TMI Blog2016 (11) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 30 of the Act. The AO shall verify the contentions of the assessee on facts and in the light of the afore-stated decision of Hon’ble Bombay High Court in the case of RPG Enterprises Limited(supra) on merits. The issue is therefore set aside and restored to the file of the AO for de-novo adjudication of the issue by the AO on merits. - I.T.A. No. 5841/Mum/2012 - - - Dated:- 7-9-2016 - Shri Mahavir Singh, Judicial Member And Shri Ramit Kochar, Accountant Member Assessee by : Shri Viral A. Merchant Revenue by : Shri Aarsi Prasad ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee company, being ITA No. 5841/Mum/2012, is directed against the appellate order dated 29th August, 2012 passed by learned Commissioner of Income Tax (Appeals)- 5, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2009-10, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 20th December, 2011 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee company in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted artificial discrimination by segregating the total expenditure for renovation of ₹ 94,61,331/-, out of which ₹ 57,05,072/- had been capitalized by the assessee and the assessee has claimed the remaining amount of ₹ 37,56,259/- as revenue expenditure on the ground that such items cannot be removed. The A.O. observed that the expenditure of ₹ 37,56,259/- is not in the nature of regular repairs but capital addition in the form of partitions, marble flooring, tables, civil works etc. and a sum of ₹ 7,95,548/- has been paid as architect fees for these capital expenditure. The AO observed that the explanation to Section 30 of the Act inserted w.e.f. 01-04-2004 clearly states that the current repairs shall not include any expenditure in the nature of capital expenditure. The A.O. observed that the assessee had shifted out of the leased premises to an interim premises for a period of 11 months , during which time the entire renovation work took place which shows that the expenditure was of the nature of capital expenditure and not current repairs. The A.O. observed that the reliance placed by the assessee in the case of CIT v. Madras Auto Service Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/-, out of which ₹ 57,05,072/- was capitalized by the assessee and balance of ₹ 37,56,259/- was claimed as revenue expenditure. The assessee has also paid separately an amount of ₹ 7,95,548/- as architect fees for the work of renovation. The assessee had shifted out of the lease premise to another premise for a period of 11 months and done the renovation work. The ld. CIT(A) held that the whole renovation work was on account of renovation work which brought into existence an enduring benefit to the assessee during the period of lease, therefore, the A.O. was justified in treating the total renovation expenditure as capital expenditure. The ld. CIT (A) relied on the following decisions:- 1. Hon ble Bombay High Court in the case of New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT [1956] 30 ITR 338. 2. Hon ble Andhra Pradesh High Court in the case of Sri Rama Talkies v. CIT [1966] 59 ITR 63 3. Hon ble Bombay High Court in the case of CIT v. Vasant Screens [1980] 124 ITR 835. 4. Hon ble Bombay High Court in the case of CIT v. Ballimal Nawalkishore [1976] 119 ITR 292 Thus, it was observed that the assessee had spent a large amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work, ceiling work, carpentry work, partition and architect fees etc. which has been incurred on premises taken on leave and license basis. While on the other hand the expenses which were capitalized were incurred on fixed assets which can be removed like furniture, AC, office equipment, furniture and fixtures, computers etc. . The assessee also submitted that since this premise is a rental premise no capital asset has been created in favour of the assessee as when the assessee will vacate the premises, these repair expenses to the tune of ₹ 37,56,259/- will not be having any value/utility for the assessee as these cannot be removed and taken along with. Whereas the revenue has contended that the assessee has brought new asset into existence which has resulted into an enduring benefit to the assessee. The Hon ble Bombay High Court in a recent decision delivered on 29-06-2016 has elaborately discussed this issue in RPG Enterprises Limited v. DCIT in (2016) 71 taxmann.com 137(Bombay) wherein it was held as under: 5. We find that the appellant was a tenant of the said premises. It was paying monthly rent of ₹ 73,530/- from April, 1995 onwards under the agreement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1.50crores for the reconstruction/repairs/restoration of the building in consideration of there being no increase in the rent payable by the assessee in the new structure to that being paid in the old structure. It was in the aforesaid facts that it was held that where a lump-sum payment of ₹ 1.50 crores gets rid of annual business expenses chargeable against revenue then the lumpsum is to be regarded as a revenue/business expenditure. The benefit obtained by the assessee in the above case was premises at a lower rent in view of the contribution made to the developer for repairing/reconstructing the premises. Thus, the expenditure was in the revenue field and allowable under Section 37 of the Act. In the present facts, nothing is on record to indicate that there was any advantage secured by the appellant in the revenue field. There was no decrease in the rent nor was there any embargo on future increase in the rent in consideration of the expenditure for renovation. Therefore, the above decision would not apply to the facts of the present case. 7. Similarly, the decision of this Court in Hede consultancy (P.) Ltd. (supra) upon which also reliance is placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove reason the learned Counsel for the appellant very fairly did not even attempt to suggest that deduction under Section 30 of the Act would be available even in respect of capital expenditure. 10. In the above view, the concurrent finding of fact by the Authorities under the Act that the expenditure incurred claiming to be the repairs and maintenance was in fact on account of renovation of the premises, leading to enduring benefit to the appellant assessee in as much as it enabled the appellant to accommodate larger number of employees and also facilitate its trading operations. This benefit would be available to it for a long period of time and thus, was capital in nature. It was in the above view that the Tribunal granted the benefit of depreciation to the extent the claim as revenue expenditure was disallowed. 11. In the above view, we find that the view taken by the Authorities under the Act including the Tribunal, cannot be faulted as the appellant has failed to establish that the expenditure of ₹ 31.32 lakhs claimed as Repairs and Maintenance was in the revenue field. In the above view, the substantial question of law as framed hereinabove in paragraph 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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