSEE COULD NOT PROVIDE ANY RENT QUOTATION OF THAT PERIOD . THEREFORE, IT CANNOT BE TAKEN AS VALID DOCUMENT FOR CONCLUDING THE MARKET RATE. IT IS ALSO SUBMITTED THAT THE SECTOR-18, GURGAON ITSELF IS AN INSTITUTIONAL AREA WHERE LOT OF FINANC IAL ACTIVITIES CAME IN F.Y. 2004-05 AND F.Y. 2005-06. THEREFORE, IT IS SUBMITTED THAT ON THE BASIS OF DOC UMENTS FILED BY THE ASSESSEE COMPANY. IT CANNOT BE CONCLUD ED THAT ASSESSEE HAD PAID LOWER RENT AS COMPARED TO MARKET RENT. THE RENTAL AGREEMENT RELATED TO OTHER PARTIES SUCH AS GIVO LTD. SITUATED AT 26 MILESTONE, KHERKI DAULA AND FIRTO LAY INDIA SITUATED AT VILLAGE SIKANDERPUR, GH OSI, GURGAON ARE SITUATED AT A DISTANCE OF MORE THEN 3-4 KILOMETERS FROM THE PROPERTY OF THE ASSESSEE, SITUA TED AT SECTOR-18, GURGAON. THEREFORE, THE RENT AGREEMENT(S ) OF THE SAID PARTIES CANNOT BE COMPARED WITH THAT OF TH E ASSESSEES. IT IS ONCE AGAIN EMPHASIZED THAT THE CLAIM OF THE ASSESSEE IS NOT TENABLE IN VIEW OF THE REASONS MENTIONED AND THE ORDER PASSED BY THE AO BE UPHELD A S THE SAME HAS BEEN PASSED AFTER DUE DELIBERATION. PERUSAL OF THE REMAND REPORT SHOWS THAT THE AO HAS NOT BROUGHT ANY EVIDENCES ON RECORD OR MADE ANY INQUIRIES REGARDING THE RENTAL VALUE OF PROPERTY. O N THE OTHER HAND THE AO IS ACCEPTED THE FACT THAT SECTION 18 WOULD NOW WHERE THE LEASE PROPERTY IS LOCATED IS AN INSTITUIOTIAL AREA WHERE LOT OF FINANCIAL ACTIVITY WERE TAKING PLACE. PERUSAL OF FACTS ON RECORDS SHOWS THA T THE APPELLANT HAD SUBMITTED THE RENT AGREEMENTS MADE BY TWO INDEPENDENT COMPANIES I.E. GIVO LTD. AND FRITO LAY INDIA WHICH ARE MANUFACTURING COMPANIES AND HAVE TAKEN LEASE OF PROPERTY WHICH IS FAR AWAY FROM THE CITY ITA NO. 5008/D/2010 7 IN THE RELEVANT A.Y. AS PER THE AGREEMENT PLACED ON RECORD IT IS SEEN THAT THE RENT PAYABLE BY THEM WAS MUCH HIGHER THAN THE LEASE RENT PAID BY THE APPELLA NT COMPANY IN SPITE OF THE FACT THAT BOTH THE COMPANIE S HAVE TAKEN THE PROPERTY ON LEASE RENT WHICH ARE AT LEAST 10-15 KM AWAY FROM THE PROPERTY TAKEN ON RENT BY TH E APPELLANT COMPANY. APPELLANT COMPANY HAD TAKEN THE PROPERTY IN SECTOR 18 WHICH IS DESCRIBED AS INSTITU TIONAL AREA OF THE GURGAON. SITUATION OF SECTOR 18 IS ALSO VERY CENTRAL BEING SITUATED NEAR IFFCO CHOWK WHICH IS A PRIMA AREA. FURTHER THE AO IS ALSO IN AGREEMENT THRO UGH HIS REPORT THAT SECTOR 18 WAS AN INSTITUTIONAL AREA WHERE A LOT OF FINANCIAL ACTIVITY IS UNDERTAKEN. THE RENTAL AGREEMENT SUBMITTED BY THE APPELLANT RELATES TO INDEPENDENT COMPANIES AND IT IS SEEN