TMI Blog2016 (12) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of land on lease for Fruit Processing Plant for 7 years and the Hon'ble High Court has held it to be in the nature of revenue expenditure. The above decisions, therefore, clearly hold that the expenditure incurred towards registration charges of leave and licence agreement is in the nature of the revenue expenditure and has to be allowed in the year of execution of the leave and licence agreement. - Decided in favour of assessee Additional depreciation u/s 32(1)(iia) - Held that:- In the case before us, the claim of the assessee is that it is running a canteen in the Cinema Theatre and therefore, is manufacturing food items and hence is eligible for additional depreciation u/s 32(1)(iia) of the Act. Running a canteen cannot be said to be manufacturing of an article or thing. Therefore, the claim of the assessee is not tenable. - Decided against assessee - ITA No. 488/Hyd/2016 - - - Dated:- 30-11-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For Assessee : Shri S.R. Patnaik For Revenue : Shri K.J. Rao, DR ORDER Per Smt. P. Madhavi Devi, J. M. This is assessee s appeal for the A.Y 2011-12. In this appeal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such expenditure, assessee submitted that the expenditure was incurred towards interior design etc. and therefore, is revenue in nature and that these expenses did not create any asset as the interiors in the Theatre Complexes have a very short life and they are changed regularly. The AO, however, observed that this expenditure cannot be treated as revenue expenditure as it is incurred for new complex and not for any repairs and maintenance. Therefore, the AO treated it as capital expenditure and allowed depreciation thereon. Further, he also observed that the assessee has incurred an expenditure of ₹ 57,19,700 towards registration of lease deed for the above theatre complex and he treated this expenditure also as capital expenditure. 4. Further, the AO also observed that during the year, the assessee has installed a new Suzion 1.5 MW WEG windmill and put it to use for a period of less than 180 days and depreciation thereon have been claimed at 40% being 50% of the eligible rate of depreciation. He observed that the assessee has also claimed additional depreciation u/s 32(1)(iia) of the Act @ 10% stating that the assessee is engaged in manufacture of food items in its cant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Saheb Ors reported in (1965) S.C 610 5.2 For the proposition that merely because the expenditure has been incurred on a new leased premises, it does not mean that the same amounts to capital expenditure and different treatment should be given, the assessee relied upon the following decisions: a) Hon'ble Supreme Court in the case of Sohan Lal Naraindas v. Laxmidas Raghunath Gadit reported in (1971) 3 SCR 319. b) Hon'ble Bombay High Court in the case of CIT vs. Reliance Industrial Infrastructure Ltd reported in (2015) 234 Taxman 256 (Bom) c) Hon'ble Gujarat High Court in the case of CIT vs. Laxmi Talkies reported in (2006) 151 Taxman 99 (Guj.) d) Hon'ble Bombay High Court in the case of CIT vs. Indian Petrochemicals Corporation Ltd reported in (2015) 233 Taxman 89 e) ITAT in the case of NMDC Ltd vs. JCIT reported in (2015) 68 SOT 199. 6. Without prejudice to the above contention, the learned Counsel for the assessee also submitted that the expenditure incurred by the assessee towards interior decorations as detailed above, are in the nature of temporary structures and therefore, is eligible for higher depreciation @ 100% as per Rule 5 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structures and constructed a new building to suit its business at its own expense in terms of lease agreement and the Hon'ble Supreme Court has held that since the asset created by the assessee by spending the amount did not belong to the assessee, but the assessee got a modern premises at a lower rent thus saving considerable revenue for the next 39 years, the expenditure should be treated as revenue expenditure. 9. The Hon'ble Telangana Andhra Pradesh High Court in the case of CIT vs. Coromandel Fertilizers Ltd reported in (2014) 367 ITR 132, has also considered similar situation and has clearly brought out the distinction between the capital and revenue expenditure in Para 8 and 9 thereof as under: 8. For instance, if the owner of an immovable property incurs expenditure even for otherwise temporary structures or fixtures like partition, in his building, it is capable of being treated as capital expenditure, since the structure, though temporary would become part of the permanent asset, and thereby, becoming an enduring addition. In contrast, if the premises are taken on lease, and for better use thereof, the lessee makes certain arrangements such as making pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expenditure, since the improvement made by the assessee were temporary in nature and could not be retrieved by the assessee at the end of lease. 13. The Coordinate Bench of this Tribunal in assessee s own case for the A.Ys 2003-04 to 2006-07 has considered the case of the assessee wherein the assessee has taken on lease a theatre complex consisting of five cinema theatres and has incurred substantial charges towards interior design, modernization, changing of floor tiles, fall ceiling, landscaping, chairs, earth filling etc., and the Tribunal has held that in view of the fact that the assessee has incurred the expenditure for repair and maintenance of building taken on lease for carrying on its business, it did not create any capital asset and the expenditure so incurred was to be allowed as revenue expenditure u/s 30(a)(i) of the Act. 14. Taking all the above decisions and the facts of the case into consideration, it is clearly seen that the assessee is into the business of setting up and running cinema theatres and in the earlier years, the assessee has carried out similar activities which has been considered by the AO as capital expenditure. ITAT has considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate or not to create an interest in the property which is the subject matter of the agreement and if it is in fact intended to create an interest in the property, it is a lease, if it does not, it is a licence. 19. In the case before the Hon'ble Bombay High Court in the case of CIT vs. Reliance Industrial Infrastructure Ltd (cited supra), the assessee therein has taken land on lease for a period of 30 years and the amount paid as stamp duty in respect of lease deed executed by the assessee with the lessor, was claimed as revenue expenditure as such expenditure was incurred for the purpose of carrying on the business. AO held that the stamp duty paid should be spread over the entire life of lease as deferred revenue expenditure. The Hon'ble High Court held that since the stamp duty amount have been paid on lease for the purpose of carrying on assessee s business, the amount of stamp duty had to be allowed as revenue expenditure in nature in the year of payment. 20. In the case of Gopal Associates (cited Supra), the Hon'ble Himachal Pradesh High Court was considering the nature of the incurred expenditure on stamp duty and registration charges at the time of executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2005, by an assessee engaged in the business of manufacture or production of any article or thing a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : 24. On a literal reading of the above provision, it is clear that where an assessee is engaged in the business of manufacture or production of any article or thing, has acquired and installed any new plant or machinery after 31.03.2005, it is entitled to the additional depreciation equal to 20% of the actual cost of such machinery or plant. The assessee has relied upon the decisions of the Hon'ble Madras High Court in the case of CIT vs. Hi Tech Arai Ltd reported in (2010) 321 ITR 477 (Mad) CIT vs. Atlas Export Enterprise reported in (2015) 373 ITR 414 (Mad.) in support of its claim. In both the cases, the assessees therein were into manufacture of oilseeds and textiles respectively and by taking the same into consideration, the Hon'ble High Court has held that the assessees therein are entitled to the additional depreciation u/s 32(1)(iia) of the Act and has held that there is no requirement that the new machinery acquired and installe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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