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2016 (9) TMI 1145 - ITAT AHMEDABAD

2016 (9) TMI 1145 - ITAT AHMEDABAD - TM - Allowability of expenditure incurred to renovation of expenses - revenue v/s capital expenditure - Held that:- We find that ld.CIT(A) while deciding the issue in favour of assessee has noted that the expenditure incurred was to make tenanted premises more suitable and conducive to business activity and by incurring the expenditure no new asset has been brought into existence. He has also given finding that the expenditure incurred also included expenditu .....

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h assessee was not paying any rent. We also find that identical issue arose in assessee’s own case for AY 2008-09 in favour of assessee as noted that the furniture deposit was old amount given to Sales India and M/s.Santosh Trading for using the existing furniture of these concerns without payment of rent. He has further noted that the deposits have been given for the purpose of business and there was no justification of disallowing the notional interest - Decided against revenue - Addition .....

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ayed payment - Held that:- The employees’ contribution of ESIC has not being paid before the due dates and in the absence of any contrary binding decision in favour of assessee, we respectfully following the decision of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT ) we set aside the order of ld. CIT(A) on this issue and uphold the decision of A.O. - Decided against assessee - I.T.A. No.2172/Ahd/2013 - Dated:- 12 .....

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the materials on record are as under:- 2.1. Assessee is a company stated to be engaged in the business of consumer domestic house-hold appliances. Assessee filed its return of income for AY 2010-11 on 28/09/2010 declaring total income of ₹ 82,89,632/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 18/02/2013 and the total income was determined at ₹ 1,31, .....

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abad has erred in law and on facts in treating disallowance of ₹ 25,75,940/- made in respect of show-room expenses as Revenue expenditure. 2) The Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the notional addition of ₹ 3,96,000/- made on account of interest u/s.36(1)(iii) of the Act. 3) The Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of ₹ 18,29,568/- made on acco .....

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ssioner of Income-Tax (Appeals)-XIV, Ahmedabad may be set-a-side and that of the order of the Assessing Officer be restored. 2.3. Assessee has raised the following grounds in its Cross Objection bearing No.38/Ahd/2014:- 1. The Assessing officer has erred in law and on facts in taking the ground that the CIT(A) has erred in law and on facts in treating expenditure in respect of show room expenses as revenue expenditure. 2. The Assessing officer has erred in law and on facts in taking the ground t .....

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d on facts in deleting the addition of ₹ 10,715/- made on account of late payment of employee s contribution to P.F. and E.S.I.C. 3. We first take up Revenue s appeal in ITA No.2172/Ahd/2013. First ground is with respect to disallowance in respect of show-room expenses. 3.1. During the course of assessment proceedings, AO noticed that assessee had incurred a sum of ₹ 28,62,156/- on account of renovation of different rented show-rooms of the assessee. On perusing the narration of the .....

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sessing Officer has treated it as capital expenditure by observing that the showroom renovation pertains to Ghatlodia show room and other show rooms and according to him it will not require repairs and renovation at one particular time and according to him as per narration of the ledger these are capital expenditures. From the submission of the appellant and the details of showroom renovation expenses it is seen that the expenses relate to various show rooms of assessee and in the earlier years .....

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spects like carrying out interiors (flooring, false ceiling airconditioning, electrical points, plumbing, etc), sourcing inventory, storage and sales for purposes of commerce, to install and maintain telephone connection, telephone instrument, drainage and sewerage system to run the business. Further the appellant is not allowed to carry out any structural or other alterations or additions or changes without the prior consent. Further the appellant is merely permitted to use the premises for the .....

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has not brought about any new asset and more importantly it was not the intention of the appellant to bring about any new capital asset. The expenses that were incurred by the appellant were towards repairing the premises taken on lease so as to make it more conducive to its business activity. It is seen that these expenditures also includes expenditure by way of replacement /repairing of old existing furniture and fixtures and modification made to facilitate the display of changed models of pro .....

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d to the carrying on or conduct of business that it may be regarded as an integral part of profit earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of carrying on of the business, the expenditure may be regarded as revenue expenditure. Further, Delhi High Court in the case of High Line Pens Pvt. Ltd. [306 ITR 182 (Del.)] has ruled that such expenditure is allowable u/s.30(a)(i) of the I. T. Act, 1961. It is also seen t .....

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appeal before us. 4.1. Before us, ld.Sr.DR supported the orders of AO and ld.CIT(A). Ld.AR, on the other hand, reiterated the submissions made before AO and ld.CIT(A) and further submitted that the ld.CIT(A) had deleted the addition by following the order of his predecessor passed for AY 2008- 09. He submitted that against the order of ld.CIT(A) for AY 2008-09, Revenue had preferred the appeal before the Tribunal (ITAT B Bench Ahmedabad). Tribunal while deciding the appeal in ITA No.972/Ahd/2011 .....

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ncurred to renovation of expenses. We find that ld.CIT(A) while deciding the issue in favour of assessee has noted that the expenditure incurred was to make tenanted premises more suitable and conducive to business activity and by incurring the expenditure no new asset has been brought into existence. He has also given finding that the expenditure incurred also included expenditure by way of replacement /repairing of old existing furniture and fixtures and modification made to facilitate the dis .....

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copies of the bills has given a finding that the expenditure incurred by the Assessee was by way of replacement/repairing of old existing furniture and fixtures and modification made to facilitate the display of changed models of products of companies which are sold by Assessee. CIT(A) after relying on the decision of the Ahmedabad Tribunal in the case of Well-known Organizers Ltd. and the decision of Hon ble Gujarat High Court granted relief to the Assessee. Before us ld.D.R. could not controv .....

