Sri.P.A.Jose, Kottayam V. ACIT, Kottayam

MA 113/COCH/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1608 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: R KRISHNA IYER
• Keywords: Capital asset; Depreciation; Business expenditure; Rectification of order; Revenue expenditure; Capital expenditure
• Section: 32; 37

Judgement Text

1 M.P. NO.112 & 113/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) M.P NO 112 & 113/COCH/2013 (ARISING OUT OF I.T.A NOS.233 & 282/COCH/2010) (ASSESSMENT YEAR 2007-08) SHRI P.A. JOSE VS A.C.I.T., CIR.1 PROP JOSCO FASHION JEWELLERS KOTTAYAM KOTTAYAM PAN : ACBPA3391B (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI R KRISHNA IYER RESPONDENT BY : SMT.LATHA V KUMAR DATE OF HEARING : 28-03-2014 DATE OF PRONOUNCEMENT : 28-03-2014 O R D E R PER N.R.S. GANESAN (JM) THE ASSESSEE FILED THE PRESENT MISCELLANEOUS PETIT IONS ON THE GROUND THAT THERE IS AN ERROR IN THE ORDER OF THIS TRIBUNAL. 2. LET US FIRST TAKE MISCELLANEOUS PETITION IN M.A. NO.112/COCH/2013. SHRI R KRISHNA IYER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED THE EXPENDITURE ON BUILDING RE PAIRS CARRIED ON THE SHOWROOM WHICH WAS TAKEN ON HIRE IN RESPECT OF THE SEVEN BUILDINGS AS REVENUE EXPENDITURE. HOWEVER, THIS TRIBUNAL FOUND THAT TILL THE 2 M.P. NO.112 & 113/COCH/2013 COMMENCEMENT OF BUSINESS, THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE BUILDINGS TAKEN ON HIRE HAS TO BE TAKEN AS CAPI TAL EXPENDITURE. THE HIGH COURT NOW ON IDENTICAL CIRCUMSTANCES IN THE CA SE OF JOY ALUKKAS PVT LTD VS CIT ITA NO.230 OF 2013 DATED 20-01-2014 FOUN D THAT SIMILAR EXPENDITURE INCURRED BY THE ASSESSEE FOR RENOVATION OF THE BUILDINGS TAKEN ON HIRE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. ACCORDING TO THE LD.REPRESENTATIVE, THE SUBSEQUENT JUDGMENT OF THE H IGH COURT CAN BE A BASIS FOR RECTIFICATION ORDER. IN OTHER WORDS, IN VIEW OF THE JUDGMENT OF THE KERALA HIGH COURT WHICH IS BINDING ON THIS TRIBUNAL IN ITA NO.230 OF 2013 DATED 20-01-2014, THE MISTAKE OCCURRED IN THE ORDER OF THIS TRIBUNAL HAS TO BE RECTIFIED. THE LD.REPRESENTATIVE FURTHER SUBMIT TED THAT THE TRIBUNAL ORDER DEAL WITH ONLY ONE BUILDING. HOWEVER, THE SUBJECT MATTER OF APPEAL IS IN RESPECT OF SEVEN BUILDINGS. THEREFORE, THE ORDER H AS TO BE PASSED IN RESPECT OF ALL THE SEVEN BUILDINGS WHICH WERE TAKEN ON HIRE / LEASE. 3. WE HEARD SMT. LATHA V KUMAR, THE LD.DR. THE LD. DR SUBMITTED THAT IN VIEW OF THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF JOY ALUKKAS IN ITA NO.230 OF 2013, THE CLAIM OF THE ASSESSEE FO R REVENUE EXPENDITURE FOR RENOVATION OF THE BUILDINGS TAKEN ON LEASE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. TO THIS EXTENT, ACCORDING TO THE LD.D R, THERE IS AN ERROR IN THE ORDER OF THIS TRIBUNAL. 