Income Tax Appellate Tribunal - Lucknow
Comfy Stores,, Kanpur vs Assessee on 16 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI SANJAY ARORA, ACCOUNTANT MEMBER
ITA No.135/LKW/2012
Assessment Year:2004-05
Comfy Stores v. ACIT-3
403, Krishna Tower Kanpur
15/63, Civil Lines, Kanpur
PAN:AACFC8528K
(Appellant) (Respondent)
Appellant by: Shri. P. K. Kapoor, C.A.
Respondent by: Shri. V. V. Singh, D.R.
Date of hearing: 16.07.2012
Date of pronouncement: 24.07.2012
ORDER
PER SUNIL KUMAR YADAV:
This appeal is preferred by the assessee against the order of the ld. CIT(A) mainly on two issues - one is with regard to the addition on account of expenditures incurred in renovation of three shops situated at Gurgaon, Lucknow and Jaipur, and the other addition is with regard to the disallowance of 1/5 of the total claim of Telephone Expenses and Conveyance Expenses.
2. With regard to the disallowance of expenditures incurred in renovation of three shops, it is noticed from the orders of the lower authorities that the assessee has initially claimed 100% depreciation on the temporary construction for renovation of the said three shops at Gurgaon, :-2-:
Lucknow and Jaipur. But it was disallowed by the Assessing Officer for the reason that none of the items fall within the relevant clauses of the Schedule. During the course of assessment proceedings, the assessee has also raised an alternative plea that if 100% depreciation is not allowed, expenditures incurred in renovation of these three shops be allowed as revenue expenditure. In the rented shop, the assessee has incurred expenses in flooring, false ceiling, paintings, etc which should be considered as revenue expenditure, but this alternative claim of the assessee was also disallowed by the Assessing Officer.
3. The assessee preferred an appeal before the ld. CIT(A) but did not find favour with him.
4. Now the assessee is before us with the submission that the assessee has incurred expenditures only for renovation of the shops, which were taken on rent, by changing the floors, putting false ceiling and painting and polish. Therefore, the expenditures should be allowed either under section 30(a)(i) of the Income-tax Act, 1961 (hereinafter called in short "the Act") or under section 37 of the Act. In support of his contention, the ld. counsel for the assessee has placed reliance upon the following judgments/decisions:-
1) CIT v. Hi Line Pens (P) Ltd. [2008] 306 ITR 182 (Del)/
2) DCIT v. Chaya Lakshmi Creations (P) Ltd. [2010] 6 taxmann.com 29 (Hyd-ITAT)/
3) Girdhari Dass & Sons v. CIT [1976] 105 ITR 339 (All).
4) CIT v. Andavar Calendering Mills [1994] 210 ITR 815 (Mad).
5) CIT v. Kishenchand Chellaram (India) P. Ltd. [1981] 130 ITR 385 (Mad).
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6) CIT v. Haridas Bhagath & Co. (P) Ltd. [1999] 240 ITR 169 (Mad).
7) ITO v. S. L. Batra [1986] 19 ITD (Del) 342.
8) CIT v. Print Systems & Products [2006] 285 ITR 337 (Mad).
9) ITAT Lucknow Bench in the case of Smt. Rajmati Devi v. ITO Basti in ITA No. 332/LKW/2011.
5. The ld. D.R., on the other hand, has placed reliance upon the order of the ld. CIT(A).
6. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that the assessee has incurred expenditures in renovation of all these three shops at Gurgaon, Lucknow and Jaipur by putting false ceiling, changing floors, painting walls, etc. Undisputedly all these shops were rented accommodations. Therefore, assessee did not acquire any enduring benefit by incurring expenditures in renovation of all these shops. We have carefully examined the various judgments referred to by the assessee and we find that in all these judgments it has been categorically held that if the expenditures are incurred in rented accommodations, it would be revenue expenditure because the assessee would not acquire any enduring benefit therein.
