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2013 (8) TMI 751 - AT - Income TaxRevenue or Capital expenditure - Expenditure on renovation work - CIT allowed depreciation - Whether the said expenditure incurred by the assessee to renovate the said premises is to be allowed as capital expenditure or as a revenue expenditure - Held that:- On perusal of the agreement entered by the assessee, it is observed from the Clause 3.1 that none of the party is entitled to terminate this agreement during the said lock-in-period of 24 months beginning from 9.2.2007 till 8.2.2009. The above terms and conditions of the agreement itself establishes that the first lease agreement entered into by the assessee with its sister concern, a partnership firm to take the said premises on rent on monthly rent of ₹ 3000/- and thereafter spent the said amount of ₹ 59,65,000/- in the Financial Year relevant to the year under consideration and let out the said premises at monthly rent of ₹ 15,00,000/- appears to be a colourable device - expenditure has been incurred by the assessee for complete renovation of the building to suit the requirement of licensee - Said expenditure cannot be said to be a revenue expenditure but it is a capital expenditure giving enduring benefits to the assessee in the form of regular receipt of monthly rent and interest free refundable security deposits - CIT(A) has rightly held that the said expenditure incurred by the assessee in relation to the premises under consideration for complete renovation to suit the requirements of licencee is a capital expenditure and the assessee is entitled to depreciation - Explanation to section 32(1) of the Act also stipulates that all the expenditures incurred by the assessee in relation to lease premises for renovation or extension or improvement is entitled to depreciation as is shown by the assessee - Decided against Assessee. Disallowance of expenditure incurred on repairs to Air conditioner - Held that:- expenditure has been incurred by the assessee towards cost of new compressor and to replace old damaged one, therefore, no new asset has come into existence. The said expenditure is revenue in nature as expenditure has been incurred to replace the damaged compressors of existing Air- conditioners - Decided in favour of assessee.
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