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TMI Blog2016 (11) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... mises or that the seating capacity was increased or otherwise. It was only within the same complex the expenses were incurred in order to update the facility which ultimately would result as good business to attract the customer. Considering the facts and circumstances, it appears to us that the view taken by the Tribunal cannot be said to be erroneous nor such view can be said to be contrary to any statutory provision. - Decided against revenue - ITA No. 254/2015, C/W ITA No. 255, 256, 257/2015, ITA No. 254/2015 - - - Dated:- 21-9-2016 - Jayant Patel And Aravind Kumar, JJ. For the Appellants : Sri E R Indra Kumar, Sr. Counsel A/W, Sri E I Sanmathi, Advocate ORDER As in all appeals common questions are to be considered, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of the same observed that this expenditure indicated that major renovation works had been undertaken and therefore cannot be treated as revenue expenditure. The Assessing Officer referring to Explanation 1 to Section 32 of the Act, was of the view that the assessee has incurred capital expenditure and therefore is entitled to depreciation thereon @ 10%. Accordingly, the Assessing Officer disallowed the assessee s claim for the aforesaid expenditure to be allowed as revenue expenditure, treated the same as capital expenditure and allowed the assessee depreciation thereon @ 10%. 5.4.2 The question that now arises for consideration is, when the assessee has incurred expenditure on renovation of the hotel taken on lease, then whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on the capital expenditure incurred by a tenant in leased premises . Therefore, it is obvious that prior to the introduction of sub-section 1A to Section 32 of the Act w.e.f. 1.4.1971 by the Taxation Laws (Amendment) Act, 1970, the assessee who takes the business premises on lease was not entitled to any depreciation on capital expenditure incurred thereon. In other words, prior to 1.4.1971, assesses who incurred capital expenditure on leased premises were not entitled to any benefit at all in this regard. Therefore, by removing the legal restrictions in respect of capital expenditure incurred by the assesses who take business premises on lease, Parliament intended to grant / allow depreciation on the capital expenditure incurred on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the premises taken on lease continued to be the same w.e.f. 1.4.1971. Therefore, whenever the assessee incurred the expenditure, in the process of earning profit while carrying on the business in the leased premises, the expenditure has to be treated as revenue expenditure and neither sub-section (1A) to Section 32 OR Explanation 1 to Section 32 of the Act would come in the way of allowing the same as revenue expenditure. However, when the assessee incurred expenditure which is of capital nature, then the Parliament allows the benefit to the assessee for claiming depreciation on such capital expenditure in relation to renovation, extension or improvement w.e.f. 1.4.1971 u/s. 32(1A) and in accordance with the provisions of Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was not increased after the expenditure. The expenditure incurred was only for carrying on the business and was an integral part of the profit earning process. Therefore, we find that no case has been made out to say that the assessee has obtained any enduring benefit by virtue of this expenditure. The nature of the work undertaken by the assessee is to carry on the business and not obtain any asset. Further, as already observed, no capital asset of an enduring nature came into existence. In other words, the assessee has not acquired any asset/income earning apparatus. It is well settled principle of law that the expenditure incurred for acquisition of an asset is a capital expenditure and expenditure incurred in the process of earning pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expenses were incurred only for the purpose of carrying on day to day business and earn profits and do not result in the bringing into existence of any capital asset. Therefore, in the light of the discussion form paras 5.1 to 5.4.9 of this order and the facts and circumstances of the case, in our view, the learned CIT (Appeals) was not right in upholding the disallowance of the expenditure by holding it as capital in nature. We, accordingly, reverse the findings of the authorities below on this issue and allow the assessee s claim for deduction of expenditure incurred towards renovation of plant design system, computer cabling, fire detection and alarm system, plumbing, air conditioning work, electrical works, interior work etc. on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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