TMI Blog2015 (9) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... e land has been transferred through a registered deed involving transfer of immovable property, thus, the assessee has acquired fixed asset. CIT(Appeals) upheld the order of Assessing Officer. The Tribunal reversed the findings of the CIT(Appeals). In appeal by the Department, the Hon'ble High Court upheld that the findings of the Tribunal, that the land in question was not acquired by the assessee. That merely because the deed was registered the transaction in question would not assume a different character. The lease rent was very nominal. By obtaining the land on lease the capital structure of the assessee did not undergo any change. The assessee only acquired a facility to carry on business profitably by paying nominal lease rent. Thus, from the analysis of the above judgment of the Hon'ble Gujarat High Court it can be safely concluded that the Special Bench decision in the case of JCIT Vs. Mukund Ltd. (2007 (2) TMI 358 - ITAT MUMBAI) cannot be applied in the facts of the present case. The expenditure incurred by the assessee on construction of storage structure etc. has to be allowed as revenue expenditure. - Decided in favour of assessee. - ITA No. 258/PN/2013 - - - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital. The Assessing Officer vide impugned assessment order followed the directions of DRP and treated the said expenditure as capital and allowed the benefit of depreciation on same. Against the aforesaid findings of Assessing Officer, the assessee is in appeal before the Tribunal. 3. Shri Ketan Ved appearing on behalf of the assessee submitted that the assessee had taken land measuring 4.5 acres on lease from B.G. Shirke Construction Equipments Pvt. Limited along with structures consisting of equipment shop admeasuring 15724.07 sq. mtrs. built up area and store and office block admeasuring approximately 1191 sq. mtrs. The assessee incurred expenditure towards the leveling and flooring of the land and construction of storage space for raw material measuring 3600 sq. mtrs. and for finished goods admeasuring 5000 sq. mtrs. The assessee had claimed the expenditure on the construction of the said structures as revenue in nature. The lease agreement was for the period of 3 years with renewal option of further period of 3 years i.e. total period of 6 years. The improvement made by the assessee over the lease land was primarily for advancement of the business of the assessee and not fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d measuring 4.5 acres along with building and structures including factory, shed, equipment shops etc. for the period of 3 years. As per the terms and conditions of lease agreement the user/lessee could make changes in the said structure from time to time and build further structure on the said land during the lease period. The assessee constructed sheds measuring 3600 sq. mtrs. for storage of raw materials and 5000 sq. mtrs. for storage of finished goods. Apart from the above the assessee had also constructed drainage, fence with gate, expenditure was also incurred on electrical lighting, landscaping, leveling and flooring of land. The assessee treated the expenditure on the aforesaid structures / improvements as Revenue in nature. On the contrary the Department held the expenditure on the aforesaid improvements and constructions as capital. 6. In appeal the issue raised is; Whether the expenditure incurred by the assessee on construction of sheds etc. is it be classified as revenue or capital expenditure. Whether the expenditure is revenue or capital in nature is a question of fact which has to be decided in the facts and circumstances of the each case. The primary reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of storage sheds and fence wall with gate is in furtherance to carry its business in more convenient manner. The Hon'ble Supreme Court of India in the case of CIT Vs. Madras Auto Service (P.) Ltd. (supra) has held that where expenditure is incurred for the purpose of conducting the business of assessee more profitably or more successfully and the asset created by incurring such expenditure does not belong to the assessee, in such cases the expenditure has to be treated as revenue expenditure. The relevant extract of the order of Hon'ble Supreme Court of India reads as under: 6. 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. What advantage did the assessee get by constructing a building which belonged to somebody else and spending money for such construction? The assessee got a long lease of a newly constructed building suitable to its own business at a very concessional rent. The expenditure, therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including land and building and plant and machinery for ₹ 75 lakhs. Under the deed of assignment, it was mentioned that the value of land and buildings and plant and machinery stood bifurcated for the purposes of payment of stamp duty into two parts viz ₹ 72 lakhs for land and building and ₹ 3 lakhs for plant and machinery. The assessee claimed ₹ 72 lakhs as revenue expenditure being the cost of the land purchased from the official liquidator. The Assessing Officer found that the assessee had purchased the whole unit for ₹ 75 lakhs, out of which ₹ 45 lakhs related to acquisition of leasehold land. The Assessing Officer treated ₹ 45 lakhs as capital expenditure for the purpose of leasehold rights. In appeal, the Tribunal upheld the findings of Assessing Officer. The matter travelled to the Hon'ble High Court. The Hon'ble High Court confirmed the findings of the Tribunal in treating the cost of leasehold land as capital expenditure. We find the facts of the present case are entirely different. Thus, the ratio laid down by the Hon'ble Bombay High Court in the case of CIT Vs. Khimline Pumps Ltd. (supra) cannot be applied in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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