THA T THESE COMPANIES HAD TAKEN PROPERTY ON LEASE WHICH A RE LOCATED AT A DISTANCE FROM THE PROPERTY TAKEN ON RE NT BY THE APPELLANT. THE PROPERTY TAKEN ON RENT BY THE APPELLANT IS LOCATED AT SECTOR 18 WHICH THE AO HIMSE LF IN HIS REMAND REPORT HAS ACCEPTED THAT IT WAS A INSTITUTIONAL AREA WHERE A LOT OF FINANCIAL ACTIVIT IES WERE TAKING PLACE. THE AO HAS NOT GIVEN ANY BASIS FOR REJECTING THE RENTAL AGREEMEN T SUBMITTED BY THE APPELLANT. THE ONLY CONTE NTION OF THE AO IS THAT THE AGREEMENT WAS NOT ACCEPTABLE SINCE THEY WAS SITUATE D AT THE DISTANCE OF 3 TO 4 KILOMETERS FROM THE PROPE RTY OF THE APPELLANT. PERUSAL OF THE AGREEMENT FILED BY TH E APPELLANT SHOWS THAT THE AS PER THE RENTAL AGREEMEN T FILED BY THE APPELLANT M/S GIVO LTD. HAD TAKEN LEAS E OF PROPERTY IN OCTOBER, 2000 @ RS. 38.90 PER SQ. FEET. IT IS ALSO SEEN THAT M/S FRITO LAYS INDIA LTD. HAD TAKEN THE PROPERTY ON LEASE IN JUNE, 2000 @ RS. 35.00 PER SQ. FEET. THE ABOVE 2 COMPANIES ARE INDEPENDENT COMPANIES AND ARE IN NO WAY CONNECTED TO THE APPELLANT. IT IS ALS O OBSERVED THAT WHEREAS THE PROPERTY OF THE APPELLANT IS LOCATED IN SECTOR 18, WHICH IS A PRIME ARE OF GURGA ON, THE PROPERTY OF WHICH RENT AGREEMENTS HAVE BEEN SUBMITTED ARE LOCATED AT THE DISTANCE FROM THE MAIN AREA OF THE CITY. THE ABOVE FACTS CLEARLY POINT OUT THAT THE RENTAL RATES OF PROPERTY WHICH WERE BETWEEN RS. 35 P ER SQ. FEET AND RS. 38 PER SQ. FEET WILL BE LESS THAN T HE RATE IN THE MAIN INSTITUTIONAL AREA OF THE CITY WHERE TH E PROPERTY OF THE APPELLANT IS LOCATED. THE AO HAS HIM SELF ACCEPTED IN THE REMAND REPORT THAT THE PROPERTY OF THE ITA NO. 5008/D/2010 8 APPELLANT IS LOCATED IN THE MAIN INSTITUTIONAL AREA WHEREAS THE PROPERTY FOR WHICH THE RENT AGREEMENT H AVE BEEN FILED BY THE APPELLANT IN SUPPORT OF HIS CLAIM OF LOWER RENT ARE LOCATED AWAY FROM THE MAIN AREA. THE AO HAS NOT BROUGHT ANY EVIDENCES ON RECORD TO SHOW THA T THE RENTAL BEING PAID BY THE APPELLANT WAS MORE THA N THE MARKET VALUE. THE AO HAD ALSO NOT BROUGHT ANY FACTS ON RECORD DOUBTING THE AGREEMENT FILED BY THE APPELLAN T. IN ADDITION TO THE ABOVE THE APPELLANT HAS ALSO FILED A COPY OF QUOTATION FROM A PROPERTY DEALER WHICH HAS BEEN CONSIDERED BY THE HONBLE ITAT ALSO. THE APPELLANT I S PAYING RENT FOR THE PROPERTY TAKEN ON LEASE @ RS. 13 PER SQ. FEET AND HAS SUBMITTED COPIES OF RENTAL AGREEME NTS MENTIONED ABOVE WHICH SHOW THAT THE PAYMENT OF RENT WERE MUCH LOWER THAN THE MARKET RENT APPLICABLE. QUOTATION HAS ALSO BEEN SUBMITTED FROM A