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TMI Blog2016 (5) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) instead of Plant (depreciation @ 15% Rs. 24292) . 1.3 The learned CIT (A) failed to appreciate that the asset hoarding structures being in the nature of plant also meets the condition laid down under the act 2. Interest on loan 2.1 On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming addition of Rs. 34,932/- out of total interest claimed. 2.2 The learned CIT (A) failed to appreciate that interest expense was incurred wholly and exclusively for the purpose of business of the appellant as amounts receivable are outstanding on account of sales conducted by the appellant and there is direct nexus between the expenditure and business purpose. 2.3 The Learned CIT (A) ought to have held that the estimated disallowance is adhoc, arbitrary and uncalled for. 3. Hoardings Expenses 3.1 On the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming treatment of Hoarding Expenses incurred in respect of Hoardings amounting to Rs. 4,94,500/- being 50% of two bills of hoarding expenses amounting to Rs. 9,89,000/- as Capital Expenditure and adding Rs. 4,94,500/- to the appellants income after allowing deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is used by a businessman for carrying on his business. The assessee firm also cited the decision of the Hon'ble Supreme Court in the case of Scientific Engineering Houses P. Ltd. v. CIT, 157 ITR 89, 96 wherein it was held that plant includes any article or object fixed or movable, live or dead, used by businessman for carrying on his business and is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business.. The A.O., however, rejected the contentions of the assessee firm and held that by no stretch of imagination can the hoarding site be considered as a 'plant' which on itself can actively or passively result in generation of a service/product to constitute a plant. The A.O. relied upon the decision of Hon'ble Apex Court in the case of CIT v. Anand Theatres [2000] 110 Taxman 338 (SC) ,wherein the Hon'ble Apex Court held that such buildings cannot constitute a plant. The word 'plant' specified in Section 43(3) of the Act nowhere mentions the word building and with effect from 1-4-2004 the provisions of the Act specifically excludes buildings, furniture and fixtures from the word plant. The AO ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the AO's action was completely unjustified and incorrect in restricting the depreciation @ 10%. This is also a fact on record that the appellant was allowed depreciation since many years by the Department @ 15% on hoarding structure. Hence also, in my considered view, any deviation on the part of the AO on accepted norms of the Department consistently followed in the appellant's case without having any major change of facts, was not correct. Taking note of all these facts, I consider proper and appropriate direct the AO to allow the depreciation @ 15% to the appellant on such hoarding structure. Thus, this ground of appeal is allowed." 8. On the other hand, the ld. D.R. relied upon the order of the CIT(A) . 9. We have considered the rival submissions and also perused the material on record. It is observed that the assessee firm has claimed depreciation @ 15% on hoarding structure's under the category of 'plant and machinery' while the Revenue authorities have allowed depreciation @ 10% being part of the building. We have observed that the assessee firm is in the business of exhibiting cinema slides and short films in theatres and sole concessionaries and also in allie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act,1961 u/s 43(3) has given a very wide definition to the word "plant" which is an inclusive definition and not an exhaustive definition, to includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. The term 'Plant' should be given its ordinary meaning as understood by common man and has to be read in the context of particular trade or manufacturing carried on by the tax-payer. The Oxford English dictionary has defined the word 'plant' means "fixtures, implements, machinery and apparatus used in carrying on any industrial process". The dictionary meaning of plant shall not include stock-in-trade or the place where the business is carried on. It is a tool of the trade with which business is carried on. In order to find out whether building constitute 'plant', functional test must be applied but the same test is not conclusive. It must be seen whether the building or structure or part thereof constitute an apparatus or tool of the tax-payer or whether it is merely a space where tax-payer carries on his business. If the building or structure or part thereof is, something by means of which the business activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis period for which the expenditure is incurred, an allowance (in this Chapter referred to as 'an initial allowance') equal to three tenths of the expenditure." (p. 62) The matter was decided by the majority view and it was held that the dry dock was a plant. For this purpose, Lord Reid considered the definition of the word 'plant' given by Lindley L.J. in Yarmouth v. France [1887] 19 Q.B.D. 647, 658. This definition reads "in its ordinary sense, it includes whatever apparatus is used by a businessmen carrying on his business-not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business." Thereafter it was observed as under : ". . . The dry dock was in our view not the mere setting or premises in which ships were repaired. It was different from a factory which housed machinery, for in the operation of the dock, the dock itself played a part in the control of water and enabled the valves, pumps and electricity generator, which were an integral part of its construction, to perform their functions. The dock was not a mere shelter or home but itself played an essentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was wrong as it was something quite different from the generally accepted conception of 'plant'. 