Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 81230 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-10-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
19-08-2014
Assessment Year
2009-2010
Appeal Filed On
15-04-2013
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 700/MDS/2013 / ASSESSMENT YEAR : 2009-10 JAYAKRISHNA FLOUR MILLS PVT. LTD., NO.5-A, RAJAJI ROAD, SALEM 636 007 [PAN: AAACJ 5436 G] ( !% /APPELLANT) VS THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, SALEM 636 007 ( &'!% /RESPONDENT) / APPELLANT BY : SHRI V.S.JAYAKUMAR, ADVOCATE / RESPONDENT BY : SHRI GURU BHASHYAM, JCIT / DATE OF HEARING : 19-08-2014 ! / DATE OF PRONOUNCEMENT : 27-10-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS), SALEM DATED 24-01-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 9-10. I.T.A. NO. 700/MDS/2013 2 2. THE ASSESSEE IS RUNNING A FLOOR MILL. IN THE AY UNDER CONSIDERATION, THE ASSESSEE SPENT AN AMOUNT OF ` 53,88,776/- FOR THE CONSTRUCTION OF STORAGE SHED ON THE LEASE-HOLD LAND AND CLAIMED THE SAME AS EXPENDITURE IN PROFIT & LOSS A/ C. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER HELD THAT THE SHEDS WERE CONSTRUCTED ON LEASE-HOLD LAND, THER EFORE, THE CASE OF ASSESSEE FALLS WITHIN THE AMBIT OF EXPLANATION-1 TO SECTION 32(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). THE AMOUNT SPENT BY THE ASSESSEE ON CONSTRUCTION OF SHEDS IS CAPITAL EXPENDITURE ALLOWABLE FOR DEPRECIATION AND IS NOT A REVENUE EXPENDITURE. AGAINST THE ASSESSMENT ORDER DATED 30-11-2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). THE CIT(APPEALS) VIDE IMPUGNED ORDER UPHELD THE FINDING S OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL. AGGRIEVED BY THE ORDER OF FIRST APPELLATE AUTHORITY , THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBU NAL. 3. SHRI V.S.JAYAKUMAR, APPEARING ON BEHALF OF THE A SSESSEE SUBMITTED THAT FOUR STORAGE DEPOTS WERE ALLOTTED TO THE ASSESSEE ON LEASE-HOLD BASIS FOR THE PERIOD OF TWENTY NINE Y EARS IN INTEGRATED STORAGE CUM MARKETING YARD COMPLEX BY TA MIL NADU I.T.A. NO. 700/MDS/2013 3 FOODGRAINS MARKETING YARD LIMITED., A SPECIAL PURPO SE VEHICLE FORMED BY MINISTRY OF COMMERCE AND INDUSTRY, GOVT. OF INDIA. THE ASSESSEE CONTRIBUTED FOR THE CONSTRUCTION OF SHEDS. THIS DID NOT RESULT IN CREATION OF ANY ASSET OR BENEFIT OF ENDUR ING NATURE TO THE ASSESSEE. HOWEVER, THESE CONTRIBUTIONS FOR INTEGRA TED STORAGE FACILITIES HELPED THE ASSESSEE TO SECURE LOWER MONT HLY LEASE RENTS. APART FROM PROVIDING STORAGE DEPOT, THE TAMIL NADU FOODGRAINS MARKETING YARD LIMITED., IS PROVIDING OTHER FACILIT IES VIZ., WAREHOUSE, SOLAR TUNNEL, DRYER PRO-PROCESSING CENTR E, R&D LABORATORY, AGRI-BUSINESS SOURCING CENTRE, COLD STO RAGE UNIT, CONTAINER TERMINAL, TRAINING CENTRE ETC. THE LAND DOES NOT BELONG TO THE ASSESSEE AND AFTER THE COMPLETION OF LEASE PERIOD, THE SHEDS SHALL BE TRANSFERRED TO THE LESSOR. THERE FORE, THE AMOUNT CONTRIBUTED TOWARDS THE CONSTRUCTION OF SHED IS A REVENUE EXPENDITURE, AS NO CAPITAL ASSET HAS COME INTO EXIS TENCE. EXPLANATION-1 TO SECTION 32(1) HAS NO APPLICATION I N THE CASE OF THE ASSESSEE. THE LD.AR IN