Income Tax Appellate Tribunal - Delhi
Haldiram Products Pvt. Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C' NEW DELHI
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER
AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .No.-5158/Del/2012
(ASSESSMENT YEAR - 2008-09)
DCIT, Vs Haldiram Products Pvt. Ltd.,
Circle-12(1), 1454/2, Near Fountain,
New Delhi Chandni Chowk, New Delhi-06
PAN-AAACH8461R
(APPELLANT) (RESPONDENT)
Appellant by: Shri. Satpal Singh, Sr. DR
Respondent by: Shri. V. Raja Kumar, Adv.
Appeal heard on-06.12.2012
Order pronounced on-08.02.2013
ORDER
PER T.S.KAPOOR, AM
This is an appeal filed by revenue against the order of CIT(A)-XV, New Delhi dated 03.07.2012. The grounds of appeal taken by revenue are as under :-
"1. The CIT(A) has erred in law as well as circumstances of the case in holding Rs.22,19,954/- paid to MCD on account of conversion charges and parking charges in respect of rented property as revenue expenditure.
2. The CIT(A) has erred in law as well as circumstances of the case in not analyzing the fact that Rs.22,19,954/- paid to MCD by the assessee on account of conversion charges and parking charges in respect of rented property results in providing enduring benefit to the assessee.
3. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing." 2 I.T.A .No.-5158/Del/2012
2. The brief facts of the case are that assessee company is engaged in running sweet shop and fast food restaurant in various parts of Delhi. The return of income for the year under consideration was filed on 25.09.2008. The case of the assessee was selected for scrutiny. During assessment proceedings, the AO made disallowance u/s 14A to the extent of Rs.53,918/- and also disallowed an amount of Rs.22,19,954/- which was paid by assessee company to MCD on account of conversion of its rented outlet at Moti Nagar from industrial unit to commercial unit. Further an amount of Rs.66,500/- was paid by assessee in respect of its rented showroom at Chandni Chowk as one time parking charges to MCD. The AO considered expenditures to be of enduring benefit to the assessee and, therefore, disallowed the same.
3. The assessee preferred an appeal before CIT(A). The Ld. CIT(A) after going through the submissions of assessee upheld the disallowance with respect to expenditure u/s 14A but deleted the disallowance made on account of conversion charges and parking charges for which revenue is in appeal before us. Ld. AR had submitted before CIT(A) the following submissions in respect of disallowance of Rs.22,19,954/-:-
i) That the rented shop at Chandni Chowk is on the main road of Chandni Chowk and had been running since 1983 and the first shop of Haldi Ram Group, Delhi. During the year under consideration, there was a massive crack down on commercial establishments and shops in 3 I.T.A .No.-5158/Del/2012 Delhi and there was ceiling and removal of unauthorized shops in commercial outlets in commercial and residential areas. Conditions were imposed that the shops should provide for proper parking to the customers and in case those were unable to provide parking, they have to pay charges to MCD towards parking charges and, therefore, the assessee had paid an amount of Rs.66,500/- for parking charges and payment of these charges had not given any additional benefit to the assessee and or enhanced the value of premises as the premises was on rent.
ii) That the assessee company had taken the showroom at Moti Nagar on 24.11.2005 and rent started w.e.f 15.02.2006 and after necessary renovation and interior, it had started its outlet in September, 2007.
The MCD had fixed some charges on payment of which the parties were allowed to carry on commercial activities or otherwise had to close the business and it was also submitted that the money was spent for the purpose of enabling the company to carry on and earn profits in the trade. Therefore, any expenditure which was incurred for preventing the extinction of the respondent's business would be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. 4 I.T.A .No.-5158/Del/2012
iii) That the payment of regularization charges to MCD does not add to the value of the property in any way and does not give any enduring benefit to the assessee in any way. Therefore, the charges paid to MCD were in the nature of municipal taxes which are allowable as deduction under Income Tax Act, 1961.
iv) That both the retail outlets were in existence and if the assessee had refused to deposit the required charges the retail outlets would have to be closed, therefore, the money was spent to run the business efficiently and conveniently.
v) That both the properties at Chandni Chowk and Moti Nagar are on rental basis and are not owned by the assessee company and by depositing the charges, the assessee had not acquired/added any value to the assets. Therefore, regularization/parking charges paid were revenue in nature and not a capital expenditure.
Reliance was placed in the judgement of the following cases ;_
(a) Escorts Ltd. Vs ITO (1989) 30 ITD (DEL) 349
(b) Lakshmiji Sugar Mills Co. P. Ltd. Vs CIT (1971) 82 ITR 376 (SC)
(c) CIT Vs Hindustan Motors Ltd. (1968) 68 ITR 301 (CAL) Ld. CIT(A) on the basis of above submissions of the assessee deleted the addition made by AO.
5 I.T.A .No.-5158/Del/2012
4. Aggrieved the revenue filed an appeal before this Tribunal. At the outset, Ld. DR invited our attention to page 4 of assessment order and argued that one time conversion charges and parking charges were in the nature of capital expenditure as the benefit of these expenses was of enduring nature. It was further argued that assessee had not paid any regular expenses to maintain parking but these were one time charges only and, therefore, were capital in nature. On the other hand, Ld. AR argued that one of the shop was running for past 26 years which was suddenly asked to pay parking charges and parking was already there and, therefore, it has not resulted into benefit of enduring nature.
