9911796707
TMI Blog2022 (2) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Appellant was permitted to make alterations which were of temporary nature as per the lease agreement entered into with the lessor of the premises. 4. The Learned CIT(A) erred in law and on facts in concluding that the additions made to the leasehold premises were not temporary without appreciating that the Appellant had to remove such partitions/ structures as may have been erected by it on the leased premises to its original condition on expiry of the lease period. as per lease agreement entered into with the lessor of the premises. 5. The Learned CIT(A) in his Order failed to understand the meaning of the term 'Purely temporary erections' included under the head 'Building' in New Appendix I. Part A. Tangible Assets. 6. The Learned CIT(A) ought to have appreciated that additions like air conditioners. electrical fittings, fire and access control. etc on the leased premises were purely of temporary nature and on removal upon expiry of the contract or vacation of premises they would be completely unusable for the Appellant. 7. The Learned CIT(A) erred in law and facts in concluding that additions on account of interiors and civil works do not q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Delhi Income-tax Appellate Tribunal for AY 2000-01 and AY 200102 and by the order of the Learned CIT(A) itself for AY 2002-03. wherein it was held that the expenditure incurred was to facilitate day to day working so that the Appellant can run the business smoothly and that the entire expenditure on leasehold improvements was allowable as deduction. 2. The only issue that arises for consideration in this appeal is as to whether the Revenue authorities were justified in allowing depreciation @ 10% on improvements carried out in the lease hold premises of Rs. 2,10,01,372/- as against the claim of the assessee that it is entitled to 100% depreciation on the leasehold improvements as the improvements were of the nature falling within the ambit of part-A in Appendix-I to the Income Tax Rules, 1962 (Rules) under the head 'Tangible assets' entry (4) "Purely temporary erections such as wooden structure". The grounds of appeal are argumentative in nature and project the different facets of arguments that the assessee wants advance in support of its claim. 3. The assessee is engaged in the business of distributing advanced weight management and nutritional products. For Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the AO, the expenditure would give enduring benefit and not a temporary one. The expenditure is part of setting up of a business or a new unit of business. To test the expenses as temporary and it is not giving any enduring benefit, the AO called upon the Assessee to furnish the details of all the premises used for the business purpose and the details of expenses incurred in leasehold improvements for the same. The Details provided by the assessee is reproduced below: Sl. No. Location Address Date on which leasehold improvements put to use Amount (Rs.) Date of Vacation of premises 1 Guwahati Mayur Gardens, Ground Floor, Opp. HDFC Bank, G.S. Road, Guwahati- 781005 31-03-2008 12,75,451 Not vacated till date 2 Mumbai AL-Dossal, 50, Pali Road, Bandra, Mumbai- 400050 31-03-2008 24,78,078 vacated in May 2012 3 Bangalore Vaswani Wilshire, No. 14, Commissariat Road, Bangalore - 25. 1/4/2007 1,50,68,567 Not vacated till date 4 Kolkata 36A, Shakespeare, Sarani, kolkata - 700017 11/7/2007 11,17,125 Not vacated till date 28-07-2007 29,12,000 Not vacated till date Total 2,28,51,221 6. On analysis of the details provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, DG, Power, Fire and Safety, Plumbing and Sanitary with appropriate consultants and the client. 2. Super imposing clients requirement. 1. Schematic proposal and approval. 2. Proposed infrastructure - Renovation of required Civil work, Mezzanince floor structural work, Wet areas, Interiors and chairs. Landscaping, External required glazing and structure, AC, Electrical works, Access control, Fire and Safety." 4.11 As per the agreement, following drawings/details were also made available to the appellant by the vendor in relation to the work assigned to it: Following shall be the deliverables in the form of drawings / details. SUPER SIRUCTURE * Structural layout and details for Ground floor , Entrance, Mezzanine floor, Staircase - Ground and Mezzanine floor. * Fire escape staircase * External glazing details * Toilet ARCIIITEC:TRUAL& INTERIORS * Super imposed false ceiling layout/AC/Electrical/Data/Fire and Safety. Super imposed other infrastructure details * Flooring layout and details * False ceiling layout and details * Partition and door layout and details * Wall, Column paneling and cladding * Non movable furniture details, Conference, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temporary erection'. All these items would fall within the definition of furniture and fittings. As regards the remaining interior works including flooring, false ceiling, floor structure work, glazing, etc., the same do not involve any work of temporary erection as the above said work is carried out on already existing structures in the building. So these would form part of the building eligible for depreciation @10% only. 4.15 As regards expenditure of Rs. 44,69,926/- on civil works, here again the same involves the renovation of the existing building including plumbing/sanitary work and fittings, partitioning ana door layouts, which is carried out on the existing structure of the building and thus not in the nature of any temporary erection. So the above said expenditure would be eligible for depreciation @10%, being part of the building used for the business by the appellant. 4.16 Considering above, an amount of Rs. 13,18,950/- would be eligible for depreciation @15% being Air conditioner forming part of Machinery and Plant and the balance amount of Rs. 1,37,49,616/- would be eligible for depreciation @10% either due to fact that the expenditure forms part of the buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother amount of Rs. 2,61,390/- has been spent on various items of electrical fittings which includes main switches, electrical bus-bar, halogen blast and lamps, aluminium and copper cables, sockets, starters, MCBs, light fixtures, electricity meters, earthing etc. All these items would fall within the scope of electrical fittings eligible for depreciation @10% as the same cannot be considered as building or a building in the nature of temporary erection. 4.22 Expenditure of Rs. 9,49,370/- has been incurred on interiors which includes vertical blinds, storage units, Manager cabin table, reception table, sign boards etc. All these items would fall within the scope of furniture and fittings eligible for depreciation @10% as the same *:annot be considered as building or a building in the nature of temporary erection. In addition there is expenditure on sanitary fittings and plumbing, pantry counter with sink, rolling shutter, glass doors, cabin doors, sliding doors and aluminium frame work with gypsum board, wall painting etc. These are not temporary erections but added to the existing structure of the building and as such this expenditure would become part of the building used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to expenditure of Rs. 12,75,451/- incurred in Guwahati, the appellant has enclosed copy of an invoice of Rs. 10,35,000/-. For the balance amount of Rs. 2,40,451/-, the relevant details were not produced. Thus it can be presumed that the appellant does not want to dispute the action of the AO in relation to the expenditure to the extent of Rs. 2,40,451/-. As regards the balance amount of Rs. 10,35,000/-, a perusal of the detailed invoice shows that the same includes the expenditure on purchase of work stations, cabinets, tables, chairs, display rack, steel rack, counters, soft board, electrical fittings (Switches, distribution board, lights) etc. All these items would fall within the scope of furniture and fittings including electrical fittings eligible for depreciation @10% as the same cannot be considered as building or a building in the nature of temporary erection. As regards front shutter, the work has been carried out on the existing civil structure and no fresh temporary erections have been raised out to be considered to be eligible for depreciation @100%. So this item would form part of the building used for the business eligible for depreciation @10%. Further sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Laws (Amendment and Miscellaneous Provisions) Act, 1986 inserted Explanation 1 to section 32 w.e.f. 1.4.1988, which reads thus : - "Explanation-1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession 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." Explnation-1 would apply when, (i) when the premises in which the Assessee carries on business in building not owned by it in respect of which the Assessee holds lease or other right of occupany. (ii) when such Assessee incurs any expenditure which is capital expenditure ; (iii) and such capital expenditure should be incurred (a) on construction of any structure or (b) doing of any work in or relaltion to and by way of renovation or extention of, or improvement to the building. The ingre ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
