TATA CONSULTING ENGINEERING LTD.,MUMBAI vs. THE ADDL. CIT, RANGE-7(3), MUMBAI

O R D E R PER S. RIFAUR RAHMAN (AM)

(A.Y: 2011-12) Tata Consulting Engineering Ltd., “1:0 Re: Improvements to Leasehold premises The Assessing Officer / the Commissioner of Income-tax (Appeals) have erred in treating the expenses incurred on improvements to leasehold premises of Rs.5,16,28,446/- as capital expenditure and accordingly disallowed a sum of Rs.4,64,65,600 after granting depreciation @ 10% on the said expenditure. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the expenses incurred by it during the year under consideration on improvements to leasehold premises are revenue in nature and are therefore allowable as deduction and the stand taken by the Assessing Officer / the Commissioner of Income-tax (Appeals) in this regard is incorrect, erroneous and misconceived, The Appellant submits that the Assessing Officer be directed to delete the addition and to re-compute its total income and tax thereon accordingly. 2:0 Re.: Deduction in respect of ‘Education Cess on income-tax’ and ‘secondary and higher education cess on income-tax’ (collectively referred to as ‘education cess on income-tax’) while computing total income of the Appellant: The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, “education cess on income-tax’, ought to be allowed as a deduction while assessing its income for the year under consideration. The Appellant submits that the Assessing Officer be directed to re- compute its total income and tax thereon after allowing deduction for “education cess on income-tax’. 3:0 Re.: General The Appellant craves leave to add, alter, amend, vary, omit and/or substitute all or any of the foregoing grounds of appeal or add a new ground(s) at or before the hearing of the appeal.”

(A.Y: 2011-12) Tata Consulting Engineering Ltd., 3. Ground No. 1 is in respect of improvements to leasehold premises, Ld. AR brought to our notice that similar ground which assessee has raised before the Coordinate Bench in ITA.No. 3595/Mum/2013 for the A.Y.2008- 09 and ITA.No. 6786/Mum/2012 for the A.Y. 2009-10 and the Coordinate Bench has considered and adjudicated the issue in favour of the assessee by order dated 25.11.2016 and he brought to our notice Para No. 5 and 6 of the order and requested the same may be followed for the assessment year under consideration. Copy of the Tribunal order is placed before us.

6. Keeping in view of the arguments advanced by the learned representative of the parties and perusing the concerned record it came into the notice that the assessee took some premises on lease for the period of three years. The assessee makes improvement such as cabling work for computers / LAN, tiles, flooring, partition, fixing floor mats and other interior work etc., electrical fixtures and other electrical works, switches and distribution boards. The provision of explanation 1 of the section 32 does not disallow the leasehold improvement expenditure if it is revenue in nature. Moreover, this controversy has also been decided in the above mentioned law i.e. CIT Vs. Talathi & Panthaki Associates (P.) Ltd. (343 ITR 309) (Bom.) and CIT Vs. HEDE Consultancy (P.) Ltd. (258 ITR 380) (Bom.) and CIT Vs. Hi Line Pens (P.) Ltd. (175 Taxman 132) (Delhi) and Urban Infrastructure Venture Capital Ltd. Vs. DCIT (48 taxmann.com 156) (ITAT Mumbai) and Peri India (P.) Ltd. Vs. JCIT (71 taxmann.com 79)(ITAT Mumbai). In view of the above said law it is quite clear that the expenditure incurred on lease hold premises has been treated by the above said authorities as revenue expenditure, therefore, in view of the said circumstances we are of the view that the finding of the CIT(A) on this issue is wrong against law and facts, therefore is not liable to be sustainable in the eyes of law hence we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to consider the expenditure as revenue in nature. Accordingly, this issue is decided in favour of the assessee against the revenue.

(A.Y: 2011-12) Tata Consulting Engineering Ltd., 7. Coming to Ground No. 2 which is in respect of Deduction of ‘education cess on income-tax’ while computing total income of the Assessee. Ld. AR of the assessee invited our attention to the decision of the Hon'ble Jurisdictional High Court in the case of Sesa Goa Ltd., v. JCIT [(2020) 423 ITR 426] wherein it has been specifically stated that “education cess” is deductible while computing income under “business income”. In support of his contention Ld. AR relied on the following decisions of the Coordinate Bench: (i). Tata Capital Ltd., v. DCIT in ITA.No. 7058/Mum/2017 (Mumbai Tribunal) (ii). Voltas Ltd. v. ACIT in ITA.No. 6612/Mum/2018 (Mumbai Tribunal)

(A.Y: 2011-12) Tata Consulting Engineering Ltd.,

“8. Considered the rival submissions and perused the material on record in the light of the case laws relied upon by either party. In the instant case, the Revenue has challenged the order passed by the CIT(A) in inter–alia allowing the assessee’s claim of education cess as an allowable business expenditure. We find that provisions of Section 40(a)(ii) of the Act, the education cess paid on Income Tax doesn’t come under the purview of the definition as it is levied on the amount of Income Tax, but not on profits of business. We also find that the assessee also relied on the CBDT Circular no.91/58/66-ITJ(19) dated 18th May 1967, which states that the effect of the omission of the words “cess” from section 40(a)(ii) of the Act is that, only taxes paid are to be disallowed in the assessment for the assessment years 1962- 63 onwards. The assessee also relied on the judgment of Hon’ble Rajasthan High Court wherein identical issue was decided in favour of the assessee and particularly held that education cess is an allowable expenditure. We also note that the learned CIT(A) has also allowed the claim by referring to the contents of the CBDT Circular (supra) as while relying upon the judgment of the Hon’ble Rajasthan High Court. We further notice that the Hon'ble Jurisdictional High Court in the case of Sesa Goa Ltd. v/s JCIT, [2007] 294 ITR 101 (Bom.), held the similar view. In view of the aforesaid, we see no legal infirmity in the impugned decision of the learned CIT(A) and do not warrant us to interfere with the order passed by the learned CIT(A) at the instance of the Revenue. Thus, the Revenue fails on this ground.”

(A.Y: 2011-12) Tata Consulting Engineering Ltd., 10. Respectfully following the said decision, we allow the grounds raised by the assessee. Even in this case, Ld. AR relied on Sesa Goa Ltd., v. JCIT (supra). Ground raised by the assessee is allowed.

Order pronounced on 07.02.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.