PROPERTY DEALER WHICH IS ON RECORD. MOREOVER, THE AO HAS NOT BROUGHT ANY FACTS OR EVIDEN CES ON RECORD WHICH SOWS THAT RENT PAID BY THE APPELLAN T IS MORE THAN THE MARKET RATE. THE AO HAS ALSO NOT BROUG HT ON RECORD AND FACTS WHICH WOULD SHOW THAT THE RENTA L AGREEMENTS FILED BY APPELLANT WERE NOT CORRECT, ON THE OTHER HAND THE AO HAS OBSERVED THAT THE PROPERTY TAK EN ON RENT BY THE APPELLANT WAS LOCATED IN AN PRIME INSTITUTIONAL AREA WHEREAS THE PROPRIETIES FOR WHIC H AGREEMENTS HAVE BEEN FILED BY THE APPELLANT WERE SO ME DISTANCE AWAY FROM THE PRIME AREAS. IN VIEW OF THE DIRECTIONS OF THE HONBLE ITAT AND IN VIEW OF THE FI NDINGS ABOVE I AM INCLINED TO AGREE WITH THE VIEWS OF THE APPELLANT THAT THE RENT BEING PAID BY THE APPELLANT WAS MUCH LOWER THAN THE RENTAL RATE OF PROPERTY IN NEAR BY AREA. SINCE THE APPELLANT HAS DERIVED BENEFIT BY INCURRING LOWER RENT, THEREFORE, IN VIEW OF THE DIR ECTIONS OF THE HONBLE ITAT THE EXPENDITURE INCURRED BY THE APPELLANT ON CONSTRUCTION ON THE LEASE PREMISES WIL L BE ALLOWABLE AS REVENUE EXPENDITURE. THIS GROUND OF AP PEAL IS ALLOWED. 6. IN VIEW OF THE ABOVE, IT CLEARLY DEMONSTRATE THA T THE CIT(A) CONSIDERED DIRECTIONS OF THE TRIBUNAL ORDER (SUPRA) , ORDER OF THE ASSESSING OFFICER PASSED IN PURSUANT TO THE TRIBUNA L ORDER, ASSESSEES SUBMISSIONS DATED 1.09.2008, LETTER OF THE ASSESSIN G OFFICER DATED ITA NO. 5008/D/2010 9 19.5.2010 AND REJOINDER TO THE SAID REMAND REPORT O F THE ASSESSING OFFICER. 7. FROM VIGILANT PERUSAL OF THE OPERATIVE PART OF T HE IMPUGNED ORDER WE NOTE THAT THE CIT(A) TAKING CARE OF DIRECT IONS OF THE TRIBUNAL ORDER (SUPRA) PASSED A VERY DETAILED ORDER AFTER CO NSIDERING THE ALL RELEVANT MATERIAL SUBMISSIONS OF THE ASSESSING OFFI CER AND STAND AND CONTENTIONS/ALLEGATIONS OF THE ASSESSING OFFICER AN D FINALLY HELD THAT THE RENT AGREEMENTS OF TWO INDEPENDENT COMPANIES VI Z. GIVO & FRITROLAY INDIA, WHICH ARE MANUFACTURING COMPANIES, HAVE TAKEN LEASE PROPERTY WHICH IS FAR AWAY FROM THE CITY DURING REL EVANT PERIOD AND RENT PAYABLE BY THEM WAS MUCH HIGHER THAN THE LEASE RENT PAID BY THE APPELLANT COMPANY IN SPITE OF THE FACT THAT THESE T WO COMPANIES HAVE TAKEN THE PROPERTY ON LEASE WHICH ARE 10-15 KM AWAY FROM THE PROPERTY TAKEN OR RENT BY THE PRESENT ASSESSEE COMP ANY. IT WAS ALSO NOTICED THAT THE ASSESSEE COMPANY HAD TAKEN THE PRO PERTY ON LEASE IN SECTOR 18 WHICH IS DESCRIBED AS INSTITUTIONAL AREA OF GURGAON BEING SITUATED NEAR IFFCO CHOWK WHICH IS A PRIME AREA AND THE ASSESSING OFFICER HAS ACCEPTED THESE FACTS IN HIS REMAND REPO RT BY STATING THAT SECTOR 18 WAS AN INSTITUTIONAL AREA WHERE A LOT OF FINANCIAL ACTIVITIES ARE UNDERTAKEN. 