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TMI Blog2022 (5) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered by the CIT(A), hence the order of CIT(A) may please be set aside and the disallowance of Rs. 28,66,569/- made by the AO may please be deleted. 4. The assessee craves to leave, amend, alter or take additional grounds of appeal before or at the time of hearing. From the aforesaid grounds it would be clear that the only grievance of the assessee relates to the expenditure of Rs. 28,66,569/- treated by the AO as capital expenditure instead of revenue expenditure as claimed by the assessee. 3. Facts of the case in brief are that the assessee was engaged in manufacturing of readymade garments and trading of accessories for the year under consideration. The return of income was filed on 04/11/2017 declaring an income of Rs. 7,56,92,130/- which was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). Later on the case was selected for scrutiny. 3.1. During the course of assessment proceedings, the AO noticed that the replies dt. 28/11/2019 and 04/12/2019 furnished revealed that a loss amounting to Rs. 28,66,569/- had been claimed by the assessee on account of fire. According to the Assessing officer, the damage to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order and read as under: 1. The learned AO has made the additions of Rs. 2866569/- on account of fire loss expenses debited to profit and loss account during the assessment year 2017-18. The information was called by the AO before making the additions. The assessee company has filed reply on 13.12.2019 against the questionnaire and the following documents were attached with this letter: a. Copy of FIR Lodged b. Copy of report to Fire brigade department c. News Paper cutting d. Intimation letter to insurance company e. Copy of Insurance policy f. Copy of claim form lodged g. Surveyor report h. Claim finalization letter by insurance company i. Copy of account of Repair Building (damaged by fire) along with copies of major bills. The reply filed with AO is attached for your kind references at paper book page no 8 to 88. The complete documents along with this letter were filed with the AO to prove the contention. The said leased building is in the name of Smt. Sangeeta Jain who has given part of the building to M/s. Vrinda International Pvt. Ltd. and part of the building to M/s. Jain Amar Clothing Pvt. Ltd. The fire broke out in the premises of M/s. Vrinda In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his assessment order. It is requested and prayed to delete the additions wrongly made under the wrong notion of law. 2. The second ground of appeal is that the AO has mentioned in Para 4.2 of the assessment order regarding additions of Rs. 4388370/- in the building account and Rs. 9536788/- in the electrical fittings account. Please note that these figures relates to assessment year 2016-17 and not to the assessment year 2017-18. Further correct figure is Rs. 4368370/- and no Rs. 4388370/- as mentioned in the assessment order in page 2 para 4.2. The assessee company has attached the complete Balance Sheet for the year 2017-18 along with auditor report in the paper book at page no 89 to 150. Your kind attention is invited to page no. 139 of depreciation chart of the balance sheet and your honour will find that additions under the head building are Rs. 11430197/- and under the head electrical fittings are Rs. 3543567/-. However, AO has mentioned additions of Rs. 4388370/- in the building account and Rs. 9536788/- in the electrical fittings account in his assessment order. The copy of Return of Income along with computation chart for the assessment year 2017-18 is also placed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." The judgement has been attached for your kind reference at paper book pages no 200 to 204. 5. Your kind attention is also invited to the judgement of Commissioner of Income Tax & ORS vs. Janakiram Mills Ltd. & ORS of Honorable Madras High Court on this issue. The judgement is attached in the paper book at page no 205 to 231. 6. In view of the above submissions, it is requested and prayed to accept the contention of the assessee and delete the addition made by the AO under the wrong notion of law." 4.2. The Ld. CIT(A) further asked the assessee to file the details of premises used by the assessee and to give the breakup of the building wise construction/addition to the building and expenses incurred on electrical fitting account. In response the assessee submitted as under: The written submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises, this shall be borne by the party of the second part. In this case since the asset created by spending the said amounts did not belong to assessee but the assessee company got business advantage of using modern premises at low rent, thus saving considerable revenue expenditure. The A.O. has tried to co-relate this rented property with the factory buildings at different locations which is against the facts and law, hence the expenditure of Rs. 28,66,569/- may please be allowed as revenue expenditure." 4.3. The Ld. CIT(A) after considering the submissions of the assessee observed that the assessee had filed the details of building repairs account damaged by fire alongwith the major bills which revealed that the bills were in respect of cement bags, steel plates, paint, labour charges, tiles, enamel, electrical fittings, wires & cables, junction box, thermal rolls etc, and bill for construction charges for shed at ground floor including MS frame structure, area of shed 12/14 sq. ft. bill for construction charges included plaster, flooring, paint, MS doors & windows, stairs, labour charges for civil construction work, PVC bill & PVC Junction, copper wire conductors, panel lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Ld. CIT(A) was not justified in upholding the view taken by the AO. 7. In her rival submissions the Ld. Sr. DR reiterated the observations made by the authorities below in their respective orders and strongly supported the impugned order passed by the Ld. CIT(A). 8. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the assessee was not the owner of the building in which fire took place rather he is the lessee and the building premises was taken on lease, copy of the lease deed is placed at page no. 1 & 2 of the assessee's compilation, clauses 3, 4 & 8 of the said lease deed dt. 23/06/2016 read as under: 3. It is expressly argued and understood that the Second Part shall have no right, title, interest or any claim whatsoever on the premises of the First Party, Which is exclusively the property of the First Party. 4. The First Party will not be liable for any loss or damage to the goods due to theft or any other natural or unnatural causes. 8. Second Party will be responsible for any wear & tear, maintenance and other repairs of the building. If due to any calamit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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