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TMI Blog2016 (12) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Electrical Maintenance & Installation Rs. 48,60,079 iv) Stamp duty for the registration of licence deed Rs. 57,19,700 Ground No.2.5.1:- That the learned CIT (A) and the learned AO erred in holding that the registration charges incurred for registering the licence agreement amounting to Rs. 57,19,700 as capital expenditure. Ground No.3:-. That the learned CIT (A) and the learned AO erred in disallowing the additional depreciation claimed by the assessee amounting to Rs. 90,23,900 towards the windmill". 2. It was also submitted that all the other grounds are arguments in support of these grounds and hence need no specific adjudication. 3. Brief facts of the case are that the assessee company, which is engaged in the business of exhibition of feature films, running canteens, vehicle parking, advertising space or time, and sale of power, gaming revenues etc., filed its return of income on 29.09.2011 admitting total loss of Rs. 2,11,99,644. During the assessment proceedings u/s 143(3) of the Act, the AO called for various details in support of its claims. The details have been filed by the assessee. AO observed that during the financial year relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee had entered into a Leave and Licence Agreement with the owner of the mall for maintaining the 'Multiplex Cinema' in a small portion of the mall and the assessee is not in the possession of the entire mall. He submitted that the licensor had provided a full functional premises and the assessee was given licence to operate only in a limited portion of the mall and therefore, according to him, the decision of the Hon'ble Supreme Court in the case of Ballimal Naval Kishore vs. CIT reported in 224 ITR 414 (S.C) is applicable to the facts of the case before us. He also placed reliance upon the following other decisions for the proposition that the expenditure incurred towards interior decoration so as to make the premises functional and to make it suitable for the business of the assessee is revenue expenditure: a) Hon'ble Madras High Court in the case of CIT vs. Amrutanjan Finance Ltd reported in (2014) 363 ITR 135 (Mad.) b) Hon'ble Madras High Court in the case of Thiru Arooran Sugars Ltd vs. DCIT (T.C. No.197 of 2005 dated 26.7.2011). c) Hon'ble Supreme Court in the case of Gobind Sugar Mills Ltd vs. CIT reported in (1998) 232 ITR 319 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fees. The assessee is also authorized to create the infrastructure necessary for setting up and maintaining the theatre and to carry on commercial operations. In this process, the assessee has incurred expenditure towards interior decorations & POP wall design, false ceiling & cleaning charges, electrical installation & maintenance. The stand of the Revenue is that the assessee is setting up a new theatre and therefore, is creating an asset of enduring benefit and therefore, the entire expenditure should be treated as capital expenditure. However, we find that the assessee has taken the premises on leave and license basis, for a period of 18 years. The expenditure incurred by the assessee initially against the above items cannot be said to be expenditure incurred for creating any asset and that too for getting an enduring benefit. The assessee cannot run the Theatre without the necessary infrastructure. The interior decorations, false ceilings, electrical installation & maintenance can be of no use to the assessee whenever the assessee vacates the premises. The Hon'ble Supreme Court in the case of CIT vs. Madras Auto Services P Ltd reported in (1998) 233 ITR 468 (S.C) was dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the ambience of office was revenue in nature as there was strict competition in the business of the assessee and the expenditure could not at all be said to be capital expenditure. It was held that mere fact that the premises has been taken on lease for six years would not by itself render the expenditure as capital in nature. 11. The Coordinate Bench of this Tribunal at Bangalore in the case of Emdee Apparels v. ACIT (ITA Nos.576 & 577/Bang/2011) dated 21st September, 2012, to which one of us i.e. J.M. is the signatory, has also considered that in a situation where an assessee who is already in the business of retail trading of Reebok Footwear and shoes and is opening a new outlet in a different location for the said purpose, mere opening of a new showroom, cannot be said to be starting of a new business and the expenditure of civil and electrical work incurred in leasehold premise cannot be held to be of enduring benefit. It was also held that the quantum of expenditure cannot determine the nature of the expenditure. 12. In the case of Joy Alukkas India (P) Ltd vs. ACIT, the Hon'ble Kerala High Court has held that the refurnishing, repairs and improvement expenses incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se agreement for a period of 18 years only, the assessee has been continuing in the said premises even till date and therefore, clearly it is in the nature of capital expenditure. 17. Having regard to the rival contentions and the material on record, we find that the Hon'ble Supreme Court in the case of M/s. M.N. Clubwala & Anr (cited Supra) has considered the distinction between a lease and a leave and licence agreement and has held that the legal possession of the property taken on leave and licence must be deemed to have been with the landlords and not with the licence holders and the right of the licence holders was only to the exclusive use of the premises during the fixed hours and nothing more. It was held that the intention of the parties was of paramount importance to decide the nature of the expenditure. 18. Similarly, in the case of Sohan Lal Naraindas (cited Supra), it was held that the intention of the parties to an instrument, must be understood from the terms of the agreement and the surrounding circumstances and that the description given by the party may be evidence of the intention but is not decisive. It was held that the crucial test in each case is whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the assessee is entitled to the additional depreciation. In support of this contention, he placed reliance upon the following decisions: a) CIT vs. Hi Tech Arai Ltd reported in (2010) 321 ITR 477 (Mad) b) CIT vs. Atlas Export Enterprise reported in (2015) 373 ITR 414 (Mad.) c) VTM Ltd v. CIT reported in (2009) 319 ITR 336 (Mad.) d) CIT v. Texmo Precision Castings reported in (2010) 321 ITR 481 (Mad.) 22. The learned DR, however, supported the orders of the authorities below and has also brought out the purpose of the relevant section i.e. 32(1)(iia) of the Act and submitted that the assessee should have utilized the new machinery for manufacturing of goods or things and further that the canteen run by the assessee cannot be considered as manufacturing of food items. 23. Having regard to the rival contentions, we deem it fit and necessary to reproduce the relevant portion of the section 32 as it was for the financial year 2010-11 hereunder: "Section 32(1)(iia): Depreciation. 32. (1) In respect of depreciation of- (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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