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TMI Blog2012 (12) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) is not justified in upholding the disallowance of an amount of Rs. 4,87,255/- made by the learned respondent in respect of expenditure incurred on the purchase of Keyman insurance policies. (4) The learned CIT(A) is not justified in upholding the disallowance made by the learned respondent of a sum of Rs. 15,12,766/- incurred on account of sales promotion. (5) The learned CIT(A) is not justified in upholding the disallowance an amount of Rs. 1,02,700/- made by the learned respondent in respect of expenditure incurred on account of brokerage, under section 40(a)(ia) for want of deduction of tax at source under section 194H. (6) The learned CIT(A) is not justified in upholding the levy of interest under section 234B and section 234C". 3. At the time of hearing, the learned counsel for the assessee submitted that ground Nos.4 and 5 relate to disallowance u/s 40(a)(ia) of the Act for want of deduction of tax at source u/s 194H of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]. He submitted that the assessee has paid brokerage and sales promotion expenses without deduction of tax at source u/s 194H and therefore the disallowance u/s 40(a)(ia) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these agreements do not have any limitation on the period nor any termination clauses or conditions for termination etc. Therefore, he came to the conclusion that the Agreement is perpetual and permanent in nature except in the case of unexpected happenings or default of the assessee. He further observed that these amounts are spent for new show-rooms and the payments include interior and exterior works, furniture, Mannequins, racks, light fittings, partitions etc., which is going to provide the assessee benefit of enduring nature. He therefore held that such expenditure could not be claimed as revenue expenditure. 6.2 He also examined the allowability of the same separately under the provisions of sec. 30(a)(i) and also u/s 37 of the Act. He observed that u/s 30 only amount spent on repair is allowable and that repairs imply existence of a thing which has malfunctioned and can be set right by effecting repairs by the assessee and the assessee has incurred expenditure for setting up a new showroom, he held that it cannot be held to be repair expenditure and therefore is not allowable u/s 30(a)(i) of the Act. 6.3 As regards the applicability of sec. 37 of the Act, he held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the location of the showroom, the Agreement would invariably be between Reebok and the landlord. He submitted that Reebok would thereafter handover the premises to the assessee to open the showroom and do the retail trading of its goods. He has drawn our attention to various clauses of the Agreement to show that the term of lease was for a period of 4 years only and also that the assessee was required to carry out interior and exterior works of the showroom and it was also required to pay security deposit for the lease of the premises and lease rentals. Thus, according to him, the assessee was in occupation of the premises for a limited period only and therefore by carrying out the internal and exterior works required to do its business effectively and efficiently as per the requirements of the brand Reebok, it would be business expenditure for the running of business and therefore revenue in nature. He submitted that the test of enduring nature is not the only test to determine the nature of the expenditure. According to him, it is also to be seen whether there is any creation of new asset which has enlarged the scope of profit making to come to the conclusion that it is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showrooms it cannot be said that the assessee is starting a new business. The Hon'ble Madras High Court in the case of Sakthi Sugars Ltd. (supra) was considering the case of a sugar factory where it set up two sugar units and the expenditure incurred for the purposes of setting up these new units was held to be revenue expenditure. Therefore, respectfully following the same, we hold that by setting up new showrooms, the assessee is only expanding its business and is not setting up new business. Coming to question No. 2, we find that in a catena of decisions relied upon by the learned counsel for the assessee (cited supra), it has been held that when any expenditure is incurred by an assessee on leasehold premises, even though it may give an enduring benefit, it would not amount to capital expenditure as no capital asset is being created in favour of the assessee. In some of the cases, the expenditure is on civil and electrical works also. In the case before us, we find that the AO has erroneously held that there was no termination clause in the agreement of lease and that the lease is permanent. We find that the lease is for a period of 4 years only and the assessee was to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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