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TMI Blog2021 (9) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... udicate the above issues as under:- Disallowance of expenditure amounting to Rs. 12,95,867 2. The assessee is a wholly owned undertaking of Government of Karnataka. It is engaged in manufacture of soaps, detergents and sandalwood oil. For the assessment year 2014-2015, the return of income was filed on 26.11.2014 declaring total income of Rs. 54,20,30,270. The assessee had set up a branch office in Mumbai. The branch office was housed in a leased premises (leave and licence deed was executed on 5th December, 2013). The leased premises required certain repairs and renovation amounting to Rs. 12,95,867. The assessee had claimed the above expenditure of Rs. 12,95,867 as a revenue expenditure in the return of income. The assessment was comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel for the assessee submitted that the expenditure incurred by the assessee towards repairs and renovation of the premises to house the branch cannot be stated to be capital in nature. It was submitted that the premises which was taken on lease required repairs and renovation to uplift the ambiance and make it fit for operating as a branch office. Therefore the expenditure incurred was in connection with the business of the assessee and an allowable deduction. The assessee also placed reliance on the following judicial pronouncements:- (i) CIT v. MAC Charles (India) Ltd. (2015) 233 Taxman 177 (Kar.). (ii) CIT v. Infosys Technologies (No.2) (2012) 349 ITR 588 (Kar.). (iii) CIT v. Sagar Talkies (2010) 325 ITR 133 (Kar.) 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,95,867 6.1 The copies of the invoices / bills for incurring the above such expenditure of Rs. 12,59,867 is placed on record at pages 17 to 55 of the paper book filed by the assessee. On scrutiny of the same, it is seen that expenditure incurred by the assessee towards repairs and renovation to the leased premises cannot be stated to be a capital expenditure. It is very important to note that under leave and licence agreement dated 05.12.2013, the assessee is barred from carrying out any alteration with regard to the structure without prior approval from the licensor. The admitted facts is that there is no addition / increase to premises on account of incurring of the impugned expenditure. 6.2 The Hon'ble jurisdictional High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal concluded that the amount could not be said to be a capital expenditure and was only a revenue expenditure. On appeal, the Hon'ble High Court confirmed the ITAT's order. The Hon'ble High Court held "that the premises had been taken on lease by the assessee and the repairs that were carried out for the purpose of business to create the ambience and to carry out repairs to use the premises as the office of the assessee as there was stiff competition in the business of the assessee and the expenditure of the amount of Rs. 15,89,613 which would come to Rs. 9 per sq.ft. in respect of 17113 sq.ft. could not be said to be capital expenditure. The mere fact that it was taken on lease for six years would not itself render the expenditure c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so filed revised computation of income along with a covering letter. It is stated that during the hearing, the Authorised Representative of the assessee also made a mention about the inadvertent mistake of disallowance u/s 43B of the I.T.Act. However, the plea of the assessee was not considered and there was not even a mention of it in the assessment order. 8. Aggrieved, the assessee filed an appeal to the first appellate authority. The first appellate authority rejected the ground raised by the assessee. The relevant finding of the first appellate authority, reads as follow:- "As seen from above the Act provides opportunity to the assessee to rectify the defects within reasonable time. The assessee has not filed the revised return durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise. The CIT(A) while hearing an appeal has all the powers which an Assessing Officer can exercise. The CIT(A) ought to have independently considered the issue raised before him de hors the fact that the issue was not considered by the Assessing Officer. In this context, we rely on the judgment of the Hon'ble Apex Court in the case of Jute Corporation of India Ltd. v. CIT (supra). Further, the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Limited v. CIT reported in 284 ITR 323 only impinge upon the powers of the Assessing Officer to consider a claim which is not made in the return of income, whereas, such restriction is not there with regard to power of an Appellate Authority. We are of the view that the issue of ex-g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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