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M/s. Rialto Enterprises Pvt. Ltd. Versus The Joint Commissioner of Income Tax, Corporate Range 5, Chennai

2016 (9) TMI 956 - ITAT CHENNAI

Disallowance of expenditure incurred on repairs and maintenance in the lease hold premises - revenue or capital expenditure - Held that:- Admittedly, in the present case, the assessee has laid new floor on the leased asset of the company, for which it has purchased tiles for this purpose and by claiming the same as revenue expenditure, debited an amount of ₹.27,09,957/- under the head ‘building maintenance’. However, the Assessing Officer treated the same as capital expenditure and additio .....

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le Jurisdictional High Court, we direct the Assessing Officer to delete the addition made on this account - Decided in favour of assessee. - I T.A. No. 803/Mds/2016 - Dated:- 11-8-2016 - Shri Chandra Poojari, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri R. Vijayaraghavan, Advocate For The Respondent : Shri A.V. Sreekanth, JCIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commission .....

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cleaning brushes. The assessee filed its return of income on 29.09.2008 declaring a loss of ₹.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 assessment under section 143(3) of the Act was completed on 12.10.20 .....

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ore the Tribunal. By relying on the decision in the case of CIT v. Ayesha Hospitals (P) Ltd. 292 ITR 266 (Mad), the ld. Counsel for the assessee has submitted that the expenditure incurred by the assessee on relaying of damaged floors on the leasehold premises should be allowed as revenue expenditure and prayed that the addition made by the Assessing Officer should be deleted. 5. On the other hand, the ld. DR supported the orders of authorities below. 6. We have heard both sides, perused the mat .....

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head 'Building Maintenance' the assessee has debited an amount of ₹.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 assesse .....

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h Court has observed and held as under: 3. The assessee is a private limited company running a hospital in a leased premises. The assessment year is 1991-92 and the corresponding accounting year ended on March 31, 1991. The assessee-company filed a return of income on October 28, 1991, showing the income at ₹ 3,23,275. Later the case was selected for scrutiny and notice was issued under Section 143(2) of the Income-tax Act (hereinafter referred to as "the Act"). Then the assessme .....

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Assessing Officer in respect of the expenditure. Aggrieved by the same, the assessee filed an appeal before the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). The Tribunal allowed the 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 amo .....

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Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1988, and held as capital expenditure. 5. Learned Counsel appearing for the assessee submitted that whenever the tenant had incurred expenditure, it would amount to only revenue expenditure and further stated that Explanation 1 to Section 32(1) of the Act is not applicable to the facts of the case. 6. Heard counsel. The assessee had spent a sum of ₹ 1,85,557 towards painting, re-laying of the damag .....

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and the same has to be allowed as revenue expenditure. The Tribunal has correctly followed the judgment of the Supreme Court in the case of CIT v. Madras Auto Service P. Ltd. , wherein the Supreme Court held that the expenditure incurred on construction of a leased premises by the assessee was deductible as revenue expenditure. The nature of the expenditure indicates that it is only revenue expenditure for the purpose of carrying on business. 7. An alternative plea also was made by learned stan .....

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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 the said structure or work is a building owned by the assessee. 8. From a reading of the above, it is clear that if the lessee incurs capital expenditure on the building of the nature mentioned above, the said provision treats the building as if owned by the assessee. The Explanation is a .....

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