2011 (9) TMI 1013 - HC - Income Tax

Expenditure allowable as revenue expenditure - ITAT deleted the disallowance by holding that the expenditure incurred was revenue expenditure - Held that - From the reasons recorded by the ITAT in para 8 of its order it is seen that majority of the expenditure incurred were in relation to providing lighting and power installations and for providing computers power telephones circuits power distribution and fire alarm systems which were in the nature of office expenses for carrying the business of the assessee. In these circumstances in our opinion the decision of the ITAT is based on finding of fact and no question of law arises from the order of the Tribunal.

Summary

Issues:

1. Whether the ITAT was justified in holding that the expenditure of Rs. 1.45 crores incurred by the assessee was allowable as revenue expenditure for the assessment year AY 2000-01.

Analysis:

The High Court of Bombay addressed the primary issue raised by the revenue in the appeal, which questioned the justification of the Income Tax Appellate Tribunal (ITAT) in allowing the expenditure of Rs. 1.45 crores as revenue expenditure. The case involved the assessee incurring a total expenditure of Rs. 2.92 crores on repairs and renovations for premises taken on lease, out of which Rs. 2.41 crores was claimed as revenue expenditure. The assessing officer disallowed a significant portion, treating it as capital expenditure, resulting in disallowance of depreciation on that amount.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] restricted the disallowance to Rs. 1.45 crores. Subsequently, the ITAT further appealed by the assessee, deleted the disallowance, asserting that the expenditure was revenue in nature. The ITAT's decision was based on the fact that the majority of the expenditure was related to essential office expenses for conducting the business, such as lighting and power installations, computers, telephones, power distribution, and fire alarm systems.

The High Court, in its detailed analysis, emphasized that the ITAT's decision was factual and not a question of law. The Court found that the expenses incurred were directly linked to office operations and business activities, supporting the ITAT's conclusion that the expenditure qualified as revenue expenditure. Consequently, the High Court dismissed the appeal, ruling in favor of the assessee, with no order as to costs.