ACIT, TIRUNELVELI vs. M/S. RM. K.V. SILKS, TIRUNELVELI

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ITA 2705/CHNY/2016Status: DisposedITAT Chennai07 March 2022AY 2012-133 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the renovation and repair expenses were revenue in nature, considering the leased property and the purpose of attracting customers. It also held that delayed payment of employees' contribution to welfare funds, made before the due date of filing the return, was allowable.

What were the facts?

The revenue appealed against the ITAT's earlier order, which had dismissed their appeal. The appeal was recalled to adjudicate two grounds: renovation/repair expenses treated as capital expenditure and disallowance under Section 36(1)(va). The assessee incurred expenses for renovation and repair of a leased property to attract customers.

What were the issues?

Whether renovation and repair expenses on a leased property are capital or revenue expenditure, and whether delayed payment of employees' contribution to welfare funds is allowable if paid before the return filing due date.

Which sections of the Income-tax Act were involved?

Section 36(1)(va)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Shri R. Vijayaraghvan (Advocate) – Ld. AR
For Respondent: Shri P. Sajit Kumar (JCIT) –Ld. DR

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

1.

Aforesaid appeal by revenue is a recalled matter since the appeal was dismissed vide common order dated 26.07.2017. However, the order was recalled for limited purpose vide MP No.398/Chny/2017 dated 12.10.2018 since two grounds raised by the revenue were not 2 - adjudicated. These were-(i) Renovation / repair expenses treated as capital expenditure- Rs.118.26 Lacs & (ii) Disallowance u/s 36(1)(va). The same are adjudicated as under: - 2. Nature of renovation / repair expenses The assessee being resident firm is stated to be engaged as retailer of silk goods. It incurred expenses in the nature of general stores changes, additional gondolas fittings, room alteration, civil and interior work etc. The same were claimed as revenue expenditure. However, Ld. AO held that the same were towards creation of new assets and therefore, the same was disallowed. During appellate proceedings, it was submitted that the expenditure was incurred on a leased property for smooth conduct of the business as the property could not be put to use for business purposes as such. Expenses such as reflooring, painting of walls, false ceiling, temporary wooden structures were incurred to produce the right ambience to attract customers. Therefore, the same were revenue expenditure as held by Tribunal in assessee’s own case for AY 1995-96 as well as for AYs 2006-07 to 2009-10. The revisional jurisdiction on this issue for AYs 2002-03 & 2003-04 was also quashed by the Tribunal on the ground that the expenditure was revenue in nature. Concurring with the same, Ld. CIT(A) allowed the expenditure against which the revenue is in further appeal before us. We find that the fact that similar issue, in other years, has been held by Tribunal in assessee’s favor, remain undisturbed before us. Even otherwise, we note that the expenditure has been incurred on leased property to produce the right ambience to attract customers. Therefore, the expenditure would be revenue in nature. Respectfully following the consistent view of the Tribunal, we dismiss this ground raised

by the revenue.

3. Disallowance u/s 36(1)(va) The assessee delayed the payment of employees’ contribution to welfare funds for Rs.0.79 Lacs and therefore, the same were added back to assessee’s income u/s 36(1)(va). The Ld. CIT(A) deleted the same since the payment was made well before due date of filing of return of income. Aggrieved, the revenue is in further appeal before us. We find that this issue is covered in assessee’s favor by the decision of Hon’ble High Court of Madras in CIT v. Industrial Security & Intelligence India (P.) Ltd. [TCA No. 585 of 2015, dated 24-7-2015]. Therefore, finding no infirmity in the impugned order, on this issue, we dismiss the ground raised by the revenue.

4. The appeal stands dismissed.

Order pronounced on 07th March, 2022.

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