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TMI Blog1986 (7) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... f New Delhi for a sum of Rs. 75,000 for getting the above work executed and for making of some furniture. The expenditure of Rs. 75,000 was allocated by the assessee as follows : Rs. (1) Cost of making partition, wooden panelling, false ceiling, painting and white-washing, etc. 60,990 (2) Cost of furniture 14,010 ------ &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the background of the abovementioned facts. Shri K.K. Sharma, the learned departmental representative has supported the order passed by the ITO by submitting that the law laid down by the Hon'ble Delhi High Court in the case of Hotel Diplomat squarely applied to the facts of the case and against the assessee. Mr. Sharma has also placed reliance on a decision of the Hon'ble Punjab High Court in Uttar Bharat Exchange Ltd. v. CIT [1965] 55 ITR 550 in order to contend that the expenditure claimed by the assessee was capital in nature. According to him, the expenditure incurred by the assessee was initial expenditure for making the premises usable and that, therefore, the view taken by the ITO should be preferred to the view taken by the Commissioner (Appeals). Mr. Sharma has also referred to the provisions of section 32(1A) of the Act, in order to contend that the expenditure incurred by the assessee in the premises taken on lease was a capital expenditure. 4. On the other hand, Shri S. L. Batra has contended that the expenditure was of revenue nature. In order to support his contention Shri Batra has taken us through a paper book and in particular through the details of expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a lump sum of Rs. 75,000. The allocation of Rs. 75,000 between revenue expenditure and capital expenditure has already been given by us in an earlier portion of this order and now we would proceed to decide as to whether the expenditure incurred by the assessee as per details given above was capital or revenue in nature. Before we do so, we may take notice of the various decisions on which reliance has been placed by the contending parties. 6. In the case of Hotel Diplomat it had been held by their Lordships of the Hon'ble Delhi High Court that the expenditure of Rs. 3,361 for construction of bathrooms was a capital expenditure. Since apparently the facts in that case were entirely different, from the facts found in the present case, we would agree with the viewpoint of the Commissioner (Appeals) that the reliance placed by the ITO on this decision, does not in any way help the department's case. The decision in the case of Uttar Bharat Exchange Ltd. on which reliance has been placed by the learned departmental representative supports the case of the department. In that case, the assessee had taken premises on lease for a period of two years and as per the terms of the lease a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court that the expenditure incurred in putting up the wooden panelling did not result in any enduring benefit to the assessee and was deductible as a revenue expenditure. In the case of Kisenchand Chellaram (India) (P.) Ltd. the assessee had taken three buildings on lease and effected improvements in those buildings by construction of partition walls and by providing wall panellings and show-windows, etc. Their Lordships of the Madras High Court held that the expenditure, thus, incurred was of revenue nature. In the case of Mehta Transport Co. the assessee was a transport operator having a branch office in rented premises. A loft construction inside the office premises was made for providing adequate accommodation to the staff. Their Lordships of the Hon'ble Gujarat High Court held that the available office space was put to optimum use resulting in greater efficiency and in improvement of working conditions and that therefore the expenditure incurred by the assessee did not bring into existence any enduring benefit and was allowable as revenue expenditure. In the decision of the Tribunal in the case of Kapur & Co. [IT Appeal No. 4137 (Delhi) of 1984, decided on 10-4-1986], the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rest of the expenses were allowable as revenue expenses. 9. We have gone through the agreement of lease entered into between the assessee on one hand and his son on the other. It is evident from that deed that the assessee, who was the lessee of the premises was allowed to make minor alterations and attach fixtures, etc., inside the hall taken on lease and that major structural changes or repairs to the building were to be undertaken only by the lessor. In accordance with the terms of the lease deed, the assessee had structured its office space by making wooden cabins and by incurring other expenses on distempering and white-washing of the inside of the building which was nothing, but a revenue expenditure. The provisions of section 32(1A) are no doubt indicative of the law that any capital expenditure incurred by an assessee in the premises taken on lease or on the basis of any other rights of occupancy would be inadmissible expenditure and would be eligible for grant of depreciation only, but in the present case the details of the expenditure incurred by the assessee do not show that those were capital in nature. The assessee had not made any renovation, extension or impro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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