7. In the case of CIT v. Hi Line Pens (P) Ltd. (supra), their Lordships of Hon'ble Delhi High Court have held that expenditure incurred by the assessee towards renovation of premises taken on lease so as to make it more conducive to business activities, clearly fall within the expression 'repairs to the premises as appearing in section 30 (a)(i) of the Act and therefore the cost of repairs is allowable as deduction under section 30(a)(i) of the Act. In that case, the expenditures were incurred in false ceiling, fixing tiles, replacing glasses, wooden partitions, replacement of :-4-:
electric wiring, earthing, replacement of GI pipes, etc. In the instant case also, the expenditures were incurred in replacement of tiles, wooden partitions, false ceiling, etc. Therefore, the case is squarely covered by the aforesaid judgment of Hon'ble Delhi High Court.
8. Similar views were expressed by the Tribunal in the cases of DCIT v. Chaya Lakshmi Creations (P) Ltd. (supra) and Smt. Rajmati Devi v. ITO Basti (supra).
9. In the case of Girdhari Dass & Sons v. CIT (supra), the jurisdictional High Court have categorically held that the expenditures incurred on the structural changes made in the rented shop did not bring into existence any capital asset for the assessee or any benefit of enduring nature but was for facilitating carrying on of its business and therefore allowable.
10. Concurring with the same view, Hon'ble Madras High Court has also held in the case of CIT v. Andavar Calendering Mills (supra) that the expenditures incurred by the lessee on construction of a bedding to install an engine and also a room on leasehold property was only for better enjoyment of leasehold property and this being co-terminus with lease, expenditure was not capital expenditure.
11. Similar views were expressed by Hon'ble Madras High Court in the cases of CIT v. Haridas Bhagath & Co. (P) Ltd. (supra) and CIT v. Print Systems & Products (supra).
12. Since it has been repeatedly held by various High Courts that the expenditures incurred in renovation of rented accommodation is revenue expenditure, we find no merit in the additions made by the Assessing Officer after making disallowance of the expenditures incurred in renovation :-5-:
of the rented shops. We, therefore, set aside the order of the ld. CIT(A) and delete the addition made in this regard.
13. The next ground relates to the disallowance of 1/5 of telephone expenses and conveyance expenses.
14. The ld. counsel for the assessee has submitted that the expenditures were incurred for shops at different places i.e. Gurgaon and Jaipur. Therefore, there is no possibility of personal use of telephone installed in the office premises of the assessee. So far as disallowance of vehicle expenses is concerned, the ld. counsel for the assessee has contended that the Revenue has made an ad-hoc disallowance without pointing out any defect in the details of vehicle expenses maintained by the assessee.
15. The ld. D.R., besides placing reliance upon the order of the ld. CIT(A), has contended that from the details of expenses it is not clear whether these expenses pertain to Jaipur or Gurgaon where the partners of the firm do not reside.
16. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that the conveyance expenses were disallowed on ad-hoc basis without pointing out any defect in the details of expenses maintained by the assessee. We, therefore, find no merit in the disallowance on account of vehicle expenses and delete the same.
17. So far as the telephone expenses are concerned, nothing is available on record to demonstrate that the expenses claimed by the assessee under this head pertains to only Gurgaon and Jaipur shops where the partners of the firm do not reside. Since the element of personal use by the partners cannot be ruled out, some disallowance on telephone :-6-:
expenses is to be made. We, therefore, keeping in view the totality of the facts, restrict the disallowance to the extent of 1/10 of the total claim. Accordingly, the order of the ld. CIT(A) is modified and the Assessing Officer is directed to restrict the disallowance to the extent of 1/10 of the total claim of the telephone expenses. Accordingly, the appeal is disposed of.
18. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 24.7.2012.
Sd/- Sd/-
[SANJAY ARORA] [SUNIL KUMAR YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:24.7.2012
JJ:1707
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar