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TMI Blog2016 (9) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has erred in confirming the disallowance of expenditure incurred on repairs and maintenance in the lease hold premises, amounting to Rs..27,09,957/- as capital expenditure. 2. Brief facts of the case are that the assessee is engaged in the business of manufacture of electrical, engineering goods, tooth brush and cleaning brushes. The assessee filed its return of income on 29.09.2008 declaring a loss of Rs..63,89,379/-. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 ["Act" in short]. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee on 14.08.2009. After considering the submissions of the assessee, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee during the course of hearing, it was noticed that under the head 'Building Maintenance' the assessee has debited an amount of Rs..27,09,957/- for the purpose of purchase of tiles for floor laying and has claimed as a revenue expenditure. While treating the expenditure incurred towards laying of the road on the leased asset as capital expenditure, same treatment should have been given for the expenditure incurred towards laying of floor as it also gives enduring benefit to the assessee and adding value to the fixed asset, whereas, the assessee has taken a different stand on the similar issue. In view of the above, by allowing the eligible depreciation, the Assessing Officer has treated the amount of Rs..27,09,957/- spent toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal and set aside the order of the Commissioner of Income-tax (Appeals). 4. Learned senior standing counsel appearing for the Revenue submitted that the Income-tax Appellate Tribunal erred in treating the expenditure as revenue without appreciating the fact that it would amount to acquisition of a new capital asset. It was further submitted that the Tribunal ought to have appreciated that the co-owners of the property and the directors of the assessee-company are the same persons and had colluded and have evaded the assessability of the capital expenditure in the hands of the co-owners. An alternative submission also has been made that the Tribunal ought to have applied the proviso under Explanation 1 to Section 32(1) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plea also was made by learned standing counsel for the Revenue that the present case comes within the purview of Explanation 1 to Section 32(1) of the Act which is inserted with effect from April 1, 1988. The said Explanation reads as follows: Explanation 1.--Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work, in 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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