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TMI Blog2016 (6) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... A.III for the same assessment year i.e. 2005-06 whereas ITA No.288 of 2011 has been filed by the assessee against the order dated 28.2.2011, Annexure A.3 for the assessment year 2006-07. The facts have been extracted from ITA No.680 of 2010. 2. ITA No.680 of 2010 has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 24.9.2009, Annexure A.III passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' Chandigarh (in short, "the Tribunal") in ITA No.1057/CHANDI/2008, for the assessment year 2005-06, claiming following substantial questions of law:- "I. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,72,100/- was filed on 30.10.2005 by the assessee. The assessment was completed vide order under section 143(3) of the Act dated 18.12.2007, Annexure A.1 at a total income of Rs. 3,24,71,901/-. The Assessing Officer made total addition of Rs. 96,99,801/- (i.e. disallowance under section 37(1) - Rs. 67,28,214/-, borrowed capital under section 36(1)(iii) - Rs. 24, 21,587/-, interest of Rs. 50,000/- as capital expenditure and Rs. 5 lakhs on account of personal and inadmissible expenses). Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 15.10.2008, Annexure A.II, the CIT(A) partly allowed the appeal of the assessee giving relief on disallowance of expenditure incurred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of claim of expenditure of Rs. 67,28,214/- incurred on repair and renovation of Lajpat Nagar Hospital, it has been categorically recorded by the Tribunal that the expenditure had been incurred by the assessee on the hospital building which had been taken on lease under an agreement dated 25.2.2004 between the assessee and Malhotra Heart Institute and Medical Research Centre Private Limited. This expenditure had not been incurred either by way of demolition of old structure or construction of a new hospital, as recorded by the CIT(A). After examining the entire material on record and the case law on the point, it was concluded by the Tribunal that where the expenses are incurred towards repair of the premises taken on lease so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (Party of the first part)........... 10. On consideration of the above provisions, we find that what has to be disallowed is capital expenditure. However, in the instant case, expenditure is towards repair of hospital and not capital expenditure. ...... 15. From the above said judicial pronouncements, an irresistible conclusion is that where the expenses are incurred by the assessee towards repairs of the premises taken on lease so as to make it fit for its business activity, such expenditure would fall within the expression of repair as appearing in section 30(a)(i) of the Act. In the instant case, there is nothing to distinct from the plea set up by the assessee that the impugned expenditure has not resulted in demolition of old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (interest free loans). It was held that once it is established that there is nexus between the expenditure and purpose of business, revenue cannot justifiably claim to put itself in arm chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to the circumstances of the case. It was recorded as under:- "26.The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 27. No doubt, as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cement (B.) Ltd.' [2002 (254) ITR 377] wherein the High Court had held that once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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