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Peri (India) Pvt. Ltd. Versus Jt. Commissioner of Income Tax (OSD) , Range – 8 (2) , Mumbai.

2016 (5) TMI 426 - ITAT MUMBAI

Disallowance of leasehold improvement expenditure - Held that:- We have noted from the details of expenses produced before us that the expenditure in question pertains inter alia for interior designing, for metal, cement & bricks for mockup, for replacing of tiles and allied expenses. In our considered view, these expenses cannot be treated as capital expenditure, particularly when, given facts of this case, they have limited useful life.

As regards the Assessing Officer’s reliance up .....

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by the assessee as a tenant and when the assessee has undertaken to bear the cost of repairs to the business, the amounts paid on such repairs is to be allowed as deduction under section 30(a)(i) of the Act. As regards the restriction to the effect that only current repairs can be allowed, it is set out in section 30(a)(ii). It refers to a situation when the premises are occupied by the assessee otherwise than as a tenant. Clearly section 30(a)(ii) does not apply to the facts of the case. The as .....

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1-3-2016 - Pramod Kumar AM and Pawan Singh JM For The Appellant : M.P. Lohia, Nikhil Tiwri & Ankit Kochar For The Respondent : Mallikarjun Utture ORDER Per Pramod Kumar, AM: By way of this appeal, the assessee appellant has challenged correctness of the order dated 09.12.2013 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year 2009-10. 2. In the first ground of appeal, the assessee has raised .....

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, the Assessing Officer noticed that the assessee has shown expenditure of ₹ 9,00,511/- on account of leasehold improvement. This amount was spent on the premises which was taken on lease towards repairs and furnishing. The claim of the assessee was that this amount has been spent on repairs and is claimed as deduction under section 30(a)(i) of the Act and that the intention was not to bring about any new capital asset. It was stated that the expenditure was incurred on repairing the premi .....

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purpose of the business or profession on the construction of any structure or doing of any work or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. He was of the view that in view of this specific provision, the expenditure in question is required to be treated as capital expenditure. He was further of the view that such a huge expenditu .....

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eal before the ld. CIT(A) but without any success. Learned CIT(A) confirmed the findings of the Assessing Officer and observed as follows :- 3.4 I have considered the facts of the case, submissions of the appellant as against the findings/observations of the AO in the order u/s.143(3) of the I.T. Act. The contentions and submissions of the appellant are being discussed and decided here in under: i. The appellant contended that as per lease agreement dated 22.2.2007 and 5.12.2007 it has taken off .....

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and considered the nature of payment made and treated the same as capital in nature. Hence, contention of the appellant is not acceptable. iii. From the details filed is also noted that huge expenditure has been incurred. This expenditure is equivalent to its opening WDV as on 1.4.2008 and hence, I agree with the AO that such a huge expenditure cannot be categorized as current repairs. The ratio of the case laws relied upon by the appellant being based on different set of facts are not applicabl .....

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erior designing, for metal, cement & bricks for mockup, for replacing of tiles and allied expenses. In our considered view, these expenses cannot be treated as capital expenditure, particularly when, given facts of this case, they have limited useful life. As regards the Assessing Officer s reliance upon Explanation-1 to section 32, it could come into play only when the capital expenditure is incurred in connection with a leased premises, but then, merely because it is an expense incurred in .....

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i) of the Act. As regards the restriction to the effect that only current repairs can be allowed, it is set out in section 30(a)(ii). It refers to a situation when the premises are occupied by the assessee otherwise than as a tenant. Clearly section 30(a)(ii) does not apply to the facts of the case. The assessee was occupying the premises as a tenant. In this view of the matter, it cannot be said that the repair expenses which are to be allowed as deduction when the assessee is restricted to onl .....

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d is dismissed as such. 7. In ground no.3, the assessee has raised the following grievance:- On the facts and Circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the addition of ₹ 13,49,009/- on account of transfer pricing adjustment without appreciating the facts that it was the prerogative of the assessee to decide whether expenditure or services are required for business expediency or not. Without prejudice to above, appellant also submitted relevant details .....

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n their respective orders for the assessment year 2008-09. In this background, we may refer to the following observations made by the co-ordinate bench of this Tribunal while deciding a similar issue in the immediately preceding year :- 7. We have considered the rival submissions and relevant material on record. It is relevant to take into consideration, for adjudication of the issue, that the assessee was incorporated on 28th Dec. 2006 and this was the first full year of business activity of th .....

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t the site of L&T Ltd. It is not the case of revenue that the services claimed to have been availed by the assessee from its AE through their experienced and expert design engineers, otherwise available with the assessee in its own organization. When the assessee was not having such an experienced design engineer to execute the technical services at the site of the clients then the said services which is inevitable for providing services by assessee to its clients was in any case has to be h .....

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to its clients involves highly technical services then the nature of business activity of the assessee itself demonstrates the requirement of technical design engineer in the field. As the assessee was not having such experienced design engineers in its own organization then availing the services for performing the business activity is otherwise part and parcel of the business activity of the assessee. Thus, the mode and actual service availed by the assessee cannot be doubted keeping in view th .....

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rary to the facts as well as evidence produced by the assessee. The assessee has produced the invoices raised by the AE for providing the services which is based on the total number of hours spent by the engineers of the AE at the site of the clients of the assessee in providing the services. The TPO/Assessing Officer has not disputed the presence of the engineer in India for providing the services, the assessee even produced the record with regard to the actual work executed at the site of L&am .....

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