TMI Blog2014 (10) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ed - even while claiming that the expenditure is revenue, in nature, the revenue claimed depreciation on it – Following CIT vs. Madras Auto Service Private Limited [1998 (8) TMI 1 - SUPREME Court] In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view - the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts - the assessee did not get any capital asset by spending the amounts - The assessee could not have claimed any depreciation - Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure – Decided against re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 256(1) of the Income Tax Act. After hearing both the parties, the Tribunal framed the following three questions and referred them to this Court: 1. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that allowance of expenditure has to be limited under Rule 6D with reference to the whole of the previous year and not by splitting up each trip of an employee? 2. Whether on the facts and in the circumstances of the case, the ITAT was correct in law in allowing the expenditure of ₹ 22,39,868/- under wooden partitions, electric wiring, power connections, interior layout and carpeting etc., as revenue expenditure for the assessment year 1987-88? 3. Whether on the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court, it just took into account, an order passed by it in the previous assessment year and answered it in favour of the respondent. He submits that questions 2 and 3 deserve to be answered in favour of the revenue. Learned counsel for the respondent, on the other hand, submits that the premises in which the respondent was conducting business and arranging the partitions and other amenities were taken on lease, and whether one takes into account, the temporary nature of the structures or the fact that the agency that arranged it was not the owner of the premises; the inescapable conclusion is that the items were not enduring additions to the assets, and thereby the expenditure was not capital in nature. He submits that the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for better use thereof, the lessee makes certain arrangements such as making partitions or arranging electricity supply to suit the business needs, it may not be treated as addition of assets of enduring nature. The reason is that when the lessee vacates the premises, he would be at liberty to take away all the fixtures arranged by him, and in such event the fixtures cannot be treated as permanent assets, independent of the building. Similar instances can be cited. The respondent in the instant case is a lessee of a building. The business premises naturally needed certain alterations and works of arranging partitions extending electricity supplies carpeting, wherever needed was arranged. Curiously enough, even while claiming that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 39 years by expending these amounts. The saving in expenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. Following the same, we answer the second question against the department and in favour of the assessee. The answer to third question does not need much of discussion. The reason is that on the same aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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