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Cornell Overseas Pvt. Ltd. Versus DCIT, Circle-3 (1) , New Delhi.

2016 (9) TMI 854 - ITAT DELHI

Addition being legal and professional expenses incurred in relation to shares buy back - Held that:- The Hon’ble Supreme Court in Punjab State Industrial Development Corporation (1996 (12) TMI 6 - SUPREME Court) has held that the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. Similar view has been reiterated in Brooke Bond India Ltd. (1997 (2) TMI 11 - SUPREME .....

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. In that case, the assessee, a licensee of the showroom, erected new counters and built a new lift shaft at a new site. It was held that such amount was not in the nature of current repairs but a capital expenditure not deductible in full. We thus reject the viewpoint of the assessee of such an expense being of revenue nature. - Explanation 1 to section 32 provides that where the business is carried on in a building not owned by the assessee, but in respect of which the assessee holds a lea .....

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t of which the assessee holds mere occupancy rights, cannot be allowed deduction as a revenue expense, but such expenditure of a capital nature is liable to be considered as a building owned by the assessee for the purposes of section 32 and hence depreciation is allowable pro tanto. In view of the above discussion, by which we have held that the expenditure incurred by the assessee in respect of the building is a capital and not a revenue expenditure, we hold that the assessee is entitled to de .....

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involved in this appeal is against the confirmation of addition of ₹ 1,95,320/-, being legal and professional expenses incurred in relation to shares buy back. 3. Briefly stated, the facts of this ground are that the assessee claimed deduction for Legal and professional charges. The AO held some of such expenses to be capital in nature. An ad hoc disallowance of ₹ 5 lac was made on this score. The ld. CIT(A) reduced the disallowance to ₹ 1,95,320/-, being the expenditure relati .....

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te qua the assessee. 5. Adverting to the facts of the instant case, it is observed that the disallowance of expenditure of ₹ 1,95,320/- sustained in the first appeal relates to buy back of shares. The Hon ble Supreme Court in Punjab State Industrial Development Corporation (supra) has held that the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. Similar vi .....

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he alternative in not allowing depreciation on the same. 7. The facts apropos this ground are that the assessee claimed deduction under the head Repair & maintenance at ₹ 8,28,304/- On perusal of the details, it transpired that a number of expenses were incurred for renovation of building. The AO treated this amount as capital expenditure and disallowed the same. The ld. CIT(A) upheld the disallowance. 8. After hearing the ld. DR and perusing the relevant material, it is observed that .....

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lowable as current repairs. This judgment indicates that any capital expenditure on total renovation is liable to be considered as capital expenditure. The Hon ble jurisdictional High Court in Bigjo s India Ltd. vs. CIT (2007) 293 ITR 170 (Del) considered almost a similar situation as is obtaining before us in the present appeal. In that case, the assessee, a licensee of the showroom, erected new counters and built a new lift shaft at a new site. It was held that such amount was not in the natur .....

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