DCIT 4(1), MUMBAI V. DERIVIUM TRADITION SECURITIES (I) P. LTD, MUMBAI

ITA 5843/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2841 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH , MUMBAI BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA , ACCOUNTANT MEMBER . ITA. NO. 5843 / M UM /20 1 3 (ASSESSMENT YEAR: 2 0 1 0 - 11 ) THE D C IT 4 ( 1 ), MUMBAI APPELLANT VS. M/S. DERIVIUM TRADITION SECURITIES (INDIA) PVT. LTD., 10, EUCHARISTIC CONGRESS BLDG., 5 TH CONVENT ROAD, COLABA, MUMBAI 400 0 39 RESPONDENT PAN: AA BCD8117D / BY APPELLANT : SHRI JEETENDRA KUMAR , D.R. / BY RESPONDENT : SHRI ASHOK PATIL , A .R. / DATE OF HEARING : 2 4 . 0 9 .2015 / DATE OF PRONOUNCEMENT : 28 . 1 0 .201 5 ORDER I T A NO . 5843 / M UM / 1 3 A.Y. 10 - 11 [ D C IT VS. M/S. DERIVIUM TRADITION SECURITIES (INDIA) PVT. LTD. ] PAGE 2 PER SHAILENDR A KUMAR YADAV, J . M: THIS APPEAL HAS BEEN FILED BY REVENU E AGAINST THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEALS) - 8 , MUMBAI , DATED 30 TH JULY, 20 1 3 FOR A.Y. 20 1 0 - 11 ON FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE EVEN THOUGH THE EXPENSES OF RS.47,87,297/ - ARE OF CAPITAL NATURE AND FOR ENDURABLE BENEFIT FOR THE PERIOD OF 5 YEARS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDE R OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE THAT OF THE ASSESSING OFFICER BE RESTORED. 2. FACTS OF THE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE CLAIMED AN AMOUNT OF RS.68,13,80 0/ - AS LEASEHOLD IMPROVEMENT EXPENSES OUT OF WHICH RS.20,26,503/ - WAS TRANSFERRED TO FIXED ASSETS ACCOUNT AND DEPRECIATION WAS CLAIMED OVER IT. THE BALANCE AMOUNT OF RS.47,87,297/ - WAS CLAIMED AS REVENUE EXPENSES WHICH ASSESSEE DID NOT DEBIT IN PROFIT AND LOSS ACCOUNT AND DIRECTLY DEDUCTED IN COMPUTATION OF INCOME AND ADDED A FOOTNOTE TO COMPUTATION OF INCOME. THEREFORE, ASSESSING OFFICER ASKED TO ASSESSEE TO EXPLAIN ITS CLAIM OF LEASE IMPROVEMENT EXPENSES AS REVENUE EXPENSES KEEPING IN VIEW THE NATURE OF EXPENSES AND FACT THAT ASSESSEE ITSELF HAD CAPITALIZED AN AMOUNT OF RS.20,26,503/ - AND CLAIMED DEPRECIATION OVER IT. IN RESPONSE TO SHOW CAUSE, ASSESSEE MADE WRITTEN SUBMISSION VIDE LETTER I T A NO . 5843 / M UM / 1 3 A.Y. 10 - 11 [ D C IT VS. M/S. DERIVIUM TRADITION SECURITIES (INDIA) PVT. LTD. ] PAGE 3 DATED 07.12.2012. ASSESSING OFFICER HAVING CONSIDERED THE SUBMIS SIONS ON BEHALF OF ASSESSEE REJECTED THE CLAIM OF ASSESSEE. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO ASSESSEE. S AME HAS BEEN OPPOSED BEFORE US INTER ALIA SUBMITTED THAT CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE EVEN THOUGH THE EXPENSES OF RS.47,87,297/ - ARE OF CAPITAL NATURE AND FOR ENDURABLE BENEFIT FOR THE PERIOD OF 5 YEARS. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 4 . AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSEE HAS INCURRED AN EXPENDITURE AT RS.68,13,800/ - ON ACCOUNT OF FUNCTIONAL FACILITATION OF PREMISES. IT IS A MATTER OF RECORD THAT PREMISES ARE RENTED OUT AND DOES NOT BELONG TO ASSESSEE. ASSESSEE HAD CAPITALIZED THE EXPENDITURE ON FIXED ASSET WHICH CAN BE REMOVED FROM BUILDING AS PART O F CAPITAL EXPENDITURE AND CLAIMED DEPRECIATION THEREON. THE REMAINING AMOUNT OF RS.47,87,297/ - WAS FOR IMPROVEMENT OF PREMISES TAKEN ON RENT. RENT AGREEMENT WAS FOR A PERIOD OF 5 YEARS AND ONCE ASSESSEE VACATED PREMISES, ADDITION OF WOODEN PARTITION, PAI NTING, GLASS WORK ETC. IN THE PROPERTY WAS OF NO USE TO ASSESSEE, AND, THEREFORE, IT DOES NOT I T A NO . 