Income Tax Appellate Tribunal - Mumbai
Continetal Air Services P.Ltd, Mumbai vs Department Of Income Tax on 9 July, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" Bench, Mumbai
Before Shri D.K. Agarwal, Judicial Member
and Shri B. Ramakotaiah, Accountant Member
ITA No. 5612/Mum/2009
(Assessment Year: 2004-05)
ACIT, Central Circle 22 M/s. Continental Air Services P. Ltd.
4th Floor, Aayakar Bhavan Vs. 6th Floor, NKM International House
M.K. Road, Mumbai 400020 Backbay Reclamation
Mumbai 400020
PAN - AAACC 1938 L
Appellant Respondent
Appellant by: Shri Devdasan
Respondent by: None
ORDER
Per B. Ramakotaiah, A.M.
This appeal by the Revenue is against the order of the CIT(A), Central IV, Mumbai dated 09.07.2009.
2. The only issue raised by the Revenue in three grounds is with reference to an amount of `30,51,175/- disallowed by the A.O. as capital expenditure but allowed by the CIT(A) as revenue in nature.
3. Briefly stated, assessee has taken a property at Bangalore on lease. It has spent an amount of `32,11,763/- in repairing the said premises. The A.O. was of the opinion that the expenditure incurred for civil construction, wood work, terrace tiling , water proofing, etc. was of capital in nature and accordingly he capitalized the amount and allowed depreciation of `1,60,588/- and thereby disallowing the net expenditure `30,51,175/-. Before the CIT(A) it was the contention that the assessee had incurred certain expenses in connection with repairs and maintenance of leasehold premises at Bangalore and the amount spent on repairs did not create any asset of enduring nature. The repairs were carried out for the smooth operation of the business of the assessee. The amount spent on repairs and maintenance was incurred for better enjoyment of the leasehold property and benefit derived was co-terminus with the lease. The assessee relied on 2 ITA No. 5612/Mum/2009 M/s. Continental Air Services P. Ltd.
the decision of the of CIT vs. Hede Consultancy Pvt. Ltd. 258 ITR 380 (Bom) and Shriram Refrigeration Industries Ltd. 253 ITR 783. It was claimed by that the expenditure incurred towards the extension, renovation or improvement of building on leasehold basis shall amount to revenue expenditure. The entire maintenance expenditure was incurred to facilitate the business operation of the assessee without creating any capital asset. After considering the submissions the CIT(A) has given the following finding in para 14: -
"14. I have carefully considered the facts on the case, the assessment order and also the submissions of the Ld. Counsel. I find considerable merit in the contentions of the Ld. Counsel that the repair work undertaken for rented premises is not capital in nature. Majority of the expense was in creating wooden partitions, painting of the premises and water proofing. No new asset of enduring nature came into existence. Here I am supported immensely by decision of the Hon'ble Bombay High Court in the case of Nila Products Ltd. Vs. CIT (148 ITR 99) wherein it was held that the alterations made exclusively for proper utilization of premises taken on lease, could not be said to bring any asset or benefit of an enduring nature. The expenditure so incurred is of a revenue nature. Further, CIT Bombay - III Vs. Oxford University Press (108 ITR 166) wherein it was held that no change in the nature of the assets had been made, in the sense that when the repairs had not increased the earning capacity of the building, no benefit of enduring nature had brought into existence and mere quantum of expenditure is not by itself decisive of the question whether it is nature of revenue or capital."
4. Further, the CIT(A) also relied on the following case laws:
i) CIT, West Bengal-II vs. ICI (India) Pvt. Ltd. 139 ITR 105 (Cal)
ii) CIT West Bengal-I vs. J.K. Industries (P) Ltd. 125 ITR 218 (Cal)
iii) CIT vs. Kisenchand Chellaram (I) )vt. Ltd. 130 ITR 385 (Mad)
iv) Installment Supply (P) Ltd. vs. CIT 149 ITR 52 (Del)
5. After considering the factual and legal matrix, the CIT(A) held that the repair expenses are revenue in nature and directed the A.O. to allow it as such and the depreciation should be withdrawn. Revenue is aggrieved.
6. The learned D.R. submitted that the assessee has incurred a large amount of expenditure, eventhough on lease property in the guise of repairs and maintenance but the nature of expenditure as can be seen from the 3 ITA No. 5612/Mum/2009 M/s. Continental Air Services P. Ltd.
Assessing Officer's order is of capital in nature. He submitted that the CIT(A) was wrong in allowing the amounts.
7. Assessee was not represented by anybody and the case was heard exparte qua respondent.
8. We have considered the issue. As found out by the CIT(A) the repair work was undertaken on rental premises and major expenditure was in creating wooden partitions, painting of the premises and water proofing. Eventhough the A.O. has mentioned the expenditure in his order also he has not given the bifurcation of the expenses and as per CIT(A)'s order the expenditure on civil construction and masonry work seems to be small proportion to the repairs undertaken in the leased premises. In view of the legal as well as factual matrix in which the CIT(A) has considered the issue and decided the matter, we have no reason to interfere with such findings. Since the premises is one of leases premises and since it was not established that a new asset has been formed by making this expenditure, we uphold the order of the CIT(A) and reject Revenue's grounds.
9. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 17th September 2010.
Sd/- Sd/-
(D.K. Agarwal) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, Dated: 17th September 2010
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) - Central IV, Mumbai
4. The CIT- Central II, Mumbai City
5. The DR, "C" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.