TMI Blog2015 (5) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... . What would apply to civil work equally applies to electrical work or interior decoration. The assessee had not stated the nature of civil works constructed, the nature of interior decoration made to the leasehold premises and also the nature of electrical work undertaken. In the absence of that material and without proper application of mind, the assessing authority proceeded on the footing that the expenditure constituted capital expenditure. In view of the above, we remit the issue in dispute to the Assessing Officer to consider whether the expenditure is revenue or capital in nature and decide afresh. - Decided in favour of assessee for statistical purposes. - I. T. A. No. 1384/Mds/2013 - - - Dated:- 29-5-2015 - Chandra Poojari (Accountant Member) And Challa Nagendra Prasad (Judicial Member) For the Petitioner : Vikram Vijayaraghavan, Saroj Kumar Parida For the Respondent : Dr. Nischal ORDER Chandra Poojari (Accountant Member) 1. This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)- I, Coimbatore, dated April 22, 2013. 2. The grievance of the assessee in this appeal is with regard to confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambit of Explanation 1, questions which are to be answered are : (i) Whether the assessee is carrying on business or profession in a leased building or other rights of occupancy ? (ii) Whether the assessee has incurred any capital expenditure for the purpose of business on the construction of any structure or doing any work or in relation to and by way of renovation or extension or improvement in the building ? 5. If the answer to the aforementioned questions is in the affirmative, the assessee falls within the purview of Explanation 1 to section 32(1). In the instant case, it is an admitted fact that the assessee has taken several buildings on lease for setting up of bakery business. It is also undisputed that the assessee has carried out renovation, restructuring including flooring, false ceiling, sanitary works, partition, wall panelling, cup boards, etc., at the lease premises. The assessee has made certain changes by means of electrical works, sanitary and vitrified tiles, etc. All these activities carried out by the assessee if put to the test of Explanation 1 would show that renovation/repair/addition made by the assessee on the leased out premises would amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the Assessing Officer in treating the expenditure as capital in nature. Against this, the assessee is in appeal before us. 8. The learned authorised representative placed reliance on the judgment of the Kerala High Court in the case of Joy Alukkas India Pvt. Ltd. v. Asst. CIT 88 CCH 147 and pleaded that the above expenditure is to be considered as revenue expenditure. 9. On the other hand, the learned Departmental representative relied on the decision of the co-ordinate Bench of the Tribunal in the case of ABT Ltd. v. Asst. CIT [2013] 21 ITR (Trib) 634 (Chennai). 10. We have heard the parties and perused the record. In the present case, the assessee has taken the building on leasehold on which the assessee carried on interior work and claimed as revenue expenditure. The same was rejected by the Commissioner (Appeals). The learned Departmental representative contended that the assessee made new addition in the leased building and it is not the case of renovation of the leased building or improvement of the leased building as in the case of Joy Alukkas Pvt. Ltd., cited supra as held by the Kerala High Court. For settling the controversy, we have to go through Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d building and not on land. The High Court in paragraph 8 of the judgment further held as under (page 436) : 8. What constitutes a capital expenditure and what does not, to attract Explanation 1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or improvement to the building which is put up in a building taken on lease by him for carrying on his business and profession of the assessee, but not in a case of construction of any structure or doing any work or relation to where such building is put up/constructed for the purpose of business or the profession of the assessee in a land taken on lease by the assessee. 13. Thus, it is clear that the ratio laid down by the Madras High Court in the said judgment does not support the case of the assessee. 14. In the present case, the assessee has taken building on lease and made certain interior decoration. It is the case that the assessee has beautified the leased building. The High Court has further held in the aforesaid case that the language employed in a statute is the determinative factor of the legislative intent and even assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 17. From the above judgment, we can conclude that it is essential that the expenditure incurred on the construction of any structure on the leased premises should result in enduring benefit. That any expenditure incurred for civil work by a lessee in respect of the leased premises, without any further proof cannot be said to be capital expenditure or revenue expenditure. In order to find out the nature of expenditure, it is necessary to find out the nature of construction put up, the purpose of construction/renovation and the use to which the construction put up and also if it is a case of repair, replacement, addition or improvement has to be gone into. It is only on the aforesaid material, keeping in mind the principles enunciated in the judgments by the Supreme Court and keeping in mind section 37 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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