3 M.P. NO.112 & 113/COCH/2013 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS TRI BUNAL BY AN ORDER DATED 07-06-2013, MORE PARTICULARLY AT PARAGRAPHS 7 TO 12 FOUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TO BRING INTO EXISTENCE A NEW SHOWROOM ON THE LEASED PREMISES IS AN ADVANTAGE OF ENDURING NATURE TO THE TRADE CARRIED ON BY THE ASSESSEE. THEREFORE, T HE EXPENDITURE INCURRED BY THE ASSESSEE TILL COMMENCEMENT OF BUSINESS HAS T O BE CAPITALIZED. A SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF JOY ALUK KAS. IN THE CASE OF JOY ALUKKAS, ON THE APPEAL FILED BY THE ASSESSEE IN ITA NO.230 OF 2013, THE HIGH COURT, BY A JUDGMENT DATED 20-01-2014 REVERSED THE IDENTICAL ORDER OF THE TRIBUNAL ON IDENTICAL FACTS AND HELD THAT SU CH AN EXPENDITURE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. THE JUDGMENT OF THE KERALA HIGH COURT IS BINDING ON THIS TRIBUNAL. THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE KERALA HIGH COURT ON IDENT ICAL SET OF FACTS CAN BE A BASIS FOR RECTIFICATION U/S 254(2) OF THE ACT. T HEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS AN ERROR IN TH E ORDER OF THIS TRIBUNAL IN HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESS EE FOR RENOVATION OF THE LEASE PREMISES IN BRINGING INTO EXISTENCE A NEW SHO W ROOM IS A CAPITAL EXPENDITURE. ACCORDINGLY, THE ORDER OF THIS TRIBUN AL NEEDS TO BE RECTIFIED IN TUNE WITH THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF JOY ALUKKAS. ACCORDINGLY, THE ORDER OF THIS TRIBUNAL DATED 07-06 -2013 IS RECTIFIED AS FOLLOWS IN EXERCISE OF THE JURISDICTION OF THIS TRI BUNAL U/S 254(2) OF THE ACT. 4 M.P. NO.112 & 113/COCH/2013 5. THE FOLLOWING SHALL BE DELETED FROM THE ORDER OF THIS TRIBUNAL DATED 07-06-2013 IN ITA NO.233/COCH/2010, I.E. PARAGRAPH 7 TO 12: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE TOOK THE PREMISES ON LEASE. THE LEASE PERIOD IS 15 YEARS WITH AN OPTION TO EXTEND THE SAME FOR FURT HER PERIOD. THE INTENTION OF THE ASSESSEE IN TAKING THE PREMISES ON LEASE IS TO SET UP A NEW SHOW ROOM IN THE LEASE PREMISES. AFTER TA KING THE PREMISES ON LEASE, THE ASSESSEE INCURRED THE EXPEND ITURE IN INTERIOR DECORATION LIKE FALSE CEILING, RACKS, CHAN GE OF FLOORING, ETC. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE A SSESSEE INCURRED THE EXPENDITURE ON THE LEASED PREMISES FOR THE FIRST TIME TO SET UP THE SHOW ROOM, WHETHER IT HAS TO BE TREATED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE? IT IS WELL SET TLED PRINCIPLES OF LAW THAT ANY EXPENDITURE INCURRED IN THE COURSE OF BUSINESS FOR THE PURPOSE OF EARNING PROFIT HAS TO BE TREATED AS REVE NUE EXPENDITURE. HOWEVER, IF THE EXPENDITURE WAS INCURRED FOR THE PU RPOSE OF ACQUISITION OF A CAPITAL ASSET, THE SAME HAS TO BE TREATED AS CAPITAL IN NATURE. 8. LET US NOW EXAMINE WHETHER THE EXPENDITURE INCUR RED BY THE ASSESSEE FOR THE PURPOSE OF ESTABLISHING A NEW SHOW ROOM IS IN THE COURSE OF EARNING PROFIT / IN THE COURSE OF BUSINE SS OR IT IS AN EXPENDITURE FOR ESTABLISHMENT OF A CAPITAL ASSET. SETTING UP OF A NEW SHOW ROOM IS AN EXPANSION OF THE EXISTING BUSIN ESS. IT INCREASES THE CAPITAL BASE OF THE ASSESSEE FOR DOIN G THE BUSINESS. IN OTHER WORDS, THE ESTABLISHMENT OF A NEW SHOW ROO M EXPANDS THE PROFIT MAKING APPARATUS OF THE ASSESSEE. AS A RESU LT OF THIS EXPENDITURE, A NEW SHOW ROOM WHICH IS A CAPITAL ASS ET CAME INTO 5 M.P. NO.112 & 113/COCH/2013 EXISTENCE. THOUGH THE BUILDING BELONGS TO THIRD PAR TY, THE ASSESSEE HAD THE BENEFIT OF DOING BUSINESS IN THE NEW SHOW R OOM BY USING THE SAME AS CAPITAL ASSET. IT IS TO BE REMEMBERED THAT LEASE IS ALSO A TRANSACTION IN THE IMMOVABLE PROPERTY. THOUGH TH E ENTIRE TITLE ON THE PROPERTY IS NOT TRANSFERRED DURING THE COURSE O F LEASE, AN INTEREST IN THE PROPERTY WAS TRANSFERRED IN FAVOUR OF THE ASSESSEE DURING THE LEASE PERIOD. THE ASSESSEE WOULD BE IN PHYSICAL POSSESSION OF THE PROPERTY ON PAYMENT OF THE AGREED AMOUNT AS LEASE RENT. THEREFORE, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE RESULTED I N EXPANSION OF THE CAPITAL BASE OF THE ASSESSEE. IN OTHER WORDS, IT RESULTED IN EXPANSION OF THE PROFIT MAKING APPARATUS. THEREFOR E, THE EXPENDITURE INCURRED BY THE ASSESSEE FOR INTERIOR D ECORATION AND OTHER WORKS ON THE LEASED PREMISES FOR THE FIRST TI ME FOR THE PURPOSE OF SETTING UP OF BUSINESS IS NOT IN THE COURSE OF P ROFIT EARNING PROCESS, BUT IN THE COURSE OF ESTABLISHING A NEW CA PITAL ASSET / PROFIT EARNING APPARATUS. THEREFORE, THE EXPENDITURE INCU RRED BY THE ASSESSEE HAS TO BE TREATED AS CAPITAL IN NATURE. 9. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF T HE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF CHA YA LAKSHMI CREATIONS (P) LTD (SUPRA). THE ASSESSEE HAS TAKEN FIVE CINEMA THEATRES IN A THEATRE COMPLEX ON LEASE FROM SATYAM SAYI CORPORATION FOR EXHIBITION OF FEATURE FILMS. AFTER TAKING THE PREMISES ON LEASE, THE ASSESSEE CARRIED ON THE BUSINESS OF E XHIBITION OF FILMS. DURING THE LEASE PERIOD THE ASSESSEE INCURR ED EXPENDITURE ON REPAIR OF THEATRE COMPLEX SUCH AS CHANGE OF FLOO R TILES, FALSE CEILING, LANDSCAPING, CHAIRS, EARTH FILLING WORKS, UNDER GROUND SUMP REPAIRING, DRAINAGE AND CABLE WORKS, WALL PAPER FIX ING, DUST OPENING, CARPENTRY, PLUMBING WORKS, FALSE CEILING R EPAIR, SEAT REPAIR, PEST CONTROL, HOUSE KEEPING MATERIAL, THEATRE CLEAN ING, CHARGES ON 6 M.P. NO.112 & 113/COCH/2013 BANDOBUST AND FIXING OF CHAIRS, REPAIRING OF COMPOU ND WALL, WATER ROOFING OF CEILING, INTERIOR PAINTING, PAYMENT TO T EMPORARY STAFF, MAINTENANCE OF GENERATOR AND OTHER OFFICE EQUIPMENT S, ETC. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE MAJOR RENOVATION AND MODERNIZATION OF THE THEATRE COMPLEX WAS DONE. REFERRING TO EXPLANATION 1 TO SE CTION 32(1) OF THE ACT, THE ASSESSING OFFICER FOUND THAT THE ASSES SEE HAS INCURRED CAPITAL EXPENDITURE AND ACCORDINGLY ALLOWED DEPRECI ATION AT 10%. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSEE HAS INC URRED THE EXPENDITURE FOR THE PURPOSE OF MAINTAINING THE CINE MA THEATRE IN THE COURSE OF ITS BUSINESS ACTIVITY, THEREFORE, IT IS A REVENUE EXPENDITURE. ON APPEAL BY THE REVENUE, THE HYDERAB AD BENCH OF THIS TRIBUNAL EXAMINED THE SCOPE OF EXPLANATION 1 T O SECTION 32(1) WHICH WAS INTRODUCED BY TAXATION LAWS (AMENDMENT & MISCELLANEOUS PROVISIONS) ACT, 1986 WITH EFFECT FRO M 01-04-1988 AND THE LEGISLATIVE HISTORY OF INTRODUCTION OF EXPL ANATION 1 TO SECTION 32(1) AND FOUND THAT THE POSITION OF LAW AS IT REMA INED AFTER INTRODUCTION OF SECTION 32(1A) WITH EFFECT FROM 01- 04-1971 CONTINUED TO BE THE SAME IN RESPECT OF REVENUE EXPE NDITURE INCURRED BY THE ASSESSEE ON THE PREMISES TAKEN ON L EASE. THE HYDERABAD BENCH OF THIS TRIBUNAL FURTHER FOUND THAT WHENEVER THE ASSESSEE INCURRED THE EXPENDITURE IN THE PROCESS OF EARNING OF PROFIT WHILE CARRYING ON THE BUSINESS IN THE LEASED PREMISES, THE EXPENDITURE HAS TO BE TREATED AS REVENUE EXPENDITUR E AND NEITHER SECTION 32(1A) OR EXPLANATION 1 TO SECTION 32 WOULD COME IN THE WAY OF ALLOWING THE SAME AS REVENUE EXPENDITURE. H OWEVER, IN CASE, THE ASSESSEE INCURRED THE EXPENDITURE WHICH I S OF A CAPITAL NATURE, THEN, THE ASSESSEE HAS THE BENEFIT OF CLAIM ING DEPRECIATION ON SUCH CAPITAL EXPENDITURE IN RELATION TO RENOVATI ON, EXTENSION OR IMPROVEMENT WITH EFFECT FROM 01-04-1971 U/S 32(1A) AND UNDER THE EXPLANATION 1 TO SEC.32 W.E.F. 1.4.1988. THE HYDER ABAD BENCH OF 7 M.P. NO.112 & 113/COCH/2013 THIS TRIBUNAL PLACED ITS RELIANCE ON THE JUDGMENT O F THE APEX COURT IN EMPIRE JUTE CO. LTD VS CIT (1980) 124 ITR 1 (SC) . IN THE CASE BEFORE THE HYDERABAD BENCH OF THIS TRIBUNAL, THE EX PENDITURE WAS INCURRED IN THE COURSE OF RUNNING THE CINEMA THEATR E. THE TRIBUNAL FOUND THAT AS A RESULT OF THE EXPENDITURE INCURRED BY THE ASSESSEE, THE CINEMA THEATRE REMAINS A CINEMA THEATRE AND THE SEATING CAPACITY DID NOT INCREASE. THE TRIBUNAL FOUND THAT THE ASSESSEE MIGHT HAVE CARRIED ON THE BUSINESS IN A PROFITABLE MANNER. THEREFORE, THE ASSESSEE HAS NOT OBTAINED ANY ADVANT AGE IN THE CAPITAL FIELD. HOWEVER, IN THE CASE BEFORE US, THE BUSINESS WAS NOT COMMENCED IN THE NEW PREMISES. IN THE CASE BEFORE US, THE ASSET WAS NOT AN EXISTING ASSET; NOR WAS THE EXPENDITURE INCURRED FOR MAINTENANCE OF THE EXISTING ASSET. RATHER, IT WAS FOR THE PURPOSE OF ESTABLISHING A NEW ASSET. THEREFORE, THE EXPENDITU RE INCURRED FOR THE FIRST TIME IN THE LEASE PREMISES FOR THE PURPOS E OF ESTABLISHING A NEW SHOW ROOM HAS TO BE TREATED AS CAPITAL EXPENDIT URE. HENCE, THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNA L IN THE CASE OF CHAYA LAKSHMI CREATIONS (P) LTD (SUPRA) MAY NOT BE OF ANY ASSISTANCE TO THE ASSESSEE. THE MATTER WOULD HAVE BEEN ENTIRELY DIFFERENT HAD THE ASSESSEE INCURRED SIMILAR KIND OF EXPENDITURE AFTER ESTABLISHING THE NEW SHOW ROOM AND RUNNING THE BUSI NESS FOR 2 3 YEARS. SINCE IT IS AN INITIAL EXPENDITURE FOR ESTA BLISHING A SHOW ROOM, THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF CHAYA LAKSHMI CREATIONS (P) LTD MAY NOT BE OF ANY ASSISTANCE TO T HE ASSESSEE. 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KERALA HIGH COURT IN THE CASE OF PREMIER COTTON SPI NNING MILLS LTD (SUPRA). IN THE CASE BEFORE THE KERALA HIGH COURT, THE ASSESSEE COMPANY FORMULATED A SCHEME FOR PROVIDING HOUSES TO ITS EMPLOYEES. THE LAND BELONGING TO THIRD PARTIES WA S DIVIDED INTO 8 M.P. NO.112 & 113/COCH/2013 PLOTS AND ALLOTTED TO THE EMPLOYEES. THE ASSESSEE COMPANY MADE ARRANGEMENTS FOR LAYING ROAD, CONSTRUCTION OF WATER TANKS, PUMP SETS, DRAINAGE, DIGGING WELL AND SUCH OTHER WORK IN THE LAND AFTER ALLOTMENT TO THE EMPLOYEES WHO HAD CONSTRUCTED A BU ILDING IN THE LANDS ALLOTTED TO THEM. THE ASSESSEE CLAIMED THE E XPENDITURE FOR LAYING THE ROADS, DIGGING WELL, CONSTRUCTION OF WAT ER TANKS AND PUMPS, DRAINAGE, ETC. AS REVENUE EXPENDITURE. THE KERALA HIGH COURT FOUND THAT THE EXPENDITURE INCURRED BY THE AS SESSEE IS FOR THE BENEFIT OF THE EMPLOYEES, WHO PURCHASED THE PROPERT IES AND CONSTRUCTED BUILDING THEREON. THE LAND DOES NOT BE LONG TO THE ASSESSEE. IT DID NOT BRING INTO EXISTENCE AN ENDUR ING ADVANTAGE TO THE ASSESSEE. THE EXPENDITURE WAS IN THE NATURE OF STAFF WELFARE EXPENDITURE. THE KERALA HIGH COURT FURTHER FOUND T HAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINES S; THEREFORE, IT WAS DEDUCTIBLE AS BUSINESS EXPENDITURE U/S 37 OF TH E ACT. IN THIS CASE BEFORE US, IT IS NOT FOR THE WELFARE OF THE EM PLOYEES; BUT FOR THE PURPOSE OF ESTABLISHING A NEW SHOW ROOM. IN FACT, THE KERALA HIGH COURT EXTRACTED THE OBSERVATIONS MADE BY HOUSE OF L ORDS IN ATHERTON V. BRITISH INSULATED AND HELSBY CABLES LTD (1925) 10 TC 155 (HL), WHICH IS AS UNDER: WHEN AN EXPENDITURE IS MADE . WITH A VIEW TO BRI NGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FOR THE END URING BENEFIT OF A TRADE, I THINK THAT THERE IS VERY GOOD REASON (IN THE ABSENCE OF SPECIAL CIRCUMSTANCES LEADING TO AN OPPOSITE CONCLU SION) FOR TREATING SUCH AN EXPENDITURE AS PROPERLY ATTRIBUTAB LE NOT TO REVENUE BUT TO CAPITAL. THIS TRIBUNAL IS OF THE OPINION THAT THIS OBSERVATI ON OF THE HOUSE OF LORDS AS APPROVED BY THE KERALA HIGH COURT IS APPLI CABLE TO THE FACTS OF THIS CASE. THE EXPENDITURE INCURRED BY TH E ASSESSEE, IN 9 M.P. NO.112 & 113/COCH/2013 FACT, BROUGHT INTO EXISTENCE A NEW SHOW ROOM WHICH IS AN ADVANTAGE OF ENDURING BENEFIT TO THE TRADE CARRIED ON BY THE ASSESSEE. THEREFORE, THIS JUDGMENT OF THE KERALA H IGH COURT, IN FACT, SUPPORTS THE CASE OF THE REVENUE. 11. WE FURTHER FIND THAT THE KERALA HIGH COURT HAD AN OCCASION TO CONSIDER AN IDENTICAL SITUATION IN THE CASE OF V EERARAGHAVAN VS CIT (1967) 64 ITR 63 (KER) HAD AN OCCASION TO CONSI DER AN IDENTICAL ISSUE. IN THE CASE BEFORE THE KERALA HIG H COURT, THE ASSESSEE INCURRED THE EXPENDITURE FOR RECLAIMING A PIECE OF LAND FOR WHICH LICENCE WAS GRANTED TO INSTALL A PETROL PUMP BY BURMAH SHELL OIL DISTRIBUTING COMPANY. THE KERALA HIGH COURT FO UND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR FILLING UP THE DITCHES AND RAISING THE LAND AND OF CONSTRUCTING A WALL ARE OF CAPITAL IN NATURE, THEREFORE, IT CANNOT BE ALLOWED AS DEDUCTION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS JUDGMENT OF THE KERALA HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. 12. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 6. INSTEAD, THE FOLLOWING SHALL BE INSERTED, AS PARA 7: 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO ON PERUSAL OF THE MATERIAL AVAILABLE ON RE CORD, THE ASSESSEE HAS TAKEN SEVEN BUILDINGS FOR 15 YEARS LEA SE WITH AN OPTION TO EXTEND THE LEASE PERIOD FURTHER. THE ASS ESSEE 10 M.P. NO.112 & 113/COCH/2013 INCURRED THE EXPENDITURE FOR INTERIOR DECORATION TO SET UP NEW SHOW ROOM. THE QUESTION ARISES FOR CONSIDERATION B EFORE THIS TRIBUNAL IS THAT WHEN THE ASSESSEE INCURRED THE EXP ENDITURE ON THE LEASE PREMISES FOR THE FIRST TIME TO SET UP SHOW ROOM, WHETHER IT HAS TO BE TREATED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. ON IDENTICAL SET OF FACTS, THE KERALA HIGH COURT IN THE CASE OF JOY ALUKKAS IN ITA NO.230 OF 2013 JUDGM ENT DATED 20-01-2014 FOUND THAT AN IDENTICAL EXPENDITURE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. THE KERALA HIGH CO URT REVERSED THE ORDER PASSED BY THE TRIBUNAL BY HOLDIN G THEREIN THAT ANY SUCH EXPENDITURE HAS TO BE TREATED AS CAPI TAL EXPENDITURE. THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE JUDGMENT OF THE KERALA HIGH COURT IS BINDING ON THIS TRIBUNAL, THEREFORE, THE EXPENDITURE INCURRED BY TH E ASSESSEE HAS TO BE ALLOWED AS REVENUE EXPENDITURE, IN VIEW O F THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF JO Y ALUKKAS (SUPRA). ACCORDINGLY, THIS TRIBUNAL HOLDS THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AUTHORIT IES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLO W THE CLAIM OF THE ASSESSEE IN RESPECT OF THE BUILDINGS TAKEN ON H IRE AS 11 M.P. NO.112 & 113/COCH/2013 REVENUE EXPENDITURE IN TERMS OF THE JUDGMENT OF KER ALA HIGH COURT IN JOY ALUKKAS (SUPRA). 7. WITH THE ABOVE MODIFICATION, REMAINING PARAGRAPH S 13 TO 23 IN THE ORDER OF THIS TRIBUNAL DATED 07-06-2013 ARE RENUMBE RED AS 8 TO 18. 8. THE ORDER OF THIS TRIBUNAL DATED 07-06-2013 IN I TA NO.233//COCH/2010 IS RECTIFIED ACCORDINGLY. 9. NOW COMING TO MISCELLANEOUS PETITION IN ITA NO.1 13/COCH/2013, SHRI R KRISHNA IYER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ADVANCED INTEREST FREE LOAN TO RELATIV ES. THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS ON THE DATE OF ADVAN CE. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HAS FURNISHED THE D ETAILS BEFORE THE LOWER AUTHORITIES AS ALSO BEFORE THIS TRIBUNAL. ONCE SUF FICIENT INTEREST FREE FUNDS ARE AVAILABLE, ACCORDING TO THE LD.REPRESENTATIVE, IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF MUNJAL SALES CORPORAT ION 298 ITR 298 (SC), THERE CANNOT BE ANY DISALLOWANCE OF INTEREST. THE LD.REPRESENTTIVE HAS ALSO FILED THE DETAILS OF FUNDS AVAILABLE WITH THE ASSES SEE AS ON THE DATE OF ADVNCE. 12 M.P. NO.112 & 113/COCH/2013 10. WE HEARD SMT. LATHA V KUMAR, THE LD.DR ALSO. T HE LD.DR SUBMITTED THAT AT PARAGRAPH 22 ON PAGE 20 OF THE TRIBUNAL ORD ER, THE TRIBUNAL HAS EXAMINED THE AVAILABILITY OF FUNDS AND REMANDED BAC K THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. THE TRIBUNAL CLEARLY OBSERVED THAT IF THE ASSESSEE DEMONSTRATES THAT SUFFICIENT C APITAL FUNDS ARE AVAILABLE, THEN, THERE CANNOT BE ANY DIVERSION OF F UNDS. ACCORDINGLY, THE ASSESSING OFFICER WAS DIRECTED TO EXAMINE THE AVAIL ABILITY OF FUNDS IN CAPITAL / CURRENT ACCOUNT OF THE PROPRIETOR ON THE BASIS OF THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS THAT MAY BE PRODUCED BY THE ASSESSE E. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THERE IS NO ERR OR IN THE ORDER OF THIS TRIBUNAL. 11. HAVING HEARD THE LD.REPRESENTATIVE FOR THE ASSE SSEE AND THE LD.DR, WE FIND THAT THIS TRIBUNAL HAS MADE IT CLEAR THAT W HEN SUFFICIENT FUNDS ARE AVAILABLE IN THE CAPITAL / CURRENT ACCOUNT, THERE I S NO NEED FOR ANY DISALLOWANCE OF INTEREST. HOWEVER, THE AVAILABILIT Y OF FUNDS IN THE CAPITAL / CURRENT ACCOUNT HAS TO BE EXAMINED ON THE BASIS OF THE BOOKS OF ACCOUNT AND OTHER MATERIAL THAT MAY BE FILED BY THE ASSESSE E. WHILE MAKING THE DECISION WE MAKE IT CLEAR THAT IF THE ASSESSEE DEMO NSTRATES THE AVAILABILITY OF FUNDS IT HAS TO BE ALLOWED. AT THE VERY SAME TI ME FOR THE PURPOSE OF VERIFICATION OF THE AVAILABILITY OF FUNDS, THE MATT ER WAS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. THEREFORE, THE FUNCTION OF THE ASSESSING 13 M.P. NO.112 & 113/COCH/2013 OFFICER IS ONLY TO FIND OUT THE AVAILABILITY OF SUF FICIENT FUNDS IN THE CAPITAL / CURRENT ACCOUNT OF THE PROPRIETOR. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO ERROR, MUCH LES S, A PRIMA FACIE ERROR, WITHIN THE MEANING OF SECTION 254(2) OF THE ACT. W E MAY MAKE IT CLEAR THAT THE ASSESSING OFFICER SHALL EXAMINE THE AVAILABILIT Y OF FUNDS IN THE CAPITAL / CURRENT ACCOUNT OF THE BUSINESS CONCERN AND IF SUFF ICIENT INTEREST FREE FUNDS ARE AVAILABLE IN THE CAPITAL / CURRENT ACCOUNT, THE N, THERE CANNOT BE ANY DISALLOWANCE IN VIEW OF THE JUDGMENT OF THE APEX CO URT IN THE CASE OF MUNJAL SALES CORPORATION (SUPRA). THE ASSESSING OF FICER SHALL ALSO TAKE INTO CONSIDERATION THE PROFIT RATIO AVAILABLE DURIN G THE YEAR UNDER CONSIDERATION FOR MAKING THE AVAILABILITY OF FUNDS AS FOUND BY THE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION (SUPR A). 12. WITH THE ABOVE OBSERVATIONS, THERE IS NO ERROR IN THE ORDER OF THIS TRIBUNAL; ACCORDINGLY M.P.NO.113/COCH/2013 IS DISMI SSED. 13. IN THE RESULT, M.P. NO.112/COCH/.2013 IS ALLOWE D AND M.P. NO.113/COCH/2013 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MARCH, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 28 TH MARCH, 2014 PK/- 14 M.P. NO.112 & 113/COCH/2013 COPY TO: 1. SHRI P.A. JOSE, PROP OF JOSCO FASHION JEWELLERS, PAYYAPPALLI HOUSE, THIRUVATHUKKAL, KOPTTAYAM 2. A.C.I.T., CIR.1, KOTTAYAM 3. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH