2009 (8) TMI 835 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of renovation expenses as capital expenditure.
2. Disallowance of 10% of telephone, staff welfare, and miscellaneous expenses as personal in nature.

Summary:

Issue 1: Disallowance of Renovation Expenses as Capital Expenditure

The assessee, a Commission Agent, incurred Rs. 9,51,352 for renovating a leased shop and claimed it as revenue expenditure. The Assessing Officer (AO) treated this as capital expenditure u/s 32, allowing 10% depreciation. The CIT(A) upheld this, citing the enduring advantage from the expenditure, referencing the Delhi High Court's decision in Bigjo's India Ltd. v. CIT [2007] 293 ITR 170. The assessee argued that the expenditure was for generating revenue and relied on various judgments, including CIT v. HEDE Consultancy (P.) Ltd. [2003] 127 Taxman 597, which treated similar expenses as revenue in nature. However, the Tribunal noted that the lease agreement was not provided, and the assessee did not demonstrate any revenue advantage or reduced lease rentals. The Tribunal upheld the CIT(A)'s decision, stating that the expenditure provided an enduring benefit and rejected the assessee's claim.

Issue 2: Disallowance of 10% of Telephone, Staff Welfare, and Miscellaneous Expenses

The AO disallowed 10% of these expenses due to non-verifiability and potential personal use. The CIT(A) confirmed this disallowance, and the Tribunal found it reasonable, thus upholding the CIT(A)'s order.

Conclusion:

The appeal filed by the assessee was dismissed, affirming the disallowance of renovation expenses as capital expenditure and the 10% disallowance of telephone, staff welfare, and miscellaneous expenses.