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TMI Blog2015 (10) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's counsel on this issue - Decided against assessee. - ITA No. 700/Mds/2014 - - - Dated:- 11-9-2015 - N. R. S. Ganesan, JM And Chandra Poojari, AM For the Petitioner : Shri S Sridhar, Adv. For the Respondent : Shri P Radhakrishnan, IRS, JCIT ORDER Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-V, Chennai, dated 02.12.2013 for the assessment years 2008-2009. 2. The assessee has raised the following grounds of appeal:- 2. The CIT (Appeals) erred in confirming the disallowance of ₹ 18,98,962/- being the expenses incurred under various dates in the leasehold lands in the computation of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that having noticed the nature of expenses incurred on the factual matrix of the case and further having noticed the decisions rendered by the Jurisdictional High Court, the action to classify such expenses as capital resulting in the disallowance of such sum in the computation of taxable total income was wrong, erroneous, unjustified, incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 18,98,962/- The Assessing Officer disallowed the above expenses as capital in nature and allowed only depreciation. The Assessing Officer further observed that in respect of capital expenditure incurred by the assessee on lease hold premises, only depreciation is admissible. There is no 'response' that the fencing, temporary shed, compound etc were constructed on leasehold premises. It is pertinent to note that by incurring the said expenditure, the assessee has acquired an asset which in turn increases the enduring capacity to the assessee in the business. In this context, the assessee contention that the expenditure incurred thereon should be allowed as revenue expenditure is not justified. Hence, the Assessing Officer disallowed the revenue expenditure claimed after allowing due depreciation as laid down in Explanation 1 to sec. 32. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) 4. The Commissioner of Income Tax (Appeals) observed that the disallowance of ₹ 18,98,962/- being lease hold Land Expenses claimed by the appellant as revenue expenditure, the Assessing Officer treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing for the limited period, since the building/super structure was constructed by the assessee, the assessee need not pay rent periodically. The Ld. AR reiterated that the assessee had not acquired any asset or advantage of an enduring nature. The assessee is not the owner of these facilities, but had only a right of possession for a limited period. These structures were put up for the business purposes and had to be demolished/removed after the period of lease and hence are not of permanent nature. The Ld. AR submitted that the payment of monthly rent is only revenue expenditure and hence payment of such revenue expenditure cumulatively in one year is only revenue in nature. Relating to revenue expenditure on leasehold building, the Ld. AR submitted that the assessee had also taken on lease land and building for its business purposes. But for making it functional the assessee had to incur revenue expenditure in the nature of making temporary partitions, floorings etc. Such expenses were treated as revenue expenditure for the reason that no asset or advantage of an enduring nature was acquired out of such expenses. The Ld. AR submitted that as can be seen from the details of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding owned by the assessee. However, the aforesaid provisions are applicable where new asset has come into existence. The assessee in support of his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of M/s. Sundaram BNP Paribas Asset Management Company Ltd., Vs. ACIT (supra), the Tribunal in the aforesaid order has held as under: 5. We have considered the rival submissions. A perusal of the breakup of the expenses which have been disallowed clearly shows that the expenditures are on the interior decorations and creation of the office atmosphere. The expenditure has not resulted in any building coming into existence nor has the existing building been modified or the structure altered. As the existing building has not been altered and there is no change to its structure as a result of the expenditure incurred by the assessee, it cannot be said that the expenditure incurred by the assessee is in the capital field. Further a perusal of the expenditure clearly shows that it is in the revenue field. In the circumstances we are of the view that the expenditure on the repairs and maintenance in the form of electrical fittings, electrification, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the jurisdictional High Court in the case of CIT vs. TVS Lean Logistics Ltd, 293 ITR 432, wherein it was held that where the words of a statute are absolutely clear and unambiguous, rule of literal construction has to be followed, even if literal interpretation results in hardship or inconvenience; Court cannot enlarge the scope of legislation . 6. On the other hand , the Ld. DR strongly oppose the order of the CIT(A) on this issue and submitted that the provisions of section 32(1) are applicable to the facts of the present case and by no stretch of imagination, the expenditure incurred on construction of superstructure on leasehold land can be considered as revenue expenditure. He submitted that reliance placed by the CIT(A) on the decision of the High Court of Madras in the case of CIT vs. TVS Lean Logistics (supra) is totally misplaced. More so, he submitted that the order of the Tribunal in the case of ABT Ltd vs.ACIT 21 ITR (Trib) 634 is also not on the same facts. In that case, the Tribunal decided the issue in favour of the assessee on the reasoning that the expenditure incurred by the assessee towards refurnishing repairs and improvements of the leased premises u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions is in affirmative, the assessee falls within the purview of Explanation 1 to sec. 32(1). In the instant case, it is an admitted fact that the assessee has taken land on lease for setting up of project for processing of coir. It is also undisputed that the assessee has constructed the building at the leased premises. Thus the assessee has constructed super structure. These construction activities carried out by the assessee if put on to the test of Explanation 1 would show that the construction made by the assessee on the leased out premises would amount to capital expenditure. The assessee in order to support his case has relied on the judgment of the Madras High Court in the case of TVS Lean Logistics Ltd. (supra). In the said case, the assessee had constructed a building on the leased land for the business advantage. The 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 High Court in para 4.4 of the judgment further held as under:- 4.4 What constitutes a capital expenditure and what does not, to attract Expln ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. 12. Thereafter, the Apex Court referring 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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