5. In respect of conversion charges paid to MCD, it was argued that no new capital asset had come into existence as outlet was on lease. Reliance was placed on the judgements of the following case laws :-
(i) CIT vs J.K Synthetics Ltd. (2009) 309 ITR 371 (Del)
(ii) Bikaner Gypsums Ltd. vs CIT (1991) 187 ITR 39 (SC)
(iii) CIT vs Suri Sons (1989) 177 ITR 406 (P & H)
(iv) CIT vs Associated Cement Companies Ltd. (1988) 172 ITR 2567 (SC)
(v) CIT vs. Hi Line Pens P. Ltd. (2008) 306 ITR 182 (Del)
6. Our attention was invited to page 16 of paper book wherein copy of first judgment was placed and in this respect para 38 was read. Similarly, para 13 at page 23 & 24 were read. Para 2 at page 25 and para 4 of page 28 and para 15 & 16 of page 32 relating to different judgements were read. Relying upon the above judgements, the Ld. AR argued that expenses were necessarily of revenue nature and, therefore, Ld. CIT(A) had rightly deleted the additions. 6 I.T.A .No.-5158/Del/2012
7. In his re-joinder, Ld. DR argued that factual matrix remains that parking is the concept which is considered by customers while deciding to shop so this parking right was of enduring nature.
8. We have heard rival parties and have gone through the material placed on record. We find that assessee had paid conversion charges from industrial unit to commercial unit in respect of its outlet at Moti Nagar. Similarly, the addition of Rs.66,500/- was made on holding the same to be as one time parking charges. Ld. CIT(A) deleted the addition holding that the payments were made for preventing extinction of appellant's business and had the appellant not made the payment to MCD for regularizing, there would have been no option but to close the business units. The Hon'ble High Court of Delhi in the case of CIT vs J.K Synthetics Ltd. had enumerated broad principles on the basis of various decisions of Hon'ble Supreme Court and Hon'ble High Court, which are as under :-
"(i) the expenditure incurred towards initial outlay of business would be in the nature of capital expenditure, however, if the expenditure incurred while the business is on going, it would have to be ascertained if the expenditure is made for acquiring or bringing into existence an asset or an advantage of an enduring benefit for the business, if that be so, it will be in the nature of capital expenditure.
If the expenditure, on the other hand, is for running the business or working it, with a view to produce profits, it would be in the nature of revenue expenditure;
(ii) it is the aim and object of expenditure, which would, determine its character and not the source and manner of its payment;
(iii) the test of 'once and for all' payment i.e a lump sum payment made, in respect of, a transaction is an inconclusive test. The character of payment can be determined by looking at what is the true nature of the asset which is acquired and not by the fact whether it is a payment in 'lump sum' or in an installment. In applying the test of 7 I.T.A .No.-5158/Del/2012 an advantage of an enduring nature, it would not be proper, to look at the advantage obtained, as lasting forever. The distinction which is required to be drawn is, whether the expense has been incurred to do away with, what is a recurring expense for running a business, as against, an expense undertaken for the benefit of the business as a whole;
(iv) an expense incurred for acquisition of a source of profit or income would in the absence of any contrary circumstances, be in the nature of capital expenditure. As against this, an expenditure which enables the profit making structure to work more efficiently leaving the source or the profit making structure untouched, would be in the nature of revenue expenditure. In other words, expenditure incurred to fine tune trading operation to enable the management to run the business effectively, efficiently and profitably leaving the fixed assets untouched would be an expenditure of a revenue nature even though the advantage obtained may last for an indefinite period. To that extent, the test of enduring benefit or advantage could be considered as having broken down."
9. Similarly, Hon'ble Supreme Court in the case of Bikaner Gypsums Ltd. vs CIT (1990) 53 TAXMAN 279 had held that cost of removal of obstruction which enables the assessee to carry on of mining in an area which had already been leased out to it, was not acquisition of any capital asset. It was also held that even if some expenditure incurred resulted into advantage of enduring benefit, the expenditure may not amount to acquisition of an asset.
10. In the present case, the assessee had paid amounts for one time conversion charges and for parking charges at the two outlets, the benefits of which might accrue to the assessee for indefinite period of time yet these were incurred to enable the profit making structures to work more efficiently leaving the source or the profit making structure untouched and moreover, the expenditure were in the nature of levies/taxes paid by an assessee to a government authority for making 8 I.T.A .No.-5158/Del/2012 available the required infrastructure to run the business efficiently and effectively. Therefore, on the facts & circumstances of the case and following Judicial pronouncements, we do not find infirmity in the order of Ld. CIT(A). We are of the considered opinion that Ld. CIT(A) had rightly deleted the additions.
11. In view of the above, the appeal filed by revenue is dismissed.
The order is pronounced in the open court on 08.02.2013.
Sd/- Sd/-
(DIVA SINGH) (T.S.KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:08/02/2013
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI