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2014 (8) TMI 104 - ITAT MUMBAIExpenses incurred on temporary repairs and maintenance on leased premises treated as capital expenses – Held that:- The expenditure incurred by the assessee was in order to meet these business requirements - renovation expenses were in connection with modifying the cabins, cubicles, laying good marbles, painting and other related expenditure - repair / renovation work carried out at the premises which were not owned by the assessee but were taken on lease - The expenditure incurred has not created any capital asset nor it has given the benefit of enduring nature - None of the expenditure entails any structural change or extension or improvement of the building, therefore, Explanation 1 to section 32(1) will not be applicable. 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 assessee for efficiently carrying on its business and the items on which expenditure was made could not be reused on vacation of premises - it cannot be said that the expenditure incurred by the assessee on repair and renovation was in the nature of capital - The premises belonged to the directors of the company who had more than 50 percent share. Whether on the basis of explanation-1 to Section 32(1) it can be said that despite being expenditure in the nature of revenue the assessee will only be entitled for depreciation – Held that:- Sub-section (1A) and subsequent omission of Sub-section (1A) and insertion of explanation-1 after the second proviso to Section 32(1)(iii) are brought to the statute only for the reason that in a case where 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 to invoke the provision of explanation-1 after the second proviso to Section 32(1)(iii) is that expenditure itself should be capital in nature - If the expenditure by its nature itself is not capital in nature and its nature is revenue then provisions of explanation-1 after second proviso to section 32(1)(iii) will not be applicable at all - It has already been pointed 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 - even 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 expenses which are revenue in nature – Decided in favour of Assessee.
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