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2015 (12) TMI 1065 - PUNJAB AND HARYANA HIGH COURT

2015 (12) TMI 1065 - PUNJAB AND HARYANA HIGH COURT - [2016] 383 ITR 290 - Nature of expenses - ITAT estimated the revenue expenditure and came to the conclusion that 70% expenditure was revenue and 30% was capital - Held that:- As the case here relates to the assessment years 2000-01 and 2001-02 where the allowability of the expenditure is not in dispute but the issue is whether it had to be allowed in one year as revenue expenditure or by way of depreciation under Explanation 1 to Section 32 of .....

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come Tax Rules, 1962, the entire amount would have been allowed as deduction on account of depreciation by now and the case would be revenue neutral. Therefore, in such circumstances as well, we do not find any justification in interfering with the order of the Tribunal. - Decided against revenue - I. T. A. Nos. 309 and 312 of 2014 (O&M) - Dated:- 2-9-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN, JJ. For The Appellant : Ms. Urvashi Dhugga, Advocate For The Respondent : Mr. Rohit Jain, Advo .....

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ent year 2000-01, claiming following substantial questions of law:- 1. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in holding part of expenses related to large scale renovation running into more than one financial year and resulting into conversion of a hall into a full fledged top class show room as allowable being revenue expenditure and remaining part of these as not allowable being capital expenditure? ii) Whether on the facts and .....

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manufacturing and trading of malted products such as Horlicks, Boost etc. The assessee filed return of income for the assessment year 2000-01 on 14.11.2000 at ₹ 1,00,77,74,936/-. Initial assessment in the case was completed under Section 143(3) of the Act at an income of ₹ 1,10,49,98,156/-. In the assessment proceedings, deduction under Chapter VIA under Section 80G of the Act amounting to ₹ 7,54,194/- was allowed and deduction of ₹ 1,32,15,921/- claimed under section 80H .....

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harged was treated as capital expenditure and depreciation of 60% was allowed thereon. The Assessee company incurred substantial expenditure amounting to ₹ 4,77,59,930/- on renovation/interior decoration on leased office premises. The renovation expenditure was claimed by the assessee as revenue expenditure. The Assessing Officer while passing the original order dated 26.3.2003, Annexure A.1 made addition by disallowing expenditure incurred on renovation. The said addition was made primari .....

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renovation/interior decoration at the leased office premises to the file of the Assessing Officer and directed the Assessing Officer to verify the details of expenditure and ascertain which expenditure fell within the purview of Explanation 1 to Section 32(1) of the Act out of the total expenditure of ₹ 4,77,59,930/- incurred on renovation and interior decoration. In reassessment proceedings in order under section 254/143(3) of the Act dated 30.12.2008, the entire expenditure claimed was .....

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fittings, whitewashing, false ceiling, interior work, sanitary fittings, fire detecting system, ducting for air conditioning etc. ii) ₹ 41,86,755/- towards consultancy expenses paid to Cushman and Wakefield, Currie and Brown and other consultants for rendering professional advice in relation to the renovation work; iii) ₹ 50,20,070/- towards architecture fees, temporary art work' iv) ₹ 72,12,870/- towards carpets and tile; v) ₹ 12,63,330/- towards travelling and shift .....

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s urged that the Tribunal had erred in bifurcating the renovation expenses by holding 70% as revenue and only 30% as capital in nature. Support was gathered from the judgment of the Apex Court in CIT Vs. Sarvana Spinning Mills P. Limited, (2007) 293 ITR 201, judgments of this Court in M/s Liberty Group Marketing Division, Liberty House, Railway Road, Karnal vs. CIT, Aayakar Bhawan, Sector 13, Karnal, ITA No.97 of 2012, decided on 17.9.2013, Uttar Bharat Exchange Limited vs. Commissioner of Incom .....

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ngs recorded by the Tribunal. 7. No doubt, under Explanation 1 to Section 32 of the Act, where an assessee carrying on any business or profession in a building which is not owned by him, expends amount on renovation, extension or improvement to the leased building, then the same is capitalized and the assessee is entitled to claim depreciation in respect thereof. 8. Adverting to the factual matrix herein, the Tribunal bifurcated the expenditure under various heads as follows:- i. ₹ 4,18,27 .....

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77; 12,63,330/- towards travelling and shifting/installation expenses; vi) ₹ 8,87,694/- towards Stationeries, plants, boards; vii) Other revenue expenses like telecommunication expenses, expenditure on security services and other miscellaneous expenses. 9. The Tribunal on perusal of the evidence estimated the revenue expenditure and came to the conclusion that 70% expenditure was revenue and 30% was capital. The relevant findings recorded by the Tribunal read thus:- 33. Now the only aspect .....

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assessee has failed to provide the complete details under the various sub heads of expenditure and both the Assessing Officer and the Commissioner of Income Tax (Appeals) have failed to address the said issue on the surmise that the assessee had not furnished complete details before them. Even before us, though the assessee has furnished sample bills which have been filed before us and referred to by us in the paras hereinabove but the perusal of the said bills reflect the expenditure being incu .....

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cumstances, we are of the view that the expenditure incurred by the assessee consist of both capital and revenue expenditure. However, in the absence of complete details, we are constrained to estimate the disallowance of capital expenditure in the hands of the assessee. We hold that out of the total expenditure, 30% of the expenditure incurred by the assessee is capital in nature and the same merits to be disallowed in the hands of the assessee in both the years. The said disallowance is in res .....

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