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TMI Blog2013 (2) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... - CIT(A) deleted the addition - Held that:- Order of the CIT(A) shows that during the course of appellate proceedings, the assessee was able to produce documents and the details of repayment made through cheque. Even the bank confirmations were filed by the assessee showing that the cheques issued by the assessee were encashed by the respective parties. The assessee had also furnished identity of persons with complete details of addresses and the FD applications showing details. After satisfying himself with the documents, the CIT(A) has allowed the ground of appeal of the assessee. The DR could not controvert the findings of the CIT(A) on this issue, therefore no reason to interfere with the findings of the CIT(A) - against revenue. - IT APPEAL NOS. 1557, 1558, 1633 & 1705 (MDS.) OF 2011 - - - Dated:- 3-1-2013 - N.S. SAINI AND VIKAS AWASTHY, JJ. Vikram Vijayaraghavan for the Appellant. Dr. S. Moharana for the Respondent. ORDER Vikas Awasthy, Judicial Member - The assessee has filed ITA Nos.1557 1558/Mds/2011 relevant to the assessment years 2005-06 and 2008-09 respectively impugning the orders of the CIT(A)-I, Coimbatore dated 12.7.2011. The Revenue has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the appeal of the assessee on the issue of expenditure incurred by the assessee on construction/renovation of leased building for the aforementioned reasons. As regards the claim of the assessee with regard to higher rate of depreciation on windmills and unexplained cash credit under section 68 of the Income Tax Act, the CIT(A) allowed the appeal of the assessee. Aggrieved against the orders of the CIT(A) for the respective assessment years, both the Revenue and the assessee have come in second appeal before the Tribunal. Since common issues are involved in these appeals, they are taken up together for disposal. 4. Shri Vikram Vijayaraghavan appearing on behalf of the assessee submitted that the expenditure incurred by the assessee on the leased premises should be allowed as revenue expenditure as the assessee has spent amount to make the leased premises suitable for conducting business. The counsel for the assessee submitted that Explanation 1 to Section 32(1) will not apply in the present case. In order to support his contentions, the counsel for the assessee relied on the judgement of the Hon'ble Madras High Court in the case of CIT v. TVS Lean Logistics Ltd. [2007] 293 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R submitted that the assessee could not furnish details to substantiate genuineness of the transactions. The DR strongly supported the orders of the Assessing Officer on this issue. 7. We have heard the submissions made by both the parties. We have perused the orders passed by the authorities below and the judgements/orders referred to by the representatives of both the sides. The issue relating to nature of expenditure incurred by the assessee on leasehold premises arises in ITA No. 1557 1558/Mds/2011 filed by the assessee as well as in ITA No. 1705/Mds/2011 filed by the Revenue. In ITA No. 1557/Mds/2011 the assessee has also impugned the reopening of the assessment, since the issue was not pressed by the assessee before the CIT(A), therefore, the same cannot be subject matter of adjudication before the Tribunal as well. Confronted with the situation, the counsel for the assessee made a statement that he is not pressing the issue of reopening before the Tribunal. 8. Explanation 1 to section 32(1) which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1.4.1988 deals with the situation where the expenditure has been incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had constructed a building on the leased land for the business advantage. The Hon'ble Court held that the entire cost of construction is admissible as revenue expenditure. Explanation 1 categorically states that the business or profession is carried on in a leased building and not on land. The Hon'ble High Court in para 4.4 of the judgement further held as under:- "4.4 What constitutes a capital expenditure and what does not, to attract Expln.1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or improvement to the building which is put up in a building taken on lease by him for carrying on his business and profession of the assessee, but not in a case of construction of any structure or doing any work or relation to where such building is put up/constructed for the purpose of business or the profession of the assessee in a land taken on lease by the assessee." Thus, it is clear that the ratio laid down by the Hon'ble Madras High Court in the said judgement does not support the case of the assessee. 10. In the present case, the assessee has taken building on lease and made certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to several cases decided held as under:- "11. All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." 13. From the above judgement, we can conclude that it is essential that the expenditure incurred on the construction of any structure on the leased premises should result in saving of the revenue expenditure a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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