2017 (9) TMI 2007 - AT - Income Tax

Nature of expenses - expenditure incurred by the assessee for renovation of the lease hold premises for setting up a new show room - revenue or capital expenditure - HELD THAT - We noted that the said issue is duly covered in favour of the assessee in assessee s own case 2014 (6) TMI 80 - KERALA HIGH COURT . The only submission of Learned D. R. was that the appeal has been filed as the Revenue has gone in appeal by way of SLP before Hon'ble Supreme Court against the decision of Hon'ble High Court in assessee s own case for assessment year 2007-08. In our view, merely because the Revenue has gone in appeal against the decision of Hon'ble High Court in assessee s own case by which the issue is duly covered in the earlier year, we cannot take the view that the issue is not covered by the decision of Hon'ble High Court. We, therefore, dismiss the ground taken by the Revenue. Consequently, the appeal filed by the Revenue stands dismissed.

Summary

Issues: Treatment of expenditure relating to improvement of lease hold premises as revenue or capital expenditure.

Analysis:
1. The appeal was filed by the Revenue against the CIT(A)'s order regarding the treatment of expenditure incurred for renovation of leasehold premises. The Revenue contended that the expenditure should be treated as capital expenditure, contrary to the decision of the Dispute Resolution Panel and the assessee's claim of it being revenue expenditure.

2. The assessee had capitalized the expenditure in the books of account for setting up new showrooms. The Assessing Officer disallowed the claim as the Revenue had filed an appeal against the High Court's decision in the assessee's favor for a previous assessment year. However, the DRP and CIT(A) both upheld the assessee's claim based on the High Court's decision for the earlier year.

3. The ITAT, after considering the submissions and orders of the tax authorities, found that the issue was covered in favor of the assessee by the High Court's decision for the assessment year 2007-08. The ITAT noted that the Revenue's appeal to the Supreme Court did not alter the applicability of the High Court's decision, which had not been reversed by the Supreme Court. Therefore, the ITAT dismissed the Revenue's appeal, affirming the treatment of the expenditure as revenue expenditure.

4. The ITAT emphasized that the pendency of the SLP before the Supreme Court did not negate the validity of the High Court's decision for the assessee's case. As the High Court's decision remained in operation and had not been overturned, the ITAT upheld the CIT(A)'s decision and dismissed the Revenue's appeal, affirming the treatment of the expenditure as revenue expenditure.

5. In conclusion, the ITAT ruled in favor of the assessee, dismissing the Revenue's appeal and upholding the treatment of the expenditure related to the improvement of leasehold premises as revenue expenditure based on the High Court's decision for the earlier assessment year.