ORDER TO SUPPORT HIS CO NTENTIONS RELIED ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA I N THE CASE OF EMPIRE JUTE CO. LTD., REPORTED AS 124 ITR I (SC) AND THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD., REPORTED AS 293 ITR 432 (MADRAS). I.T.A. NO. 700/MDS/2013 4 4. ON THE OTHER HAND, SHRI GURU BHASHYAM, REPRESENT ING THE REVENUE VEHEMENTLY DEFENDED THE ORDER OF CIT(APPEAL S). THE LD.DR SUBMITTED THAT THE ASSESSEE HAS PLACED RELIAN CE ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE C ASE OF CIT VS. MADRAS AUTO SERVICE (P) LTD. REPORTED AS 233 ITR 468. THE SAID DECISION IS PRIOR TO INSERTION OF EXPLANTION-1 TO S ECTION 32(1) IN THE YEAR 1986. THERE HAS BEEN SUBSTANTIAL SHIFT IN TRE ATMENT OF EXPENDITURE INCURRED ON LEASED PREMISES AFTER INSER TION OF EXPLANATION-1. THE LD.DR IN ORDER TO SUPPORT HIS S UBMISSION RELIED ON THE FOLLOWING DECISIONS: I. L.H.SUGAR FACTORY & OIL MILLS (P) LTD., VS. CIT REPORTED AS 125 ITR 293 (SC); II. INDIAN ALUMINIUM CO. LTD., VS. CIT REPORTED AS 198 ITR 202 (CALCUTTA); AND III. DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ABT LTD., VS. ACIT REPORTED AS 21 ITR (T) 634; 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS, THE DE CISIONS/JUDGMENTS ON WHICH BOTH THE SIDES HAVE PLACED RELIANCE. THE ONLY ISSUE IN I.T.A. NO. 700/MDS/2013 5 APPEAL IS: WHETHER THE EXPENDITURE OF ` 53,88,776/- INCURRED BY ASSESSEE ON CONSTRUCTION OF SHEDS ON LEASE-HOLD LAN D IS REVENUE OR CAPITAL IN NATURE? THE ASSESSEE HAS BEEN ALLOTT ED FOUR STORAGE DEPOTS BY TAMIL NADU FOODGRAINS MARKETING YARD LIMI TED. THE ASSESSEE CONTRIBUTED MORE THAN ` 53.00 LAKHS FOR CONSTRUCTION OF SHEDS TO BE USED FOR STORAGE OF WHEAT ETC., AND CLA IMED THE SAME AS REVENUE EXPENDITURE. WHEREAS, THE CONTENTION OF THE REVENUE IS THAT AFTER INSERTION OF EXPLANATION-1 TO SECTION 32(1), ANY CONSTRUCTION MADE ON LEASE-HOLD PREMISES IS TO BE T REATED AS CAPITAL EXPENDITURE. BEFORE PROCEEDING FURTHER, LE T US FIRST EXAMINE EXPLANATION-1 WHICH READS AS UNDER: EXPLANATION 1.--WHERE THE BUSINESS OR PROFESSION O F THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY H IM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY S TRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOV ATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIO NS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDIN G OWNED BY THE ASSESSEE. EXPLANATION-1 TO SECTION 32(1) WAS INSERTED BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 W.E.F.01-04- 1998 TO DEAL WITH THE SITUATION WHERE THE ASSESSEE IS CARRYING ON I.T.A. NO. 700/MDS/2013 6 BUSINESS OR PROFESSION IN A BUILDING ON LEASE OR OTHER RIGHTS OF OCCUPANCY. ANY EXPENDITURE INCURRED BY THE ASSESSE E FOR THE PURPOSE OF BUSINESS OR PROFESSION ON THE CONSTRUCTI ON OF ANY STRUCTURE OR RENOVATION OR EXTENSION OR IMPROVEMENT TO THE BUILDING THEN THE EXPENDITURE SHALL BE TREATED AS CAPITAL EX PENDITURE. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD., (SUPRA) HAS EXPLAINED THAT THE EXPRESSION BUILDING HAS TO BE INTERPRETED IN THE MANNER AS I T IS USED IN THE SECTION. THE HON'BLE COURT THUS HELD: IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD PUT UP THE IMPUGNED CONSTRUCTION OF BUILDING ONLY ON LEASEHOLD LAND AND NO BUILDING WAS TAKEN ON LEASE BY THE ASSESSEE. THEREFORE, THE FICT ION CREATED BY EXPLANATION 1 THAT THE BUILDING PUT UP BY HIM IN TH E LEASEHOLD LAND OR STRUCTURE OR WORK SHALL BE CONSTRUED AS IF THE SAME IS OWNED BY THE ASSESSEE, IS NOT APPLICABLE TO THE CASE OF THE ASSE SSEE AND EXPLANATION 1 TO SECTION 32(1) OF THE ACT IS NOT ATTRACTED TO T HE INSTANT CASE OF THE ASSESSEE AT ALL. OF COURSE, AN ARGUMENT WAS ADVANCED ON BEHALF OF TH E REVENUE THAT THE WORDS WHERE THE BUSINESS OR PROFESSION IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH T HE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY WOULD ALSO INCLU DE LANDS AND WOULD BE READ AS WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A LAND NOT OWNED BY HIM BUT IN RESPECT OF WHI CH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND IN S UCH CASE, EXPLANATION 1 TO SECTION 32(1) OF THE ACT IS SQUARELY APPLICABL E TO I.T.A. NO. 700/MDS/2013 7 THE INSTANT CASE OF THE ASSESSEE. BUT WE ARE UNABLE TO APPRECIATE THE SAID ARGUMENT. IN A CASE WHERE THE STATUTORY PROVIS ION IS PLAIN AND UNAMBIGUOUS, THE COURT SHALL NOT INTERPRET THE SAME IN A DIFFERENT MANNER, ONLY BECAUSE OF HARSH CONSEQUENCES ARISING THEREFROM ; AND IT IS WELL KNOWN THAT THE COURT CAN IRON OUT THE CREAS ES BUT IT CANNOT CHANGE THE TEXTURE OF THE FABRIC, CANNOT ENLARGE TH E SCOPE OF LEGISLATION OR INTENTION WHEN THE LANGUAGE OF THE PROVISION IS PLAIN AND UNAMBIGUOUS, CANNOT ADD OR SUBTRACT WORDS TO A STAT UTE OR READ SOMETHING INTO IT WHICH IS NOT THERE AND CANNOT REW RITE OR RECAST LEGISLATION , VIDE NASIRUDDIN V. SITA RAM AGARWAL [2003] 2 SCC 577. SIMILARLY, THERE SHOULD BE A LITERAL RULE OF INTERP RETATION OF A STATUTE, WHICH IS THE FIRST AND FOREMOST PRINCIPLE OF INTERPRETATION AND WHERE THE OF A STATUTE ARE ABSOLUTELY CLEAR AND UNA MBIGUOUS, RECOURSE CANNOT BE HAD TO THE PRINCIPLES OF INTERPRETATION O THER THAN THE LITERAL RULE AND EVEN IF THE LITERAL INTERPRETATION RESULTS IN H ARDSHIP OR INCONVENIENCE, IT HAS TO BE FOLLOWED. THE LANGUAGE EMPLOYED IN A S TATUTE IS THE DETERMINATIVE FACTOR OF THE LEGISLATIVE EVENT AND E VEN ASSUMING THERE IS A DEFECT OR ANY OMISSION IN THE WORDS USED IN THE L EGISLATION, THE COURT CANNOT CORRECT OR MAKE UP THE DEFICIENCY, ESPECIALL Y WHEN A LITERAL READING THEREOF PRODUCES AN INTELLIGIBLE RESULT AND ANY DEPARTURE FROM THE LITERAL RULE WOULD REALLY BE AMENDING THE LAW I N THE GARB OF INTERPRETATION, WHICH IS NOT PERMISSIBLE AND WHICH WOULD BE DESTRUCTIVE OF JUDICIAL DISCIPLINE, VIDE RAGHUNATH RAI BAREJA V . PUNJAB NATIONAL BANK [2007] 135 COMP CAS 163 (SC) ; [2007] 2 SCC 23 0. WHAT CONSTITUTES A CAPITAL EXPENDITURE AND WHAT DOE S NOT, TO ATTRACT EXPLANATION 1 TO SECTION 32(1) OF THE ACT D EPENDS UPON THE CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR IN RELATION TO AND BY WAY OF RENOVATION, EXTENSION OR IMPROVEMENT TO THE BUILDING WHICH IS PUT UP IN A BUILDING TAKEN ON LEASE BY HIM FOR CARRYING ON HIS BUSINESS AND I.T.A. NO. 700/MDS/2013 8 PROFESSION OF THE ASSESSEE, BUT NOT IN A CASE OF CO NSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR RELATION TO WHERE SU CH BUILDING IS PUT UP/CONSTRUCTED FOR THE PURPOSE OF BUSINESS OR THE P ROFESSION OF THE ASSESSEE IN A LAND TAKEN ON LEASE BY THE ASSESSEE . BECAUSE THE ASSESSEE DID NOT ACQUIRE A CAPITAL ASSET, VIZ., THE LAND IN THE INSTANT CASE, BUT HAS PUT UP A CONSTRUCTION OF THE BUILDING ONLY FOR THE BUSINESS ADVANTAGE, WITH THE RESULT THE ENTIRE CONSTRUCTION COST IS ADMISSIBLE AS THE REVENUE EXPENDITURE. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CI T VS. MADRAS AUTO SERVICE (P) LTD. (SUPRA) HAS OBSERVED T HAT WHERE THE INITIAL EXPENDITURE INCURRED RESULTS IN SAVING OF R EVENUE EXPENDITURE IN THE SUBSEQUENT AYS, THE SAID INITIAL EXPENDITURE SHALL BE CONSIDERED AS REVENUE IN NATURE. 6. A PERUSAL OF THE RECORDS SHOW THAT THE ASSESSEE WAS ALLOTTED FOUR YARDS FOR STORAGE I.E., OPEN SPACE WITHOUT SHE D. THE ASSESSEE CONTRIBUTED FOR CONSTRUCTION OF SHEDS ON T HE SPACE PROVIDED BY THE TAMIL NADU FOODGRAINS MARKETING YAR D LTD. THUS, THERE WAS NO BUILDING OR ANY STRUCTURE IN EXISTENCE ON THE LAND IN RELATION TO WHICH ANY RENOVATION OR EXTENSION OR IM PROVEMENT OR ANY SIMILAR WORK WAS CARRIED OUT BY THE ASSESSEE. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD., (SUPRA) HAS HELD THAT EXPLANATION-1 WILL NOT APPLY WHERE THERE IS NO I.T.A. NO. 700/MDS/2013 9 BUILDING. IN THE PRESENT CASE, THE FACTS AS EMANAT ING FROM RECORDS SHOW THAT THE ASSESSEE HAS NOT TAKEN ANY BUILDING O N LEASE. FURTHER, THE ASSESSEE HAS STATED THAT WITH THE CONT RIBUTION FOR CONSTRUCTION OF SHEDS, THE ASSESSEE SHALL BE EN TITLED FOR LOWER MONTHLY LEASE RENTS. THIS FACT HAS NOT BEEN DISPUT ED BY THE REVENUE. THE PAYMENT OF LEASE RENTALS IS A REVENUE EXPENDITURE. THUS, THE CONTRIBUTION MADE BY ASSESSEE INITIALLY W OULD SAVE REVENUE EXPENDITURE IN LATER YEARS. THUS, IN THE LIGHT OF THE JUDGMENTS DISCUSSED ABOVE , IT CAN BE SAFELY CONSTRUED THAT THE EXPENDITURE INCURRED TOWA RDS CONSTRUCTION OF SHEDS BY THE ASSESSEE IS REVENUE IN NATURE. 7. THE LD.DR HAS RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF L.H.SUGAR FACTORY & OIL MILLS (P) LTD., VS. CIT (SUPRA). THE HON'BLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. TVS LEAN LOGISTICS LTD., (SUPRA) HAS TAKEN INTO CONSIDERATION THE AFOREMENTIONED DECISION OF THE HO N'BLE APEX COURT WHILE DELIVERING JUDGMENT. THE LD.DR HAS FUR THER PLACED RELIANCE ON THE DECISION OF HON'BLE CALCUTTA HIGH CO URT IN THE CASE OF INDIAN ALUMINIUM CO. LTD., VS. CIT (SUPRA) AND THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ABT LTD., VS. ACIT (SUPRA). WE FIND THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE I.T.A. NO. 700/MDS/2013 10 ENTIRELY DIFFERENT FROM THE FACTS OF THE CASE DEALT IN THE AFORESAID DECISIONS. THEREFORE, THE REVENUE CANNOT DRAW ANY BENEFIT FROM THE AFORESAID DECISIONS. 8. IN VIEW OF OUR ABOVE FINDINGS, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE IMPUGNED ORDER IS SET ASIDE. ORDER PRONOUNCED ON MONDAY, THE 27 TH OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 27 TH OCTOBER, 2014 TNMM &* +,-, /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF
