URBAN INFRASTRUCTURE VENTURE CAPITAL LTD, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 8397/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78956 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , . !. '#$, !% , ! & BEFORE SHRI I.P.BANSAL, JM AND SHRI N.K.BILLAIYA, A M ITA NO.8397/MUM/2011 : ASST.YEAR 2008-2009 M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 121-123 FREE PRESS HOUSE, 12 TH FLOOR FREE PRESS JOURNAL MARG NARIMAN POINT, MUMBAI 400 021. PAN : AAACU8061E. THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 39 MUMBAI. ( '( / // / APPELLANT) / VS. ( *+'(/ RESPONDENT) '( , - ! , - ! , - ! , - ! /APPELLANT BY : S/SHRI PERCY PARDIWALA & NITESH JO SHI *+'( , - ! , - ! , - ! , - ! /RESPONDENT BY : SHRI RAVI PRAKASH , ./% / / / / DATE OF HEARING : 12.05.2014 012 , ./% / DATE OF PRONOUNCEMENT : 21/5/2014 !3 !3 !3 !3 / / / / O R D E R PER I.P.BANSAL (JM) : THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) 41, MUMBAI, DATED 26.09.2011 FOR ASSESSMENT YEAR 2008-2009. 2. GROUNDS OF APPEAL READ AS UNDER:- 1(A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED DEPUTY COMMI SSIONER OF INCOME-TAX CC 39, MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN TREATING AN EXPENDITURE OF A SUM OF RS.86,48,765/- INCURRED BY THE APPELLANT FOR TEMPOR ARY REPAIRS AND MAINTENANCE ON LEASED PREMISES AS CAPITAL EXPEN DITURE. (B) THE APPELLANT SUBMITS THAT THE LEARNED COMMISS IONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD THAT THE AF ORESAID EXPENDITURE OF A SUM OF RS.86,48,765/- IS AN ALLOWA BLE REVENUE EXPENDITURE FOLLOWING THE DECISION OF THE INCOME TA X APPELLATE TRIBUNAL IN THE CASE OF DCIT V. LAZARD INDIA P. LTD . [(2010) 41 SOT 72 (BOM)] & OTHER CASES RELIED UPON BY THE APPE LLANT, ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 2 WHEREIN ON SIMILAR FACTS, THE EXPENSES WERE HELD TO BE OF REVENUE NATURE AND HENCE ALLOWABLE AS A DEDUCTION. 2. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT D IRECTING THE ASSESSING OFFICER TO ALLOW A SUM OF RS.6,78,015/- B EING SOCIETY MAINTENANCE CHARGES (INCLUDED IN THE TOTAL REPAIRS AND MAINTENANCE EXPENSES OF RS.86,48,765/-), WHICH ARE CLEARLY OF ROUTINE REPAIR AND MAINTENANCE NATURE. 3. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICE R IS DIRECTED : (I) TO DELETE THE ADDITION OF RS.86,48,765/- BEING EXPENSES INCURRED BY THE APPELLANT AS TEMPORARY REPAIRS AND MAINTENANCE ON LEASED PREMISES; (II) WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, TO ALLOW SOCIETY MAINTENANCE CHARGES OF RS.6,78,015/-; AND TO MODIFY THE ASSESSMENT IN ACCORDANCE WITH TH E PROVISIONS OF THE ACT. 4. EACH OF THE ABOVE GROUNDS OF APPEAL ARE INDEPEN DENT AND WITHOUT PREJUDICE TO EACH OTHER. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVES TMENT MANAGER / ADVISOR. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAS TAKEN A NEW PREMISES ON RENT AND HAS INCURRED TOTAL EXPENSES OF RS.86,48,765 ON REPAIR & RENOVATION ETC. AS FOLLOWS:- SR. NO. NAME OF THE SUPPLIER ADDRESS OF THE SUPPLIER TOTAL (RS.) PURPOSE A BUILDING AND OTHER MAINTENANCE EXPENSES 1. FREE PRESS HOUSE LIMITED FREE PRESS HOUSE, 215, NARIMAN POINT MUMBAI-400 021. 4,71,171 QUARTERLY BUILDING MAINTENANCE CHARGES TO THE SOCIETY 2. MITTAL TOWER PREMISES CO- OP. SOCIETY LTD. BASEMENT, MITTAL TOWERS, 210, NARIMAN POINT, MUMBAI 1,90,138 QUARTERLY BUILDING MAINTENANCE CHARGES TO THE ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 3 400 021. SOCIETY. 3. HCL MUMBAI 16,706 MAINTENANCE CHARGES TOTAL (A) 6,78,015 B. REPAIRS & RENOVATION EXPENSES 4. K.G.N.STAR SCRAP ROOM NO.H-122, S.G.NAGAR, SHABANA COMPOUND, GENERAL AKV MARG, MALAD (E), MUMBAI 97 1,00,000 LABOUR CHARGES OF BREAKING OF WALL AND CLEARING OF FLOORING ETC. 5. RUDAMAL K.BANSAL SHUJA MANSION, 324/330, MAULANA AZAD ROAD, 3 RD FLOOR, ROOM NO.101, MUMBAI 400 004. 27,499 LABOUR CHARGES FOR REMOVING OLD FLOOR BREAKING, MARBLE FIXING IN FLOOR AND WALL. 6 KALPANA INTERIORS SHIVSHAKTI WELFARE, OPP. HANJAR NAGAR, JIJA MATA ROAD, PUMP HOUSE, ANDHERI (E) MUMBAI 400 058. 15,25,080 INTERIOR & ALLIED WORK INCLUDES WOODEN CARPENTER WORK, FALSE CEILING PLUMBING WORK, MASONRY WORK, FLOORING WORK, PAINT AND POLISH, LABOUR EXPENSES ETC. 7. INTERCRAFT 3,PARSHVA SADAN, 228, DR.A.B.ROAD, WORLI, MMBAI 400 030 47,02,476 INTERIOR AND ALLIED WORK INCLUDING PAINTING, CARPENTER MATERIAL, CIVIL PLUMBING, MASONRY WORK AND LABOUR EXPENSES. 8. VARMORA GRANITO PVT. LTD 8-A NATIONAL HIGHWAY, AT.DHUVA, TAL. WANKENER, DIST RAJKOT (GUJARAT) INDIA. 66,222 SUPPLY OF VITRIFIED TILES. 9. MURUDESHWAR MURUDESHWAR 1,99,149 SUPPLY OF ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 4 CERAMICS LTD. BHAWAN, GOKUL ROAD, HUBLI 580 030 VITRIFIED TILES. 10. CLASSIC MARBLE BHANDUP VILLAGE ROAD, SUBHASH NAGAR (NEXT TO CEAT TYRE FACTORY) BHANDUP (W) MUMBAI 400 782 6,42,438 MARBLE SLABS, BATHROOM FLOORING AND WALL TILES. 11. ANTARES BUILDING PRODUCTS PVT.LTD. 7, JADAV BHAVAN, 62/B GOWALIA TANK ROAD, MUMBAI 400 026. 4,43,664 SUPPLY OF VITRIFIED / FLOOR TILES. 12 ANURUP DESIGNS PVT.LTD. ANURUP HOUSE, PLOT 96, LANE 3, HINDU COLONY, DADAR (E) MUMBAI 400 014. 2,64,222 PROFESSIONAL FEES. TOTAL (B) 79,70,750 TOTAL (A) + (B) 86,48,765 3.1 THE A.O. REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE OFFICE RENOVATION EXPENSES SHOULD NOT BE CAPITALIZED. VIDE LETTER DATED 25 TH NOVEMBER, 2010, IT WAS SUBMITTED THAT THESE EXPENSE S ARE INCURRED ON TILING, PLUMBING, FALSE CEILING, ETC. WHICH COULD N OT BE REUSED ON VACATION OF PREMISES. HOWEVER, RESORTING TO EXPLANATION 1 TO SECTION 32, THE A.O. OBSERVED THAT THE EXPENSES ARE IN RESPECT OF CIVIL WORK, TILING WORK, MARBLE WORK, FITTINGS, FIXTURES, INTERIOR WORK, ETC. CANNO T BE TAKEN AS REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE AS THESE ARE MAJOR RENOVATION EXPENSES IN THE NATURE OF CAPITAL AND SINCE THE PRO PERTY WAS TAKEN ON LEASE ON 7 TH DECEMBER, 2007, THE ASSESSEE ENTITLED TO DEPRECIAT ION AT THE RATE OF OF THE NORMAL DEPRECIATION. IN THIS MANNER THE LEAR NED A.O. ALLOWED THE DEPRECIATION TO THE EXTENT OF RS.4,32,438 AND DISAL LOWED BALANCE AMOUNT OF RS.82,16,327. THE DISALLOWANCE HAS BEEN SUSTAINED B Y THE LEARNED CIT(A) MAINLY ON THE BASIS OF EXPLANATION 1 TO SECTION 32 AND RELYING UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FREE INDIA ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 5 ASSURANCE SERVICES LTD. V. DCIT (12 TAXMAN.COM 424) . THE ASSESSEE IS AGGRIEVED, HENCE HAS FILED THE AFOREMENTIONED GROUN DS OF APPEAL. 4. AFTER NARRATING THE FACTS AND REFERRING TO THE N ATURE OF EXPENDITURE AS DESCRIBED IN THE AFOREMENTIONED TABLE, IT WAS SUBMI TTED BY THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE THAT RS.6,78,015 DE SCRIBED IN SERIAL NOS.1 TO 3 OF THE TABLE CANNOT BE DISALLOWED AT ALL AS TH ESE CHARGES PERTAIN TO MAINTENANCE CHARGES WHICH IN ANY CASE IS ALLOWABLE EVEN IN RESPECT OF LEASED PREMISES. REFERRING TO THE ABOVE DETAILS IT WAS SUBMITTED BY HIM THAT THESE EXPENSES ARE IN REVENUE NATURE. NO NEW ASSET HAS BEEN CREATED WHICH CAN BE SAID TO HAVE BEEN GIVEN ANY ENDURING BENEFIT . IT WAS SUBMITTED THAT THE LEAVE AND LICENSE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE OWNER OF THE PREMISES WAS ONLY FOR A TERM OF 33 MONTHS AN D ALL THE RENOVATION WAS DONE BY THE ASSESSEE TO EFFECTIVELY CARRY ON ITS BU SINESS ACTIVITY. NONE OF THE ITEMS ON WHICH THE EXPENSES INCURRED COULD BE REUSE D. THUS, IT WAS SUBMITTED BY THE LEARNED SENIOR COUNSEL THAT THE A. O. AS WELL AS THE LEARNED CIT(A) HAVE COMMITTED AN ERROR IN MAKING A ND UPHOLDING THE DISALLOWANCE. THE LEARNED AR RELIED ON THE FOLLOWIN G DECISIONS TO CONTEND THAT KEEPING IN VIEW THE NATURE OF THESE EXPENSES, ALL THESE EXPENSES WERE ALLOWABLE AS BUSINESS EXPENDITURE:- (I) HEDE CONSULTANCY PVT. LTD. AND ANOTHER [(2002) 258 ITR 380 (BOM)] IN THE SAID THE CASE, THE ASSESSEE HAD TAKEN A GODO WN ON LEASE AND SPENT AN AMOUNT OF RS.9,20,436 FOR CONVERTING T HE GODOWN PREMISES INTO OFFICE BY RENOVATING IT, INCURRING EX PENSES ON INTERIOR DECORATION, WHICH RESULTED IN REPLACEMENT OF THE EX ISTING ROOF WITH THAT OF CEMENT SHEETS, REPLACEMENT OF FLOOR WITH TH AT OF MARBLE, PLASTERING OF WALLS AND CONSTRUCTION OF BATHROOMS A ND W.C., ETC. THE ASSESSING OFFICER DISALLOWED THE SAME, BUT THE TRIB UNAL ALLOWED IT AND IT WAS HELD THAT SINCE THE ASSETS CREATED BY SPENDI NG THE SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSE SSEE GOT THE BUSINESS ADVANTAGE OF USING MODERN BUSINESS PREMISE S AT A LOW RENT, ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 6 THUS SAVING CONSIDERABLE REVENUE EXPENDITURE FOR A CONSIDERABLY LONG PERIOD, THE TRIBUNAL WAS HELD TO BE PERFECTLY JUSTI FIED IN COMING TO THE CONCLUSION THAT THE EXPENDITURE SHOULD BE LOOKED UP ON AS REVENUE EXPENDITURE. (II) TALATHI AND PANTHAKY ASSOCIATES P.LTD. [(2012 ) 343 ITR 309 (BOM.)] IN THE SAID CASE, THE ASSESSEE WAS A TENANT IN A BUILDING AND WAS IN THE OCCUPATION OF AN AREA ADMEASURING 5,000 SQ.FT. THE BUILDING WAS DECLARED BY THE MUNICIPAL CORPORATION TO BE UNSAFE FOR OCCUPATION AND AN EVICTION NOTICE WAS SERVED ON THE OCCUPANTS. A SUIT WAS INSTITUTED FOR PARTITION BETWEEN THE OWNER S OF THE PROPERTY. A DEVELOPER CAME TO BE IMPLEADED AS A PARTY RESPONDEN T AND WAS A PARTY TO THE CONSENT TERMS. UNDER THE CONSENT TERMS , THE DEVELOPER AGREED TO REPAIR AND RECONSTRUCT THE BUILDING AT HI S COST. UNDER THE AGREEMENT, THE TENANCY OF THE ASSESSEE IN RESPECT O F THE SIXTH FLOOR IN ITS POSSESSION WAS CONFIRMED AND THE ASSESSEE ASSUM ED AN OBLIGATION TO CONTRIBUTE A SUM OF RS.1.50 CRORE FOR THE WORK O F REPAIR AND RESTORATION OF THE STRUCTURE. IT WAS AGREED THAT TH ERE WOULD BE NO INCREASE IN THE RENT PAYABLE BY THE ASSESSEE WHICH CONTINUED TO BE RS.11,300 PER MONTH. THE AMOUNT WAS DISALLOWED BY T HE A.O. ON THE GROUND THAT THE SAID AMOUNT WAS CAPITAL EXPENDITURE . HOWEVER, THE CIT(A) REVERSED THE VIEW OF THE A.O. BY HOLDING THA T THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET AND THE EXPENDITURE W AS ALLOWABLE AS REVENUE IN NATURE. THE TRIBUNAL CONFIRMED THE ORDER PASSED BY THE CIT(A). IN DEPARTMENTAL APPEAL THE HONBLE HIGH COU RT UPHELD THE ORDER OF THE TRIBUNAL ON THE GROUND THAT SINCE THER E WAS NO ACQUISITION OF A CAPITAL ASSET, THE EXPENDITURE COU LD NOT BE REGARDED AS BEING OF CAPITAL NATURE. (III) CIT V. AMWAY INDIA ENTERPRISES [(2012) 346 I TR 341 (DEL.)] ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 7 IN THIS CASE, THE ASSESSEE HAD INCURRED EXPENSES ON FLOORING, PARTITION, WIRING, FALSE CEILING, ROOFING, AIR-COND ITIONING UNIT AND DUCT, ELECTRIC WIRING, LAYING NETWORK FOR SETTING UP COMP UTERS AND, ON PURCHASE OF FURNITURE. THE A.O. AS WELL AS THE CIT( A) DISALLOWED THESE EXPENSES ON THE GROUND THAT THEY WERE INCURRED ON C APITAL ACCOUNT. THE TRIBUNAL ALLOWED THE ENTIRE EXPENDITURE INCURRE D ON IMPROVEMENT OF LEASEHOLD PREMISES SAVE AND EXCEPT THAT WHICH WA S INCURRED ON AIR-CONDITIONING UNITS AND FURNITURE. THE DEPARTMEN TAL APPEAL AGAINST THE ORDER OF TRIBUNAL WAS DISMISSED. (IV) CIT V. AYESHA HOSPITALS P.LTD. [(2007) 292 IT R 266 (MAD.)] THE ASSESSEE WAS RUNNING HOSPITAL IN LEASED PREMI SES. THE EXPENSES WERE INCURRED ON FLOORING, PARTITION ETC. FOR THE NEWLY EXTENDED AREA OF SPACE AND CLAIMED AS REVENUE EXPEN DITURE. THE A.O. DISALLOWED THE SAME AND REFERENCE WAS MADE ESPECIAL LY TO EXPLANATION 1 TO SECTION 32. FINDING THAT THE NATURE OF EXPENDIT URE WAS IN THE REVENUE EXPENDITURE FOR THE PURPOSE OF CARRYING ON BUSINESS, THEIR LORDSHIP HELD THAT THE SAME WERE ALLOWABLE AS BUSIN ESS EXPENDITURE. ON AN ALTERNATE PLEA REGARDING APPLICATION OF EXPLANATION 1 TO SECTION 32(1), THEIR LORDSHIPS HAVE OBSERVED THAT THE READ ING OF EXPLANATION 1 WOULD MAKE IT CLEAR THAT IF THE LESSEE INCURS CAPIT AL EXPENDITURE ON THE BUILDING OF THE NATURE MENTIONED IN EXPLANATION, THEN IT WILL BE TREATED AS IF THE BUILDING IS OWNED BY THE ASSESSEE . IT WAS OBSERVED THAT THE EXPLANATION IS AN EXCEPTIONAL ONE WHICH PERMITS DEPRECIATION IN CASES WHERE THE ASSESSEE DOES NOT OWN A BUILDING . HOWEVER, THE TRIBUNAL IN THE PRESENT CASE HAD GIVEN ITS FINDING THAT IT IS A REVENUE EXPENDITURE ON THE GROUND THAT THE EXPENDITURE IS I NCURRED ONLY TOWARDS PAINTING, RE-LAYING OF THE DAMAGED FLOORS, PARTITIONS, ETC., WHICH CAN NEVER CONSIDERED TO BE CAPITAL EXPENDITUR E OF THE NATURE MENTIONED IN THE ABOVE EXPLANATION AND THUS THE APPEAL FILED BY THE REVENUE WAS DISMISSED. (V) CIT V. MEHTA TRANSPORT COMPANY [(1986) 160 ITR 35 (GUJ)] ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 8 AN EXPENDITURE OF RS.16,748 WAS LAID OUT ON CONS TRUCTION OF LOFT ADMEASURING ABOUT 350 SQ.FT. ON THE GROUND FLO OR OFFICE PREMISES TAKEN ON LEASE IN BOMBAY. THE SAID AMOUNT WAS DISAL LOWED ON THE GROUND THAT IT IS IN THE NATURE OF CAPITAL EXPENDIT URE. AS PER THE FINDING GIVEN BY THE TRIBUNAL, CONSTRUCTION OF LOFT WAS NOT IN THE NATURE OF RENOVATION BUT WAS A NEW CONSTRUCTION. HO WEVER, THE TRIBUNAL HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS WITH A VIEW TO MAKE THE LEASED PREMISES MORE SUITABLE FO R BUSINESS PURPOSES AND THEY COULD NOT BE TREATED AS CAPITAL E XPENDITURE. THEIR LORDSHIP OBSERVED THAT THE EXPENDITURE INCURRED FOR CONSTRUCTION OF LOFT WAS NEITHER FOR EXTENDING NOR FOR ADDITION TO THE PREMISES. THE ASSESSEE WAS PUTTING THE AVAILABLE OFFICE SPACE TO ITS OPTIMUM USE FOR ACCOMMODATING A LARGE STAFF OF 30 MEMBERS WHICH WOU LD RESULT IN GREATER EFFICIENCY BY IMPROVEMENT OF THE WORKING CO NDITIONS. BY CONSTRUCTING THE LOFT, THE ASSESSEE DID NOT BRING I NTO EXISTENCE AN ASSET OF A PERMANENT NATURE BECAUSE, ON THE SURREND ER OF THE LEASE, THE OPTION OF THE LESSOR OF THE PREMISES IN WHICH T HE IMPROVEMENTS WERE MADE WAS EITHER TO PAY COMPENSATION AND TAKE O VER THE IMPROVEMENT OR TO PERMIT THE LESSEE TO REMOVE THE I MPROVEMENT. THUS, IT WAS HELD THAT THE AMOUNT EXPENDED ON LOFT WAS REVENUE EXPENDITURE. (VI) CIT V. OXFORD UNIVERSITY PRESS [(1977) 108 IT R 166 (BOM.)] IT WAS HELD THAT EXPRESSION REPAIR MUST BE UNDE RSTOOD IN CONTRADISTINCTION TO RENEWAL OR RESTORATION AND THE TEST TO BE APPLIED IS TO SEE WHETHER AS A RESULT OF THE EXPENDITURE WH AT IS BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET OR WHETHER AS A RESULT OF THE EXPENDITURE A NEW ASSET OR A NEW ADVA NTAGE IS BEING BROUGHT INTO EXISTENCE. THE MERE QUANTUM OF EXPENDI TURE IS NOT BY ITSELF DECISIVE OF THE QUESTION WHETHER IT IS OF TH E NATURE OF REVENUE OR CAPITAL. IN THE SAID CASE, THE ASSESSEE DURING ASSE SSMENT YEAR 1963- 64 HAD INCURRED AN EXPENDITURE OF RS.59,000 IN THE FORM OF PAYMENT ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 9 MADE FOR GUNITING WORK CARRIED ON IN ITS BUILDING K NOWN AS OXFORD HOUSE AND ALSO A SUM OF RS.3,680 AS FEES PAID TO T HE ARCHITECTS IN CONNECTION WITH THE GUNITING WORK UNDERTAKEN ON THE ADVICE OF THE ARCHITECTS. BOTH THESE ITEMS WERE CLAIMED AS EXPEND ITURE INCURRED FOR REPAIR TO THEIR BUILDING. THE A.O. OBSERVED THAT TH E SAME COULD NOT BE CALLED AS CURRENT REPAIRS BUT THE ASSESSEE HAD UNDE RTAKEN MAJOR STRUCTURAL REPAIRS WHICH HAD THE EFFECT OF PROLONGI NG THE LIFE OF THE BUILDING FOR AT LEASE 15 YEARS AND AS THE REPAIRS R ESULTED IN EXTENSION OF THE PERIOD OF THE SERVICEABLENESS OF THE ASSET A ND IN THE CREATION OF AN ENDURING BENEFIT, THE EXPENDITURE WAS A CAPITAL EXPENDITURE. THEIR LORDSHIP OBSERVED THAT NO NEW ASSET OR NEW ADVANTAG E AS SUCH COULD BE SAID TO HAVE BEEN BROUGHT INTO EXISTENCE BY REAS ON OF EXPENDITURE INCURRED FOR DOING THE GUNITING WORK. AS A RESULT O F GUNITING WORK DONE, THE ASSESSEE HAD NOT CHANGED THE NATURE OF TH E ASSET, VIZ., THE BUILDING AS A WHOLE AND THE SAME IN NO WAY INCREASE D THE ACCOMMODATION OR EARNING CAPACITY OF THE BUILDING I N THAT SENSE, NO NEW ADVANTAGE OF ENDURING BENEFIT HAD BEEN BROUGHT INTO EXISTENCE. THE REPAIRS ALSO COULD NOT BE REGARDED AS HEAVY STR UCTURAL REPAIRS. SIMPLY BECAUSE OF REPAIRS THE LIFE OF THE BUILDING WAS PROLONGED FOR AT LEAST 15 YEARS, IT COULD NOT BE SAID THAT THE EXPEN DITURE WAS IN THE NATURE OF A CAPITAL EXPENDITURE AND THUS, IT WAS HE LD THAT THE SAID AMOUNT WAS ALLOWABLE AS BUSINESS EXPENDITURE. 5. THE LEARNED AR FURTHER DISTINGUISHED THE DECISI ON OF THE TRIBUNAL RELIED UPON BY THE LEARNED CIT(A) IN THE CASE OF FREE INDIA ASSURANCE SERVICES LTD. V. DCIT (SUPRA) . THE LEARNED AR PRODUCED BEFORE US THE COPY OF THE SAID DECISION AND IT WAS SUBMITTED THAT THE FOL LOWING FACTS DISTINGUISHABLE FROM THE DECISION. (I) THE EXPENDIT URE WAS INCURRED BEFORE THE ASSESSEE STARTED BUSINESS IN ITS OFFICE AND THE SE EXPENSES WERE NOT OF ROUTINE NATURE BUT OF ONE TIME EXPENDITURE. (II) TH E WOODEN PARTITIONS, CABINS, CUBICLES, DESKS ARE IN THE NATURE OF PERMAN ENT FURNITURE AND FIXTURES FOR STARTING THE BUSINESS. (III) THE SAID PREMISES WAS OWNED BY THE DIRECTORS OF THE COMPANY WHO HAD MORE THAN 50 PER C ENT OF THE SHARES OF THE COMPANY. THIS PREMISES WAS GOING TO BE REMAINED WITH THE ASSESSEE ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 10 PERMANENTLY FOR ALL PRACTICAL PURPOSES. THUS, IT HA D RESULTED IN ENDURING BENEFIT OF THE COMPANY. IT WAS PLEADED BY HIM THAT THE FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFERENT AND KEEPING IN VIEW THE NATURE OF EXPENSES, IT CANNOT BE SAID THAT ANY ENDURING BENEFIT HAS BEEN D ERIVED BY THE ASSESSEE BY INCURRING THESE EXPENSES. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE REFERRING TO THE ORDER PASSED BY THE LEARNED CIT(A), SUBMITTE D THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS IN THE NATURE OF CAPIT AL. HE SUBMITTED THAT THE ASSESSEE CARRIED OUT MAJOR RENOVATION WORK BY REPLA CING THE FLOOR TILES ETC. AND MAKING CABINS. THUS IT WAS SUBMITTED BY HIM THA T THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THESE EXPENSES WERE IN THE NA TURE OF CAPITAL AND HIS ORDER SHOULD BE UPHELD AND THE APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED. THE LEARNED DR ALSO REFERRED TO THE PROV ISIONS OF EXPLANATION 1 TO SECTION 32(1) AND CONTENDED THAT THE ASSESSEE FO R THE PURPOSE OF DEPRECIATION HAS BE CONSIDERED AS THE OWNER OF THE PREMISES IN VIEW OF THE NATURE OF EXPENDITURE MADE BY THE ASSESSEE ON THE L EASED PREMISES. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE ASSESSEE IS ENGAGED IN THE BUS INESS OF INVESTMENT MANAGER / ADVISOR. AS PER THE SUBMISSIONS MADE BY T HE ASSESSEE BEFORE THE CIT(A), IT ACQUIRED OFFICE IN THE LOCALITY OF NARIM AN POINT WITH A VIEW TO ENHANCE ITS BUSINESS. ACCORDINGLY THE ASSESSEE HAD TAKEN ON LEASE TWO ADJECEMENT PREMISES VIZ. B-11 AND B-12 MITTAL TOWER S, NARIMAN POINT, MUMBAI, FROM WHERE IT STARTED CARRYING ON ITS BUSIN ESS OPERATION. THE TOTAL RENT PAYABLE FOR THE PREMISES WAS RS.1,97,40,000 PE R ANNUM. AS PER THE LEASE AGREEMENT THE ASSESSEE WAS NOT PERMITTED TO S TRUCTURAL ALTERATIONS, CHANGES IN THE LEASED PREMISES AND LEASE AGREEMENT WAS SUBMITTED. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT DO ANY CONSTRUC TION / IMPROVEMENT OF BUILDING STRUCTURE AND THE SAID EXPENSES DID NOT BR ING INTO EXISTENCE ANY NEW ASSET AND ARE ALLOWABLE AS DEDUCTION U/S 30. IN ORDER TO MAKE THE PREMISES CONCLUSIVE TO THE BUSINESS NEEDS, IT WAS R EQUIRED TO MAKE SOME RENOVATION / CHANGES INCLUDING REFURNISHING. THE NA TURE OF BUSINESS OF THE ASSESSEE NEEDS A POSH OFFICE AS THE VISITORS / CLIE NTS ARE NORMALLY CORPORATE ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 11 EXECUTIVES AND HIGH NET-WORTH INDIVIDUALS. IT WAS S UBMITTED THAT DURING THE COURSE OF ITS BUSINESS, THE ASSESSEE HAD TO CATER H IGH PROFILE CLIENTS BOTH INDIAN AS WELL AS FOREIGN. IN THE CIRCUMSTANCES, TH E OFFICE PREMISES ARE REQUIRED TO BE KEPT TO A GOOD STANDARD. THE EXPENDI TURE INCURRED BY THE ASSESSEE WAS IN ORDER TO MEET THESE BUSINESS REQUIR EMENTS. THE RENOVATION EXPENSES WERE IN CONNECTION WITH MODIFYING THE CABI NS, CUBICLES, LAYING GOOD MARBLES, PAINTING AND OTHER RELATED EXPENDITUR E. THESE EXPENDITURE WERE INCURRED AND WERE NECESSARY FOR THE PURPOSE OF BUSINESS TO CARRY IT MORE EFFICIENTLY AND ALSO FOR CREATING GOOD ENVIRON MENT FOR THE STAFF AS WELL AS THE CLIENTS. THESE EXPENDITURE WERE INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE REPAIR / RENOVATION WO RK CARRIED OUT AT THE PREMISES WHICH WERE NOT OWNED BY THE ASSESSEE BUT W ERE TAKEN ON LEASE. THE EXPENDITURE INCURRED, AS CAN BE SEEN FROM THE DETAILS FURNISHED, HAS NOT CREATED ANY CAPITAL ASSET NOR IT HAS GIVEN THE BENEFIT OF ENDURING NATURE. NONE OF THE EXPENDITURE ENTAILS ANY STRUCTURAL CHAN GE OR EXTENSION OR IMPROVEMENT OF THE BUILDING, THEREFORE, EXPLANATION 1 TO SECTION 32(1) WILL NOT BE APPLICABLE. THESE SUBMISSIONS OF THE ASSESSE E ARE RECORDED BY THE LD. CIT(A) IN PARA 6.2 OF THE IMPUGNED ORDER. 