2016 (9) TMI 956 - AT - Income Tax

Disallowance of expenditure incurred on repairs and maintenance in the lease hold premises - revenue or capital expenditure - Held that - Admittedly, in the present case, the assessee has laid new floor on the leased asset of the company, for which it has purchased tiles for this purpose and by claiming the same as revenue expenditure, debited an amount of ₹.27,09,957/- under the head building maintenance . However, the Assessing Officer treated the same as capital expenditure and addition made was further confirmed by the ld. CIT(A). On similar facts and circumstances, the Hon ble Jurisdictional High Court in the case of CIT v. Ayesha Hospitals (P) Ltd. (2006 (10) TMI 117 - MADRAS High Court) has observed that the expenditure incurred by the assessee on painting, relaying of damaged floors, partitions, etc. in leasehold premises is allowable as revenue expenditure and relevant portion of the order is reproduced hereinabove. Respectfully following the above decision of the Hon ble Jurisdictional High Court, we direct the Assessing Officer to delete the addition made on this account - Decided in favour of assessee.

Summary

Issues:
Disallowance of expenditure on repairs and maintenance in leasehold premises as capital expenditure.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of expenditure on repairs and maintenance in the leasehold premises as capital expenditure.
2. The assessee, engaged in manufacturing, filed its return declaring a loss, which was later scrutinized resulting in disallowance of the expenditure in question.
3. The ld. CIT(A) upheld the addition made by the Assessing Officer, leading to the appeal before the Tribunal.
4. The assessee argued that the expenditure should be treated as revenue expenditure based on a decision in a similar case.
5. The Tribunal considered the nature of the expenditure incurred for laying new floor tiles in the leased asset and compared it to a previous judgment regarding painting and relaying floors in a leased property.
6. The Tribunal noted that the expenditure on laying the floor provided enduring benefit and added value to the fixed asset, thus should be treated as capital expenditure.
7. However, following the decision in the previous case, the Tribunal directed the Assessing Officer to delete the addition made on the account of expenditure on repairs and maintenance in the leasehold premises, allowing the appeal filed by the assessee.
8. The Tribunal concluded the judgment in favor of the assessee, emphasizing the application of the previous decision in determining the nature of the expenditure incurred.

This detailed analysis highlights the key points and reasoning behind the judgment, emphasizing the legal interpretation and application of relevant precedents in deciding the issue at hand.