26. Lord Upjohn also disagreed with the majority view by observing that too much emphasis on a functional element ought not to have been given. In a modern sophisticated factory 'purpose built' for a particular manufacture without which the factory would be useless, makes the walls of a factory part of the plant and that is not intended. It was further observed that function is no more than an element for deciding whether it is a plant or a building. 27. We may mention at the stage that even in England House of Lords has repeatedly commented that the word 'plant' is given imprecise application because of the artificial meaning given to it. In Cole Bros. Ltd. v. Phillips (Inspector of Taxes) [1982] (1) WLR 1450. The House of Lords considered the question-whether expenditure incurred in electric lighting installation and conduit and cables to socket outlets, constituted expenditure on the provision of 'plant' so as to qualify for capital allowance. For the expression 'plant' Lord Hailsham observed : "...that the word 'plant' in the relevant sense, although admittedly not a term o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is left to the court to interpret them. It naturally happens that as case follows case, and one extension leads to another, the meaning of the word gradually diverges from its natural or dictionary meaning. This is certainly true of 'plant.' No ordinary man, literate or semiliterate, would think that a horse, a swimming pool, movable partitions, or even a dry dock was plant- yet each of these has been held to be so: so why not such equally improbable items as murals, or tapestries, or chandeliers ?" [Emphasis supplied] 29. The House of Lords observed that even the 'functional' test was inconclusive. Therefore, the Court suggested that each case must be resolved by considering carefully the nature of the particular trade being carried on, and the relation of the expenditure to the promotion of the trade. Applying that test the Court held : "I do not find it impossible to attribute to Parliament an intention to encourage by fiscal inducement the improvement of hotel amenity." 30. In the said case, Lord Lowry also considered the case of Benson (supra) in which ship, or floating hulk, used as a restaurant was held not to be plant and observed : "the Crown relied on the case be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal to one-half of the amount admissible under clause (ii) (exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year : Provided that no deduction shall be allowed under this clause in respect of- (a) any machinery or plant installed in any office premises or any residential accommodation; (b) any office appliances or road transport vehicles; and (c) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation of otherwise) in computing the income chargeable under the head 'profits and gains of business or profession' of any one previous year. Explanation - For the purpose of this clause,- (a) 'new machinery or plant' shall have the meaning assigned to it in clause (2) of t he Explanation below clause (vi) of this sub-section; (b) 'residential accommodation' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in items 1 to 24 (both inclusive) in the list in the Ninth Schedule or in the case of new machinery or plant (other than office appliances or road transport vehicles) installed after that date in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things, a sum equal to twenty per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee, in respect of the previous year in which the ship or aircraft is acquired or the machinery or plant is installed, or if the ship, aircraft, machinery of plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year; but any such sum shall not be deductible in determining the written down value for the purposes of clause (ii) : Provided ****** Provided further that no deduction shall be allowed under this clause in respect of- (a) any machinery or plant installed in any office promises or any residential accommodation, including any accommodation in the nature of a guest-house, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is constructed or such work is done by way of renovation or improvement to any such building. The percentage specified against sub-Items 1, 2 or 3, as may be appropriate to the class of building in or in relation to which the renovation or improvement is effected ; (b) Where the structure is constructed or work is done by way of extension to any such building The percentage specified against sub-items 1, 2 or 3 as would be appropriate if the structure of work constituted a separate building. II. Furniture and Fittings 1. General rate 10 2. Rate for furniture and fittings used in hotels, restaurants and boarding houses;...Cinemahouses; theatres and... 15 1 2 3 III. Machinery and plant (not being a ship) - (i) General rate applicable to machinery and plant (not being a ship) for which no special rate has been prescribed under Item (ii) herein below. (ii) Special rates: 