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TMI Blog2012 (12) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 was raw. Before this raw office space i.e., a shell building could be put to use by the assessee as a business asset, the assessee had incurred expenditure on flooring, tiling, partitioning the space and sanitary fitting etc. The office created with these expenses, though on a rented premises has brought into existence a capital advantage. The new office is a part of assessee's apparatus for conducting its business. The expenditure therefore is capital in nature." 3. Apropos ground No.1, the facts as per the relevant orders are that the assessee company is engaged in the business of providing value added services to various mobile telephone service providers, like M/s Bharti Airtel Ltd. and M/s Hutchison Max Telecom Pvt. Ltd. For the year under consideration, the assessee claimed an amount of Rs. 6,86,87,898/- on account of product improvement expenses, claiming the said expenditure to have been incurred in the ordinary course of the business of the assessee. This expenditure comprised the following:- "i) The technology platform was evolved by refactoring the utility classes and back end APIs of the platform into service interfaces. ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat further, the Ld. CIT (A) has failed to appreciate that the Assessing Officer had allowed depreciation of 60% on the expenditure, which amounted to Rs. 4,12,12,739/-. 9. In this regard, having considered the rival contentions in the light of the material available on record, we find that for Assessment Year 2003-04, similar expenditure had been disallowed. The ITAT allowed the same. For Assessment Years 2004-05 to 2006-07, the Assessing Officer himself allowed similar expenditure. Likewise, for Assessment Years 2008-09 and 2009-10 also the Assessing Officer himself allowed the said expenditure. It is taking into account such allowance by the Assessing Officer himself, in the earlier as well as succeeding Assessment Years, that the Ld. CIT (A) has and, in our considered opinion, rightly so, deleted the disallowance. It remains undisputed that as observed by the Ld. CIT (A), the expenditure was incurred in terms of the agreement for production of value added service to mobile phone operators. The corresponding receipts therefrom were shown by the assessee as its trading receipts and were duly offered to tax. The expenses, the details of which as given above, consists of rent, ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture. 11. In "Assam Bengal Cement Co. Ltd." (supra), it has been observed that if the expenditure is incurred for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is capital expenditure; that if such expenditure, on the other hand, is incurred for the purpose of bringing into existence any such asset or advantage, but for running the business or working it with a view to produce profits, it is a revenue expenditure. 12. Lastly, in "CIT vs. J.K. Synthetics Ltd." (supra), it was held that the expenditure incurred towards initial outlay of business would be in the nature of capital expenditure, but if it is incurred while the business is carrying on, it would have to be ascertained if the expenditure is incurred for acquiring or bringing into existence an asset or advantage of an enduring benefit for the business and if that be so, it would be in the nature of capital expenditure; that if, on the other hand, the expenditure is for running the business or working it with a view to produce profits, it would be in the nature of revenue expenditure. 13. In view of the above, we do not find a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of the expenditure have been filed before us. It has been submitted that the premises in which the office of the assessee exist, was a rented premises; that no new asset was brought into existence by incurring the expenditure; that it was only to make the leased premises suitable for the assessee's business purposes that the expenditure in question was incurred; that moreover, the Tribunal, in the case of M/s Angelique International Ltd., vide order dated 13.07.2012, passed for Assessment Year 2007-08 in ITA No.481/Del/2011 (copy is placed on record), i.e., for the same year as under consideration herein, has allowed similar expenditure; that further, in "CIT vs. Hi Line Pens (P) Ltd." 306 ITR 182 (Del), it has been held that where the expense is incurred towards repairing the rented premises for the business activity of the assessee, and there is no intention of the assessee to bring in new capital asset into existence, such expenses fall within the expression "repairs to premises" in Section 30 (a) (i) of the IT Act, which is an allowable expenditure; that still further, the assessee is running into heavy losses and no advantage was derived from the incurrence of the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in favour of the assessee by the following decisions:- i) "CIT vs. L.G. Electronics India (P) Ltd.", 309 ITR 265 (Del); and ii) "CIT vs. Woodward Governors India Pvt. Ltd.", 312 ITR 254 (SC) 26. The Ld. DR, on the other hand, has strongly relied on the impugned order in this regard, contending that there is no error whatsoever in the order of the Ld. CIT (A) with regard to the cross objections raised by the assessee; that the loss undisputedly was on account of revaluation of current assets/liabilities in foreign currency as on 31.03.2007; that this was, undoubtedly, a notional and contingent loss; that during the year, the assessee had earned profit on account of foreign exchange rate fluctuation in respect of actual receipts; that the provision of Rs. 10,09,662/- was set off by the assessee against the said profit; that the Ld. CIT (A) has correctly observed that the transactions having not been completed during the year under consideration, the loss has been shown by the assessee as "provision" and the provisional loss on account of the year end restatement of closing balances cannot be allowed to be set off against actual profit earned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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