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2021 (9) TMI 245 - AT - Income TaxNature of expenditure - Expenditure incurred by the assessee towards repairs and renovation of the premises to house the branch - revenue or capital expenditure - HELD THAT:- The mere fact that enduring benefit ensure to the assessee by itself would not be a factor to be decided as to whether it is a capital or revenue expenditure. Tribunal concluded that the amount could not be said to be a capital expenditure and was only a revenue expenditure. On appeal, the Hon’ble High Court confirmed the ITAT’s order. Hon’ble High Court held “that the premises had been taken on lease by the assessee and the repairs that were carried out for the purpose of business to create the ambience and to carry out repairs to use the premises as the office of the assessee as there was stiff competition in the business of the assessee and the expenditure of the amount of ₹ 15,89,613 which would come to ₹ 9 per sq.ft. in respect of 17113 sq.ft. could not be said to be capital expenditure. The mere fact that it was taken on lease for six years would not itself render the expenditure capital in nature”. Explanation 1 to section 32(1) of the I.T.Act relied on by the CIT(A) is of no help to the revenue. Explanation 1 to section 32(1) of the I.T.Act only permits the assessee to claim depreciation on capital expenditure incurred on leased premises taken by the assessee. On the other hand, if the expenditure incurred by the assessee is on the revenue front, whether the premises is taken on lease or not is immaterial and the same is always an allowable deduction - CIT(A) misinterpreted Explanation 1 to section 32(1) of the I.T.Act - we hold that the assessee is entitled to deduction as revenue expenditure. Ex-gratia payment payment made to the employees is not a statutory payment, and hence, not liable for disallowance u/s 43B - CIT(A) rejected the plea of the assessee since the assessee has not filed a revised return - HELD THAT:- It is an admitted position of law that powers of the CIT(A) are coterminous with that of the Assessing Officer can exercise. CIT(A) while hearing an appeal has all the powers which an Assessing Officer can exercise. CIT(A) ought to have independently considered the issue raised before him de hors the fact that the issue was not considered by the Assessing Officer. In this context, we rely on the judgment of the Hon’ble Apex Court in the case of Jute Corporation of India Ltd. [1990 (9) TMI 6 - SUPREME COURT] - judgment of the Hon’ble Supreme Court in the case of Goetze (India) Limited [2006 (3) TMI 75 - SUPREME COURT] only impinge upon the powers of the AO to consider a claim which is not made in the return of income, whereas, such restriction is not there with regard to power of an Appellate Authority. We are of the view that the issue of ex-gratia payment, whether it can be subjected to disallowance u/s 43B of the I.T.Act needs examination by the Assessing Officer.
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