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er of the ld.CIT(A) and thus this ground of Revenue is dismissed. 6. Second ground is with respect to deleting the addition on account of notional interest. 6.1. AO on perusing the Balance-sheet noticed that assessee had given deposit of ₹ 33 lacs as furniture security deposit. He also noticed that the security deposit included ₹ 5 lacs given to Shri John J. Vargeese Proprietor of Santosh Trading Company and ₹ 28 lacs given to S/Shri John J. Vargeese and Jose John, partners of .....

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and disallowed ₹ 3,96,000/- u/s.36(1)(iii) of the Act. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A) who deleted the addition by holding as under:- 3.3. Decision I have carefully perused the assessment order and the submissions given by the appellant. The submission of the appellant is considered and from the assessment order it is noticed that this disallowance is made because according to him interest free furniture deposit has been given to the Direc .....

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the factual aspects of the deposit and decision of CIT(A) for A.Y. 2008-09, the notional addition of interest of ₹ 3,96,000/- is unjustified and therefore the same is directed to be deleted. The ground of appeal is accordingly allowed. 6.2. Aggrieved by the order of ld.CIT(A), Revenue is in appeal before us. 6.3. Before us, ld.Sr.DR supported the order of ld.CIT(A). Ld.AR reiterated the submissions made before AO and ld.CIT(A) and further submitted that ld.CIT(A) while deciding the issue .....

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e rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the issue in the present case is with respect to disallowing the interest on furniture deposits. We find that the ld.CIT(A) while deciding the issue has given a finding that the deposits have been given for the purpose of business and further it was for use of existing furniture for which assessee was not paying any rent. We also find that identical issue arose in asse .....

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deposits have been given for the purpose of business and there was no justification of disallowing the notional interest. Before us, ld.D.R. could not controvert the findings of CIT(A) and therefore we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 8. Before us, Revenue has not brought any material on record to controvert the findings of the ld.CIT(A) nor has placed any material to demonstrate that the order of the Coordinate Bench of the Tribu .....

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rom the different advertising agencies wherein he observed that Arts India was getting 15% discount on each and every advertisement but assessee had paid full amount to Arts India. AO was of the view that to the extent of the payment of discount which was received by Arts India and which was not passed on to assessee was excessive and unreasonable and attracted the provisions of section 40A(2)(b) of the Act and accordingly disallowed a sum of ₹ 18,29,568/-. Aggrieved by the order of the AO .....

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e order of the CIT(Appeals) for AY 1990- 91, it is noticed that disallowance @ 25% of advertisement expenses through M/s.Arts India was deleted by recording finding that before invoking provisions of section 40A(2)(b), no comparable case was given, where similar work has been got done at lower rates and therefore it was incorrect to arbitrarily disallow 25% of the payment to a associate concern simply because the payment happens to the associate concern. The issue was also decided by CIT(A)-XIV, .....

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y the order of ld.CIT(A), Revenue is now in appeal before us. 9.2. Before us, ld.Sr.DR supported the order of AO. Ld.AR, on the other hand, reiterated the submissions made before AO and ld.CIT(A) and further submitted that the identical disallowance was made by the AO in AY 2008-09. When the matter was carried before the ld.CIT(A), the ld.CIT(A) decided the issue in favour of assessee and thereafter Revenue carried the matter before the Tribunal. Tribunal vide order dated 13/06/2014 dismissed th .....

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oceedings. He, further relying on the decision of his predecessor of AY 2008-09, deleted the addition. We further find that in assessee s own case for AY 2008-09 the issue was decided by the Coordinate Bench in assessee s favour by observing as under:- 15. We have heard the rival submissions and perused the material on record. CIT(A) while granting the relief has noted that the similar expenditure aid for advertisement to Arts India has been allowed in the preceding years in scrutiny assessment .....

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any material on record to controvert the finding of CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 10.1. Before us, Revenue has not brought any material on record to controvert the findings of the ld.CIT(A) nor has placed any material to demonstrate that the order of the Coordinate Bench of the Tribunal in assessee s own case for AY 2008-09 has been set aside by Higher Judicial Forum. In view of the af .....

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0,715/- being the delayed contribution. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A), who deleted the addition by holding as under:- 5.3. Decision : I have carefully perused the assessment order and the submissions given by the appellant. The appellant has submitted that the employees contribution were deposited after the due date but the same has been deposited before the due date of filing of return u/s.139(1) of the Income Tax Act, and therefore, the dedu .....

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our welfare funds (PF -ESIC). As per judgment, the same benefit is now available w.e.f. 01/04/2004 by the amendment by Finance Act, 2003. It has been held that the first proviso to section 43B was curative in nature and, hence, retrospective in operation with effect from 1-4-1988. It is important to note once again that by the Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on .....

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viso came to be inserted. In view of judgement of Hon ble Supreme Court, as things stand today, the contribution to PF/ESIC both by employees or employers contribution towards employees PF/ESIC are allowable u/s.43B provided the same are deposited before the due date of filing return of income u/s.139(1) of the IT Act, 1961. Considering all the facts and circumstances and the fact that the payment has been made before due date of filing of return u/s.139(1) of the Income Tax Act, the disallowanc .....

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ed the submissions made before AO and ld.CIT(A) and supported the order of ld.CIT(A). 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to disallowance of delayed payment of employees contribution of ESIC. It is an undisputed fact that employees contribution towards ESIC has been deposited after the due date prescribed by the relevant provisions of section 2(24)(x) .....

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