8. AT THIS JUNCTURE, IT WOULD BE APPROPRIATE TO RES PECTFULLY CONSIDER THE RATIO OF THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MADRAS AUTO SERVICES P. LTD. (SUPRA) WHEREIN IT WAS HELD THAT THE SAVING EXPENDITURE IN MONTHLY RENTALS REFLECTED IN A REVENUE EXPENDITURE AND, THEREFORE, ANY EXPENDITURE MET IN SUBSTITUTION OF SUCH SAVING IS TO BE VIEWED AS A REVENUE EXPENDITUR E. FROM BARE READING OF ASSESSMENT ORDER, REMAND REPORT OF THE A SSESSING OFFICER AND SUBMISSIONS & CONTENTIONS OF THE LD. DR IT IS V IVID THAT THE QUANTUM OF EXPENDITURE AND THIS FACT HAVE NOT BEEN DISPUTED BY THE ITA NO. 5008/D/2010 10 ASSESSING OFFICER THAT THE IMPUGNED EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE THUS QUANTUM AN D BUSINESS PURPOSE OF EXPENDITURE IS NOT DISPUTED. HOWEVER, T HE CONTROVERSY REMAINED ABOUT THE TREATMENT WHETHER IT IS REVENUE OR CAPITAL EXPENDITURE WHICH WAS ALSO SETTLED BY THE TRIBUNAL UPTO THIS EXTENT THAT THE SAVING IN MONTHLY RENTALS IS TO BE VIEWED AS REVENUE EXPENDITURE. THE ISSUE OF VERIFICATION OF BENEFIT RECEIVED BY THE ASSESSEE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT IF IT MADE OUT THAT THE ASSESSEE REC EIVED BENEFIT BY WAY OF INCURRING LOWER RENT PAYMENTS THEN THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE COST OF CONSTRUCTION OVER AND ABOV E THE AMOUNT REIMBURSED/RECOVERED FROM THE LESSOR SHALL BE ALLOW ED AS REVENUE EXPENDITURE DEDUCTIBLE UNDER THE COVER OF SECTION 3 7(1) OF THE ACT. 9. AS WE HAVE ALREADY OBSERVED THAT THE ASSESSING O FFICER DID NOT FOLLOW THE DIRECTIONS OF THE TRIBUNAL ORDER (SU PRA) AND REJECTED THE CLAIM WITHOUT ANY REQUIRED VERIFICATION. BUT THE C IT(A), HAVING COTERMINOUS POWERS WITH THE ASSESSING OFFICER, ADJU DICATED THE ISSUE IN A PROPER MANNER AS PER LETTERS AND SPIRIT OF THE TRIBUNAL ORDER. THE CIT(A) GAVE AN OPPORTUNITY TO THE ASSESSING OFFICER TO COMMENT UPON AND TO SUBMIT HIS REMAND REPORT TO THE SUBMISSIONS DELIBERATIONS THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE. THE CIT (A) TOOK TWO INDEPENDENT ENTITIES AND AS PER RENTAL AGREEMENT OF M/S GIVO IT TOOK PROPERTY ON LEASE IN OCTOBER, 2000 @ RS. 38.90 PER SQ. FEET AND M/S FRITO LAYS TOOK PROPERTY ON LEASE IN JUNE 2000 @ RS . 