TMI Blog2014 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee tenant - In no uncertain terms that the capital expenditure incurred, whether by the owner on his premises or by a nonowner on the premises taken on rent or lease etc. for carrying on his business, shall not be allowed as deduction in full in the year of its incurring, but will be capitalized entitling it to depreciation – the expenditure incurred by the assessee on `Civil work, flooring work, and finishing work, etc,’, the same does not pass the test of revenue expenditure to be deductible in full - the amount has been rightly capitalized by the AO as well as CIT(A) making the assessee eligible for depreciation on it – Decided against Assessee. - I.T.A. No.-2089/Del/2013 - - - Dated:- 2-4-2014 - Sh. R. S. Syal, AM And Sh. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f civil work, flooring work, counter work, finishing work, doors and glassing work, miscellaneous accessories and lighting etc., the normal life of which was between one to two years. The AO did not concur with the submissions advanced on behalf of the assessee. He held such expenditure to have been incurred for creating structure giving enduring benefit to the assessee. It was opined that the amount was in the nature of furniture and fixture eligible for depreciation @ 10% per annum. The AO also took note of the mandate Explanation 1 section 32(1). Resultantly, depreciation was allowed @ 10% per annum which resulted into disallowance of depreciation to the tune of Rs.32,25,548/-. The ld. CIT (A) accepted the assessee s contention for allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the previous year relevant to the assessment year under consideration for a period of 3 years extendable for a further period of six years. The ld. CIT(A) has recorded a categorical finding that the building was to remain with the assessee for a period of 9 years. Such contention has not been controverted by the ld. AR with any cogent evidence worth the name. This shows that the said premises was to remain with the assessee for a period of nine years on lease basis and the lease started in the relevant financial year itself. The assessee, on taking possession of the premises, incurred total expenditure of Rs.53.61 lac on renovation of this premises and claimed it as revenue in nature. 7. The Hon ble Supreme Court in the case of Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that the ld. CIT(A) has taken unexceptional view in treating them as capital expenditure. 8. At this stage, it is relevant to note that the Tax Laws (Amendment and Miscellaneous Provisions) Act, 1986 inserted Explanation 1 to section 32 w.e.f. 1.4.1988, which reads as under: Explanation-1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension of, or improvement to the building, then, the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a case, the amount so incurred can be considered as revenue but would be capitalized entitling the assessee to depreciation as per the eligible rate. 10. Now we espouse the judgment in the case of Joy Alukkas India (supra), which is the trump card of the ld. AR. In this case, the Hon ble High Court has held that if the item resulting from the incurring of the expenditure is irretrievable at the end of the lease period, then it should be considered as revenue expenditure. This retrieval test formulated by the Hon ble High Court is to be seen in the backdrop of the facts prevailing in that case. It is not a statutory prescription so as to be universally applicable. If this test is brought to the logical conclusion then every expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner on his premises or by a nonowner on the premises taken on rent or lease etc. for carrying on his business, shall not be allowed as deduction in full in the year of its incurring, but will be capitalized entitling it to depreciation. When we view the expenditure of Rs.31.78 lac incurred by the assessee on `Civil work, flooring work, and finishing work, etc, , the same does not pass the test of revenue expenditure to be deductible in full. In our considered opinion this amount has been rightly capitalized by the AO as well as ld. CIT(A) making the assessee eligible for depreciation on it. We, therefore, uphold the impugned order on this issue. 12. In the result, the appeal is dismissed. Order pronounced in the open Court on 02/04/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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