5843 / M UM / 1 3 A.Y. 10 - 11 [ D C IT VS. M/S. DERIVIUM TRADITION SECURITIES (INDIA) PVT. LTD. ] PAGE 4 GENERATE ANY ENDURING BENEFITS TO ASSESSEE. ASSESSEE WAS UNDER AN OBLIGATION TO RAISE THIS CONSTRUCTION FOR RUNNING ITS BUSINESS IN RENTED PREMISES. THERE WAS N O ENDURING BENEFIT TO ASSESSEE AS PROPERTY IN QUESTION WAS ON LEASE. HONBLE SUPREME COURT IN CASE OF BOMBAY STEAM NAVIGATION CO. (1953) (P) LTD. VS. CIT (1965) 56 ITR 52 (SC) HAS HELD THAT THE QUESTION MUST BE VIEWED IN LARGER CONTEXT OF BUSINESS NECESSI TY OR EXPEDIENCY. IF OUTGOING OR EXPENDITURE IS SO RELATED TO CARRYING ON OR CONDUCT OF BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF PROFIT - EARNING PROCESS AND NOT FOR THE ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER, THE POSSESS ION OF WHICH IS A CONDITION TO CARRYING ON OF BUSINESS, EXPENDITURE MAY BE REGARDED AS REVENUE EXPENDITURE. SIMILAR VIEW HAS BEEN TAKEN IN CASE OF CIT VS. ASHOK LEYLAND LTD. 1973 CTR (SC) 9. HONBLE DELHI HIGH COURT IN CASE OF EXPORT FINANCE LTD. 206 (IT 4) GJX - 0341 - DEL, HELD THAT EXPENDITURE INCURRED ON PROVIDING WOODEN PARTITION, PAINTING GLASS WORK AND OTHER REPAIRS TO LEASE HOLD PREMISES WAS REVENUE EXPENDITURE. THE BREAK UP OF THE EXPENDITURE INCURRED BY ASSESSEE REVEALS THAT ASSESSEE HAD INCURRED EX PENDITURE ON ACCOUNT OF PROFESSIONAL FEE OF RS. 6.55 LAKHS, ELECTRICAL WORKS OF RS.11.18 LAKHS, CIVIL WORK INCLUDING CARPENTRY WORK & PAINTING WORK OF RS. 28.70 LAKHS AND OTHER MINOR REPAIRS OF RS.1.41 LAKHS. THESE EXPENSES ARE CLEARLY ALLOWABLE UNDER THE PROVISIONS OF SECTION 30(I) OR ALTERNATIVELY SECTION 30 OF THE INCOME TAX ACT, 1961. BY INCURRING THE SAID EXPENDITURE NO NEW ASSET WAS CREATED. THE EXPENDITURE DID NOT ADD TO FIXED I T A NO . 5843 / M UM / 1 3 A.Y. 10 - 11 [ D C IT VS. M/S. DERIVIUM TRADITION SECURITIES (INDIA) PVT. LTD. ] PAGE 5 CAPITAL OF ASSESSEE; THE PERMANENT STRUCTURE DID NOT CREATE A NEW SOURCE OF INCOME AS THE PRODUCT REMAINED SAME AND ASSESSEE DID NOT ACQUIRE A SOURCE OF PROFIT OR INCOME. THE ADVANTAGE CONSISTED MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS, ENABLING THE MANAGEMENT OF ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIE NTLY WHILE LEAVING THE FIX ED CAPITAL UNTOUCHED. IN VIEW OF ABOVE FACTUAL AND LEGAL DISCUSSION CIT(A) WAS JUSTIFIED IN ALLOWING THE SAME AS REVENUE EXPENDITURE. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5 . A S A RESULT, APPEAL FILED BY REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28TH DAY OF OCTOBE R , 201 5 . SD/ - SD/ - ( ASHWANI TANEJA ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : DATED 28 / 1 0 /2015 S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1 . / REVENUE 2 . / ASSESSEE 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. BY ORDER / , / , ,