35 PER SQ. FEET. THATS TOO THOSE LEASED PROPERTIES ARE LOCATED, AS PER REMAND REPORT OF THE ASSESSING OFFICER, 3-4 KM AWAY FROM IMPUGNED LE ASED PROPERTY TAKEN BY THE ASSESSEE, WHICH IS SITUATED IN MAIN AR EA SECTOR 18, GURGAON. UNDISPUTEDLY THE ASSESSEE COMPANY WAS PAY ING RENT @ RS. 13 PER SQ. FEET WHICH IS MUCH LOWER IN COMPARISON T O THE TWO ITA NO. 5008/D/2010 11 INDEPENDENT CASES WHERE RENT WAS APPROXIMATELY 2-3 TIMES FOR PROPERTIES WHICH ARE LOCATED FAR FROM PRIME LOCATIO N OF THE PROPERTY TAKEN OVER BY THE ASSESSEE ON LOWER RENT IN COMPARI SON TO PREVAIL RENTAL RATES DURING RELEVANT FINANCIAL PERIOD I.E. 2000-01. 10. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CI T(A) THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ON RECORD AND FACTS WHICH WOULD SHOW THAT THE RENTAL AGREEMENTS FILED BY THE ASSESS EE WERE NOT CORRECT AND AT THE SAME TIME THE ASSESSING OFFICER HAS OBSE RVED THAT THE PROPERTY TAKEN BY ASSESSEE ON RENT IS LOCATED IN A PRIME INSTITUTIONAL AREA. THE PROPERTIES FOR WHICH THE AGREEMENTS HAVE BEEN FILED WERE AWAY FROM PRIME LOCATION OF SECTOR 18 GURGAON. THE CIT(A) RIGHTLY AND CORRECTLY DISCHARGED HIS DUTIES AS PER DIRECTIONS O F THE TRIBUNAL AND HELD THAT THE RENT BEING PAID BY THE ASSESSEE WAS M UCH LOWER THAN THE RENTAL RATE OF PROPERTY EVEN SITUATED FAR AWAY FROM PRIME AREA. HENCE, THE FIRST APPELLATE AUTHORITY RIGHTLY HELD THAT THE ASSESSEE HAS DERIVED BENEFIT BY INCURRING LOWER RENT PAYMENT, THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE ON CONSTRUCTION OF LEASED PREMISES WILL BE ALLOWABLE AS REVENUE EXPENDITURE. THE LD. DR COULD NOT ALSO CONTROVERT THIS SUBMISSION OF LD. SENIOR COUNSEL OF THE ASSESS EE THAT THE LEASE AGREEMENT IS FOR 13 YEARS AND THE CONTINUOUS BENEFI T OF LOWER RENT IS TO BE ENJOYED BY THE ASSESSEE FOR A PERIOD OF ABOUT 13 YEARS. 11. ACCORDINGLY, SOLE ISSUE RAISED BY THE ASSESSEE IN ITS GROUND NOS. 1 & 2 FAIL AND APPEAL OF THE REVENUE BEING DEV OID OF MERITS IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.11.2 015 SD/- SD/- (S.V. MEHROTRA) (C.M.GARG) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 23.11.2015 *KAVITA, P.S. ITA NO. 5008/D/2010 12 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 5008/D/2010 13 DATE 1. DRAFT DICTATED ON 09.11.2015 2. DRAFT PLACED BEFORE AUTHOR 10.11.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 10.11.15 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 10.11.15 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.11.15 6. KEPT FOR PRONOUNCEMENT ON 23.11.15 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.