15 ** * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any machinery or plant installed 'in office premises or any residential accommodation'. That means the Legislature has divided building into different categories, namely, (i) buildings used for office premises or (ii) for residential accommodation; or (iii) premises used for other purposes. Meaning to the phrase 'residential accommodation' is also given under the Explanation which includes accommodation in the nature of a guest house and it specifically excludes 'premises used as a hotel'. So, the Legislature has not considered hotel building by itself as a plant. The phrase is 'premises used as a hotel' where machinery or plant is installed. (3) Under clause (v) of sub-section (1) of section 32 specific provision is made for a 'new building', the erection of which is completed after 31-3- 1967, which is 'used as a hotel'. If the conditions mentioned therein are satisfied then for a building which is used for a hotel, a sum equivalent to 25 per cent of the actual cost of the erection of the building is granted as depreciation. Further, the Legislature has considered building as separate from the hotel business and building is not considered as a plant for running t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation allowance at specified rates depending upon fulfilment of the conditions mentioned therein. Hence, there is no question of referring to dictionary meaning of the word 'plant' which may or may not include building, for arriving at a conclusion that building which is specifically designed and constructed as a hotel building would be a 'plant'. Further, in context of legislative scheme under section 32 stated above, which provides depreciation at different rates for building, machinery and plant, furniture and fixtures, ships, building used for hospital, aeroplanes, cinematograph films, machinery used in the production and exhibition of cinematograph films, recording equipment, reproducing equipment, developing machines, printing machines, synchronisers and studio lights except bulbs, projecting equipment of film exhibiting concerns, even though the word 'plant' may include building or structure in certain set of circumstances as per the dictionary meaning, but to say that building used for running the business of hotel or a cinema would be 'plant' under the Act appears, on the face of it, to be inconsistent with the aforesaid provisions. Such meaning would be clearly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 'machinery'. indeed, rule 8 of the Income-tax Rules treats aero-engines separately from aircraft. It is true that this rule cannot be used to interpret the clauses in the Act but it does show that components of an aircraft, which are machinery, can be treated separately." [Emphasis supplied] (P. 172) For the words 'plant' and 'installed' the court held : "Further, when the assessee purchased the diesel engines, they were not 'Plant' or part of a plant : because they had not been installed in any vehicle. They were, according to the definition given by the Privy Council, machinery. They were not yet part of a plant, and, according to the Act, 20 per cent of the cost thereof was allowable to the assessee. All the conditions required by the Act are satisfied. If we look at the point of time of purchase and installation, what was purchased and installed was machinery." (p. 172) Thereafter, the Court considered the meaning of the expression 'install' and held that when an engine is fixed in a vehicle it is installed within the meaning of sections 10(2) (vi) and 10(2) ( via) of the 1922 Act. Similarly, in the present case, the word 'plant' is given meaning under section 43(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des buildings used as hotel would indicate hotel building cannot be construed as a 'plant'. We agree with this view of the Madras High Court. 38. Next, it is to be stated that the judgment in the case of Barclay, Curle & Co. Ltd. (supra) would be of no assistance for holding that a building used for the purpose of a hotel or the theatre used for carrying the business of cinema will be a 'plant' because in the said case majority view was that the dry dock was not the mere 'setting' or the premises in which ships were repaired. It was not mere shelter or home but 'itself' played an essential part in the operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. It was a complete unit by itself, therefore, it was a 'plant'. Against that, for a hotel premises, under the Act, building is not considered to be an apparatus for running the hotel business but is merely a shelter or home or setting in which business is carried out. In our view, same would be the position with regard to a theatre in which cinema business is carried on. Webster Comprehensive Dictionary (International Edition) gives meaning to the word 'theatre' that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover the permanent structure of a building in which a business is carried on [John Good & Sons Ltd.'s case]. (iv) Something which is a structure or part of a structure may nevertheless be plant, if it fulfils the function of plant in the trader's operations. {Commissioners of Inland Revenue v. Barclay, Curle & Co. Ltd. [1969 SC (HL) 30 : 45 TC 221]}. (v) Apparatus which has no functional purpose in the commercial process, even if it serves to attract custom, is not plant - Dixon v. Fitch's Garge Ltd. [(1976) 1 WLR 215 : 50 TC 509, in this case the apparatus in question was a canopy constructed over the pumps of a petrol filling station to provide shelter while the commercial process of delivering fuel was carried on}." In the said case, Lord Scott adopted the distinction made by Shaw L.J. in Benson's case (supra) and relied upon following observation : "A characteristic of plant appears to me to be that it is an adjunct to the carrying on of a business and not the essential site or core of the business itself." (p. 358) Applying the aforesaid characteristic of 'plant', in our view, building for hotel or cinema cannot be stated to be adjunct, that is to say, (as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as part of the premises and the other as part of the plant. Thus, "something which becomes part of the premises instead of merely embellishing them is not plant except in the rare case where the premises are themselves plant". I do not think that what Oliver L.J. was saying in Cole Brothers is at variance with Lord Lowry's approach. It is proper to consider the function of the item in dispute. But the question is what does it function as? If it functions as part of the premises it is not plant. The fact that the building in which a business is carried on is, by its construction particularly well-suited to the business, or indeed was specially built for that business, does not make it plant. Its suitability is simply the reason why the business is carried on there. But it remains the place in which the business is carried on and is not something with which the business is carried on." Similarly, Lord Hoffmann J. (Chancery Division) observed: "...the question is whether it would be more appropriate to describe the item as part of the premises rather than as having retained a separate identity. It seems to me that items such as fixed floor tiles and shop fronts are more natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x structure designed to maintain plants of many different kinds moved from nurseries, in an environment in which they would remain in good condition until sale. It was designed so that an appropriate mini-climate could be provided in different parts of the planteria suitable for different varieties of plant, and so as to be open to the public who could walk around it and choose from the plants on offer. The Court of Appeal held that the true and only reasonable conclusion from the facts found was that planteria was part of the premises in which the business was carried on. It was a structure to which plants were brought which required special treatment. However, the fact that planteria provided the function of nurturing and preserving the plants while they were there could not transform it into something other than part of the premises in which business was carried on; the highest it could be put was that it functioned as a purpose-built structure, but that was not enough to make the structure plant. Hence, to rely upon Barclay Curle & Co. Ltd.'s case (supra) (dealing with dry dock yard) and to hold that hotel building or theatre would be a plant on functional test would be unju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a would be covered by a 'plant' and other buildings used for the same purpose would not get depreciation as 'plant', even though such business is carried on in such premises. In our view, the Delhi High Court has in the case of R.C. Chemical Industry (supra) rightly observed that mere fact that manufacture of saccharine would be better carried on in a building having atmospheric controls would not convert the building from 'the setting' to 'the means' for carrying the business. Similarly, Rajasthan High Court also in Lake Palace Hotels & Motels (P.) Ltd.'s case (supra) rightly observed that simply because some special fittings or controlling equipments are attached for the purpose of carrying on hotel business, it will not take it out of the category of building and make it a plant. In our view special fittings or equipments to control atmospheric effects would be plant, but not the building which house such equipments. Further for running almost all industries or for carrying on any trade or business building is required on occasions building may be designed and constructed to suite the requirement of a particular industry, trade or business. But that would not make such buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce; the allowance made for this in book-keeping, accounting, etc.' (Webster's New Word Dictionary) . In that sense land cannot depreciate. The other words to notice are 'such buildings'. We have noticed that in sub-clause (iv) and (v) , 'building' clearly means structures and does not include site" (p. 1439) The Court also held that :- "(7) One other consideration is important. The whole object of section 10 is to arrive at the assessable income of a business after allowing necessary expenditure and deductions. (8) Depreciation is allowable as a deduction both according to accountancy principles and according to the Indian Income-tax Act. Why? Because otherwise one would not have a true picture of the real income of the business. But land does not depreciate, and if depreciation was allowed it would give a wrong picture of the true income." (p. 1439) 44. Under the 1961 Act also for the building and machinery or plant depreciation is allowed probably after taking into consideration its life and decrease in the value of the property through wear and tear. 45. The learned counsel for the assessee vehemently submitted that even though the line between the building and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urle & Co. Ltd.'s case (supra) decided by the House of Lords pertains to a dry dock yard which itself was functioning as a plant that is to say, structure for the plant was constructed so that dry dock can operate. It operated as an essential part in the operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. The dock as a complete unit contained a large amount of equipment without which the dry dock could not perform its function. (5) Even in England, Courts have repeatedly held that the meaning to the word 'plant' given in various decisions is artificial and imprecise in application, that is to use the words of Lord Buckley, "it is now beyond doubt that the word 'plant' is used in the relevant section in an artificial and largely judge-made sense." Lord Wilber- force commented by stating that "no ordinary man, literate or semi- literate, would think that a horse, a swimming pool, movable partitions, or even a dry-dock was plant." (6) For the hotel building and hospital in the case of Carr (H.M. Inspector of Taxes) (supra) , it has been observed that a hotel building remains a building even when constructed to a lu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are constructed and erected by the assessee firm and which has been given for advertisement by the assessee firm to Creation Publicity Private Limited who in turn has given these hoarding structures to the entities for putting their advertisements on these hoarding structures. Thus, it cannot be said that these hoarding structures play any operative role as apparatus or tool in the carrying of the trade by the assessee firm or in the functioning of the assessee firm's business but rather these hoarding structures constructed and erected by the assessee firm are building simplicitor constructed and erected for entities to put their advertisements and erected by the assessee firm for entities to put their advertisment. Thus, functional test also is not satisfied in the case of these hoarding structures and it cannot be treated as 'Plant' and are merely a 'Building' constructed and erected by the assessee firm which are given on commercial terms and conditions for ultimate user as a space by the entities who are desirous of putting their advertisement of products and / or services on these hoarding structures. These hoarding structures do not satisfy the test's of being called ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 lakhs at the beginning of the year and Rs. 111.20 at the end of the year i.e. average of Rs. 119.05 lakhs. It was observed by the A.O. that the portion of interest bearing funds has been utilized for processing the debtors. Considering the said facts that the entire receivables are from group concerns and the debit balances are outstanding since long and there was no business constraint to provide for such substantial credits especially considering that the total turnover is only Rs. 54.23 lakhs. The assessee firm in reply to the query by the A.O. that the turnover of the assessee firm is entirely related to the Creation Publicity P. Ltd. submitted that the transaction is done purely on commercial basis keeping in view the prevailing market rate. It was further stated that the said Creation Publicity Private Limited has total turnover of Rs. 26.24 crores , out of which there were debtors outstanding of Rs. 20.59 crores which is nearly 78.46%, hence, there was no option but to allow credit to the said company. The A.O. rejected the contention of the assessee firm and held that these are colorable devices adopted by the assessee firm. He observed that there was no business exigency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to the assessee firm is Rs. 6.98Iakhs / Rs. 141.61 lakhs, which comes to 4.92%. On the other hand, the sundry debtors of Rs. 111 lakhs is on the higher side as the entire turnover during the previous year is only Rs. 54.23 lacs. As submitted by the assessee firm, during the course of appellate proceedings that in the case of its sister concern the sales are made to 3rd parties and even in that situation, the sundry debtors were 74% of the sister concerns total sales. This information (i.e. sundry debtors being 74% of annual sales) in the case of sister concern shows that while the sister concern itself realizes the amount from 3rd parties in 9 months time, while it pays the amounts to the assessee firm only in 24 months time and hence enjoys credit at assessee firm's cost. Thus the CIT(A) held that the benchmark of 75% (Debtors/sales ratio) can be used to determine the excess credit advanced by the assessee firm to its sister concern. The CIT(A) held that even if the same percentage is applied , then the reasonable sundry debtors at the end of the year would only be Rs. 40 lakhs being 74% of Rs. 54.23 lakhs being the annual turnover while remaining Rs. 71 lakhs on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in view the commercial expediency, the same needs to be allowed as deduction relying on decision of Hon'ble Supreme Court in the case of S A Builders Limited in 288 ITR 1(SC) . The ld. Counsel submitted that Mumbai-Tribunal in the case of M/s Creasons (supra) has allowed the claim of the assessee on identical situation. In the case of another group concern M/s Empress Advertising for the assessment year 2007-08 whereby the CIT(A) vide order dated 2-3-2012 also allowed the ground raised by the said Empress Advertising on identical facts had allowed the claim of the interest expenditure based on commercial expediency, copy of the CIT(A) 's order is placed on record vide page No. 71 to 81. Thus, the ld counsel for the assessee firm submitted that the claim of the assessee firm for interest expenditure as disallowed by the CIT(A) should be allowed in its entirety. 15. On the other hand, the ld. D.R. relied on the orders of authorities below. 16. We have considered the rival contention and also perused the material available on record. We have observed that the assessee firm has borrowed funds which were utilized for the purpose of its business. The assessee has made turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee company as being treated as capital expenditure. The assessee firm, in its profit and loss A/c claimed hoarding expenses of Rs. 14.05 lakhs. The assessee firm was required to produce copy of supporting documents for service rendered by Vikrant Enterprises, Raj Enterprises and Sai enterprises aggregating to Rs. 14.05 lacs with respect to extensive heavy repairs of the existing permanent foundation and structure embedded in the building and to clarify the allowability of the same. The A.O. on perusal of the party wise details of hoarding repairs and maintenance noted that the major expenses of Rs. 4,05,000/- with respect to M/s Vikrant Enterprises was the labour charges for painting the permanent steel structure after scraping the aforesaid existing structure and applying red oxide colour to prevent corrosion/ decay thereon due to rain and-weather effect. With respect to M/s. Raj Enterprises and M/s Sai Enterprises the major expense of Rs. 4,94,000/- and Rs. 4,95,000/- was due to extensive/heavy repairing of the existing permanent cement foundations and painting the structures embedded in the building on the hoarding sites. The charges and expense of materials li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee firm. The CIT(A) observed from the bill that the entire expenses are on account of painting of the hoarding steel structure and therefore, it cannot be said that any asset of enduring nature has been created by incurring the expenses. Painting is required as a part of the maintenance of the structure and hence in respect of this amount, no addition is warranted. With respect to the 2nd bill that is dated 21st October 2006 for a sum of Rs. 4,94,000/- which was on account of heavy and extensive repairing to the existing structure consisting of laying of cement foundation and erecting other permanent structure embedded in the building at two sites. The cost includes cost of cement and plaster for the foundation as also the parapet wall at the site. The work also includes some amount of painting and considering the nature of work undertaken, the CIT (A) held that 50% of the same is in the nature of capital expenditure as the foundation and other structure has been erected. The remaining 50% is estimated on account of revenue account mainly towards painting. Therefore, the addition to the extent of Rs. 2,47,000/- on account of this bill is sustained. With respect to the 3r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of its business of outdoor advertisement and total income of about Rs. 88 lacs was generated from this activity giving a net profit of about Rs. 18 lacs as shown by the assessee in the P&L account. These hoardings were required to be maintained by the assessee and in order to avoid corrosion of the structure and other adverse weathering effects, application of red oxide and painting was regularly required to be done. Similarly, cementing and plastering of foundation was also required to be done regularly in order to maintain the hoarding structures. Keeping in view the nature of business activity carried on by the assessee, we are of the view that the expenditure incurred by the assessee to maintain the structures used for hoardings is of revenue in nature especially when the quantum of expenditure incurred is considered in the light of the fact that there were 15 hoardings which were exposed to climate. It is also relevant to note that such expenditure is a recurring expenditure which is required to be incurred by the assessee regularly and the same therefore cannot be said to have given any enduring benefit to the assessee in capital field. Moreover, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of expenditure incurred is considered in the light of the fact that there were 15 hoardings which were exposed to climate. It is also relevant to note that such expenditure is a recurring expenditure which is required to be incurred by the assessee regularly and the same therefore cannot be said to have given any enduring benefit to the assessee in capital field. Moreover, even if the hoarding expenditure claimed by the assessee is inclusive of replacement of M.S. Angles etc., as noted by the A.O., the same is in the nature of replacement of parts of the hoarding structure which cannot be treated as capital expenditure. As such, considering all the facts of the case, we are of the view that the assesse is entitled to deduction on account of hoarding expenditure being in the nature of revenue expenditure. In that view of the matter, we delete the disallowance made by the A.O. and confirmed by the ld. CIT(A) on this issue and allow the appeal of the assessee." Respectfully following the afore-stated decision of the Mumbai Tribunal in the case of Empress Advertising(supra) as the facts and issues involved are identical , we allow this ground of appeal raised by the assessee fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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