7.1 IF THE ABOVE SUBMISSIONS OF THE ASSESSEE ARE CO NSIDERED IN THE LIGHT OF THE DETAILS OF EXPENSES SUBMITTED IN THE AFOREMENTI ONED CHART, WHICH IS REPRODUCED IN PARA 3 OF THIS ORDER, IT WILL BE REV EALED THAT THE ASSESSEE DID NOT CARRY OUT ANY STRUCTURAL CHANGE IN THE BUILDING . THE NATURE OF EXPENDITURE IS LABOUR CHARGES, BREAKING OF WALLS A ND CLEARING OF FLOORING ETC; LABOUR CHARGES FOR REMOVING OLD FLOOR BREAKING , MARBLE FIXING ON FLOOR AND WALL; INTERIOR AND ALLIED WORK INCLUDES WOODEN CARPENTER WORK, FALSE CEILING, PLUMBING WORK, MASONRY WORK, FLOORING WORK , PAINT AND POLISH, LABOUR EXPENSES ETC; INTERIOR AND ALLIED WORK INCLU DING PAINTING CARPENTER MATERIAL, CIVIL, PLUMBING, MASONRY WORK AND LABOUR EXPENSES; SUPPLY OF VITRIFIED TILES; MARBLE SLABS, BATHROOM FLOORING AN D WALL TILES, AND PROFESSIONAL FEES. ALL THESE CHANGES ARE MADE IN TH E INTERNAL PART OF THE STRUCTURE. IT IS NOT THE CASE OF THE DEPARTMENT THA T THIS EXPENDITURE HAS NOT BEEN GENUINELY INCURRED BY THE ASSESSEE. AS PER THE SUBMISSION OF THE ASSESSEE, THESE CHANGES WERE MADE IN CONNECTION WIT H THE MODIFYING ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 12 CABINS, CUBICLES, LAYING GOOD MARBLES, PAINTING AND OTHER RELATED EXPENDITURE IN ORDER TO MEET ITS BUSINESS REQUIREME NTS OF KEEPING A GOOD STANDARD OFFICE. NO CAPITAL ASSET HAS BEEN CREATED AND NO ENDURING BENEFIT HAS BEEN DERIVED. ACCORDING TO THE FACTS OF THE PRE SENT CASE, WE SEE JUSTIFICATION IN THE CASE OF THE ASSESSEE. THE LEAR NED A.O. AS WELL AS LEARNED CIT(A) HAVE FAILED TO PROPERLY APPRECIATE THE FACTS OF THE CASE AND HAVE INCORRECTLY ARRIVED AT A CONCLUSION THAT THESE EXPE NSES WERE IN THE NATURE OF CAPITAL. THE CASE LAWS RELIED UPON BY THE LEARNED A R SUPPORTS THE CASE OF THE ASSESSEE. BY INCURRING THESE EXPENSES THE ASSE SSEE DID NOT BRING INTO EXISTENCE AN ASSET OF A PERMANENT NATURE. THEREFOR E, THE EXPENDITURE CANNOT BE CALLED INTO THE NATURE OF CAPITAL AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. OXFORD UNIV ERSITY PRESS (SUPRA). THEIR LORDSHIP OBSERVED THAT REPAIR MUST BE UNDER STOOD IN CONTRADISTINCTION OF RENEWAL OR RESTORATION AND THE TEST TO BE APPLIED IS TO SEE WHETHER AS A RESULT OF THE EXPENDITURE WHAT IS BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET OR WHETHER A S A RESULT OF THE EXPENDITURE A NEW ASSET OR A NEW ADVANTAGE IS BEING BROUGHT INTO EXISTENCE. THEIR LORDSHIP ALSO OBSERVED THAT THE MERE QUANTUM OF EXPENDITURE IS NOT BY ITSELF DECISIVE OF THE QUESTION WHETHER THE E XPENDITURE IS IN THE NATURE OF REVENUE OR CAPITAL. SINCE IN THE PRESENT CASE NO NEW ASSET OR NEW ADVANTAGE HAS BEEN BROUGHT INTO EXISTENCE BY THE AS SESSEE, IT CANNOT BE SAID THAT THE ASSESSEE HAS INCURRED CAPITAL EXPENDI TURE AND QUANTUM OF EXPENDITURE ALONE ALSO CANNOT BE CONSIDERED SUFFI CIENT TO ARRIVE AT A CONCLUSION THAT THE EXPENDITURE IS IN THE NATURE OF CAPITAL. WHAT IS NECESSARY TO SEE IS AS TO WHETHER THE EXPENDITURE I S IN THE NATURE OF CAPITAL OR IT IS IN THE NATURE OF REVENUE. 7.2 IN THE CASE OF CIT V. TALATHI AND PANTHAKY ASSO CIATES P.LTD. (SUPRA), DESPITE MAKING PAYMENT OF RS.1.5 CRORE TOWARDS RECO NSTRUCTION OF THE TENANTED PREMISES, THEIR LORDSHIP HAVE HELD THAT TH E EXPENDITURE WAS NOT IN THE NATURE OF CAPITAL. THE ASSESSEE OBTAINED A COMM ERCIAL ADVANTAGE OF SECURING TENANCY OF AN EQUIVALENT AREA OF PREMISES ON THE SAME RENT AS BEFORE. SINCE THERE WAS NO ACQUISITION OF CAPITAL A SSET AND THE OCCUPATION OF THE ASSESSEE CONTINUED IN THE CHARACTER OF TENANCY, THE EXPENDITURE WAS IN ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 13 THE NATURE OF CAPITAL. IN THE PRESENT CASE ALSO THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET BUT MADE THE LEASED PREMISES MORE SUITABLE FOR ITS BUSINESS. 7.3 IN THE CASE OF CIT V. AMWAY INDIA ENTERPRISES ( SUPRA) THEIR LORDSHIP HAVE CONSIDERED THE EARLIER DECISION OF THE DELHI H IGH COURT IN THE CASE OF CIT V. HI LINE PENS PVT. LTD. [(2008) 306 ITR 182 ( DELHI)], WHERE THE EXPRESSION REPAIRS OF THE PREMISES WAS INTERPRETE D. IT WAS HELD THAT REPAIRS WAS WIDER THAN CURRENT REPAIRS. WHAT WO ULD BE RELEVANT TO BEAR IN MIND WILL BE THAT WHAT IS THE NATURE OF EXPENDIT URE WHETHER IT IS INCURRED FOR MAINTENANCE OR RENOVATION OF AN ASSET OR WAS IT EXPENDED OTHERWISE AND THE ORDER OF THE TRIBUNAL WAS UPHELD AND THE EXPENS ES INCURRED ON FLOORING, PARTITION, WIRING FALSE CEILING, ROOFING WAS HELD T O BE IN THE NATURE OF REVENUE EXPENDITURE. 7.4 THEREFORE, IN VIEW OF THE AFOREMENTIONED POSITI ON OF LAW, IT HAS TO BE HELD THAT THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE ON THE PREMISES TAKEN ON RENT WAS IN THE NATURE OF REVENUE SINCE NO NEW ASSET HAS BEEN CREATED AND THE CHANGES WERE MADE BY THE A SSESSEE FOR EFFICIENTLY CARRYING ON ITS BUSINESS AND THE ITEMS ON WHICH EXP ENDITURE WAS MADE COULD NOT BE REUSED ON VACATION OF PREMISES. THE C ONTENTION THAT THE ITEMS ON WHICH THE EXPENDITURE WAS MADE COULD NOT BE REUS ED ON VACATION WAS EVEN RAISED BEFORE AO IN THE ASSESSMENT ORDER. THE REFORE, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON RE PAIR AND RENOVATION WAS IN THE NATURE OF CAPITAL. THE DECISION ITAT IN THE CASE OF FREE INDIA ASSURANCE SERVICES LTD. (SUPRA), RELIED UPON BY LD. CIT(A) ALSO DOES NOT SUPPORT THE CASE OF THE REVENUE AS THE FACTS IN THA T CASE WERE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. THE PREMISES IN THAT CASE BELONGED TO THE DIRECTORS OF THE COMPANY WHO HAD M ORE THAN 50 PERCENT SHARE. IN THE PRESENT CASE NO SUCH CASE IS MADE OU T BY THE REVENUE. 7.5 NOW WE ARE LEFT WITH THE QUESTION THAT WHETHER ON THE BASIS OF EXPLANATION-1 TO SECTION 32(1) IT CAN BE SAID THA T DESPITE BEING EXPENDITURE IN THE NATURE OF REVENUE THE ASSESSEE W ILL ONLY BE ENTITLED FOR ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 14 DEPRECIATION AS IT HAS BEEN THE CASE OF AO AND LD. CIT(A) THAT DUE TO APPLICATION OF EXPLANATION-1 TO SECTION 32(1) THE A SSESSEE IS ENTITLED TO CLAIM ONLY DEPRECIATION ON THE EXPENDITURE INCURRED BY I T. WE HAVE CAREFULLY CONSIDERED SUCH SUBMISSION OF LD. DR. SIMILAR PROV ISIONS AS THESE ARE CONTAINED IN EXPLANATION-1 TO SECTION 32(1) WERE IN CORPORATED INTO THE STATUTE FOR THE FIRST TIME BY THE TAXATION LAWS (AM ENDMENT) ACT 1970 BY INSERTING NEW SUB-SECTION (1A)IN SECTION 32 BY SEC TION 5 OF THE AMENDING ACT W.E.F. 1/4/1971. ITS SCOPE WAS EXPLAINED IN C IRCULAR NO.56 DATED 19/3/1971. IT WAS DESCRIBED THAT UNDER THE EXISTIN G PROVISIONS OF INCOME TAX ACT, THE ASSESSEE WAS NOT ENTITLED TO DEPRECIAT ION OR ANY OTHER DEDUCTIONS IN RESPECT OF CAPITAL EXPENDITURE INCURR ED BY HIM ON EXTENSION OR RENOVATION OR IMPROVEMENT OF A BUILDING NOT BEL ONGING TO HIM WHICH IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. TH EREFORE, NEW SUB-SECTION (1A) IS BEING INSERTED W.E.F. 1/4/1971. LATER ON S UB-SECTION (1A) WAS OMITTED AND EXPLANATION-1 WAS INSERTED AFTER THE SE COND PROVISO TO SECTION 32(1)(III) OF THE ACT IN VIEW OF SWITCH OVER TO BLO CK CONCEPT BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT 1 986 AND THE REASON FOR AMENDING SUB-SECTION (1A) OF SECTION 32 AND IN SERTION OF EXPLANATION HAS BEEN STATED IN THE CIRCULAR NO.469 DATED 23/9/1 986. 7.6 THE RELEVANT PART OF BOTH AFOREMENTIONED CIRCUL ARS ARE REPRODUCED BELOW. CIRCULAR NO.56, DATED 19/03/1971. AMORTISATION OF EXPENDITURE ON RENOVATION OR EXTENS ION OF, OR IMPROVEMENT TO, LEASED BUSINESS PREMISES. 56. UNDER THE EXISTING PROVISIONS OF THE IT ACT, A N ASSESSEE IS NOT ENTITLED TO DEPRECIATION OR ANY OTHER DEDUCTION IN RESPECT OF C APITAL EXPENDITURE INCURRED BY HIM ON RENOVATION OR EXTENSION OF, OR IMPROVEMEN TS TO, A BUILDING NOT BELONGING TO HIM WHICH IS USED FOR THE PURPOSE OF HIS BUSINESS OR PROFESSION. UNDER A NEW SUB-S. (1A), INSERTED INS. 32 BY S. 5 OF THE AMENDING ACT, W.E.F. 1ST APRIL, 1971, PROVISION HAS BEEN MADE FOR THE GR ANT OF DEPRECIATION ON CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE FOR TH E PURPOSE OF HIS BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSI ON OF, OR IMPROVEMENT TO, ANY BUILDING WHICH IS USED FOR THE PURPOSE OF THE B USINESS OR PROFESSION, WHERE SUCH BUILDING IS NOT OWNED BY THE ASSESSEE BU T IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY. THE DEPRECIATION WILL BE ALLOWED ONLY IN RESPECT OF CAPITAL EXPENDITURE INCU RRED AFTER 31ST MARCH, 1970 AND IT WILL BE ALLOWED WITH REFERENCE TO THE WRITTE N DOWN VALUE OF THE ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 15 STRUCTURE OR WORK AT RATES TO BE PRESCRIBED III THE IT RULES. WHERE THE STRUCTURE OR WORK IS SOLD, DISCARDED, DEMOLISHED, DESTROYED O R SURRENDERED AS A RESULT OF THE DETERMINATION OF THE LEASE OR OTHER RIGHT OF OCCUPANCY IN RESPECT OF THE BUILDING (IN ANY PREVIOUS YEAR OTHER THAN THE PREVI OUS YEAR IN WHICH IT WAS CONSTRUCTED OR DONE), THE ASSESSEE WILL BE ENTITLED TO A TERMINAL ALLOWANCE EQUAL TO THE SHORTFALL OF THE MONEYS PAYABLE TAKEN TOGETHER WITH THE SCRAP VALUE, IF ANY, FROM THE WRITTEN DOWN VALUE OF THE S TRUCTURE OR WORK. THE TERM MONEYS PAYABLE, IN RESPECT OF ANY STRUCTURE OR WO RK, HAS BEEN DEFINED TO INCLUDE ANY INSURANCE OR COMPENSATION MONEYS PAYABL E IN RESPECT THEREOF AND, WHERE THE STRUCTURE OR WORK IS SOLD, THE PRICE FOR WHICH IT IS SOLD. THE WORD SOLD WILL HAVE THE SAME MEANING AS IT HAS UN DER THE EXISTING PROVISIONS OF S. 32, I.E. IT WILL INCLUDE A TRANSFE R BY WAY OF EXCHANGE OR A COMPULSORY ACQUISITION UNDER ANY LAW BUT WOULD NOT INCLUDE A TRANSFER FROM A COMPANY TO AN INDIAN COMPANY IN A SCHEME OF AMALGAM ATION. (EMPHASIS OURS) 57. THE FOLLOWING CONSEQUENTIAL AMENDMENTS HAVE ALS O BEEN MADE TO THE OTHER PROVISIONS OF THE IT ACT IN THIS CONNECTION: CIRCULAR NO. 469, DATED 23/09/1986. 6.4 THE AMENDMENTS RELATING TO DEPRECIATION ALLOWAN CE ARE AS FOLLOWS: (A) TO (G) (H) SEC. 32(1A) OF THE IT ACT PROVIDES FOR DEPRECIA TION ALLOWANCE IN RESPECT OF ANY ADDITION, RENOVATION OR EXTENSION OF OR IMPROVE MENT TO A BUILDING WHICH AN ASSESSEE DOES NOT OWN BUT IN RESPECT OF WHICH HE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY. AS A RESULT OF THE SWITCH OVER TO THE BLOCK CONCEPT, THIS PROVISION HAS BEEN OMITTED. BY THE NEWLY INSERTED E XPLN. 1 AFTER THE SECOND PROVISO TO S. 32(1)(III) OF THE IT ACT, IT HAS BEEN PROVIDED THAT DEPRECIATION WILL BE ALLOWED IN RESPECT OF SUCH A STRUCTURE OR WORK A S IF IT IS A BUILDING OWNED BY THE ASSESSEE. THE READING OF ABOVE EXPLANATORY NOTES WILL MAKE IT CLEAR THAT SUB-SECTION (1A) AND SUBSEQUENT OMISSION OF SUB-SECTION (1A) AN D INSERTION OF EXPLANATION-1 AFTER THE SECOND PROVISO TO SECTION 3 2(1)(III) ARE BROUGHT TO THE STATUTE ONLY FOR THE REASON THAT IN A CASE WHE RE CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE IN RESPECT OF BUILDING NOT OWNED BY HIM IN THAT CASE THERE WAS NO PROVISION IN THE ACT FOR GRANT OF DEPRECIATION OR ANY OTHER DEDUCTION AND TO MEET SUCH HARDSHIP FACED BY SUCH ASSESSEE, THE BENEFIT OF DEPRECIATION WAS PROVIDED. THE PRE-CONDITION T O INVOKE THE PROVISION OF EXPLANATION-1 AFTER THE SECOND PROVISO TO SECTION 3 2(1)(III) IS THAT EXPENDITURE ITSELF SHOULD BE CAPITAL IN NATURE. I F THE EXPENDITURE BY ITS NATURE ITSELF IS NOT CAPITAL IN NATURE AND ITS NA TURE IS REVENUE THEN PROVISIONS OF EXPLANATION-1 AFTER SECOND PROVISO TO SECTION 32(1)(III) WILL NOT ITA NO.8397/MUM/2011. M/S.URBAN INFRASTRUCTURE VENTURE CAPITAL LTD. 16 BE APPLICABLE AT ALL. IT HAS ALREADY BEEN POINTE D OUT THAT THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF RENOVATION, OR EXTENSION OR IMPROVEMENT TO THE BUILDING NOT BELONGING TO ASSESSEE ARE IN THE NATURE OF REVENUE. THEREFORE, IT IS HELD THAT EVE N ON THE BASIS OF EXPLANATION 1 AFTER THE SECOND PROVISO TO SECTION 32(1)(III), THE ASSESSEE CANNOT BE DENIED FOR THE DEDUCTION OF IMPUGNED EXP ENSES WHICH ARE REVENUE IN NATURE. 7.7 IN VIEW OF ABOVE DISCUSSION, THE ISSUE IS DECI DED IN FAVOUR OF THE ASSESSEE. THEREFORE, GROUND NO.1 IS ALLOWED. SINC E ENTIRE EXPENSES HAVE BEEN HELD TO BE ALLOWABLE, THE ALTERNATIVE GROUND R AISED BY THE ASSESSEE IN RESPECT OF A SUM OF RS.6,78,015/- HAS BECOME INFRUC TUOUS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED ON THIS 21 ST DAY OF MAY, 2014. !3 , 012 4 5 1 , 6 SD/- SD/- (N.K.BILLAIYA) (I.P.BANSAL) !% !% !% !% / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED : 21 ST MAY, 2014. VM. !3 , *.' 7!'2. !3 , *.' 7!'2. !3 , *.' 7!'2. !3 , *.' 7!'2./ COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. *+'( / THE RESPONDENT. 3. 8() / THE CIT, MUMBAI. 4. 8 / CIT(A)-29, MUMBAI 5. ';6 *. , , / DR, ITAT, MUMBAI 6. 6< / GUARD FILE. !3 !3 !3 !3 / BY ORDER, +'. *. //TRUE COPY// = == =/ // /> ? > ? > ? > ? (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI