SMART CARD IT SOLUTIONS LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1(2), PUNE

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ITA 2898/PUN/2017Status: DisposedITAT Pune10 March 2022AY 2012-133 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that expenditure incurred on furniture and interior decoration in rented premises cannot be treated as revenue expenditure. Therefore, the order of the CIT(A) was found to be justified.

What were the facts?

The assessee claimed furniture and interior decoration expenses for its Bombay office as revenue expenditure. The AO treated these expenses as capital in nature and allowed depreciation, which was confirmed by the CIT(A).

What were the issues?

Whether expenditure on furniture and interior decoration in a leasehold property can be treated as revenue expenditure.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI

For Respondent: Shri S.P. Walimbe

आदेश / ORDER

PER S.S. VISWANETHRA RAVI, JM :

1.

This appeal by the assessee against the order dated 30-06-2017 passed by the Commissioner of Income Tax (Appeals)-4, Pune [„CIT(A)‟] for assessment year 2012-13.

2.

We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex-parte. Therefore, we proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record.

3.

The assessee raised two grounds of appeal amongst which the only issue is to be considered is as to whether the CIT(A) is justified in confirming the addition made by the AO on account of repairs and renovation expenditure towards leasehold property in the facts and circumstances of the case.

4. Heard ld. DR and perused the material available on record. The assessee claimed furniture and interior decoration expenses for its Bombay Office as revenue expenditure to an extent of Rs.64,03,090/-. The AO held there was no logic to claim revenue expenditure and the expenditure claimed is capitalized and denied the claim of assessee on account of revenue expenditure but however allowed depreciation @ 5%. The CIT(A) observed that the assessee itself claimed other part of expenditure as capital and there was no explanation by the assessee as to why the expenditure on furniture and interior decoration is revenue in nature and confirmed the order of AO. The assessee contended before the AO that an amount of Rs.64,03,090/- is claimed as revenue expenses out of total expenditure of Rs.1,18,60,851/-. Further, it was also contended the expenditure to some extent was capitalized. We note that the assessee‟s only contention is that the interior decoration expenses in its Bombay Office cannot be removed from lease premises and sought to be claimed as revenue expenses. We find no merit in the contentions as made by the assessee before the AO and CIT(A) that in view of the settled position that the expenditure incurred on rented premises cannot be treated as revenue in terms of provisions of Explanation 1 to section 32 of the Act. The AO by treating the said expenses as capital in nature and allowed depreciation also. Further, we note that the assessee contended through grounds raised before us that the CIT(A) without appreciating the repairs and renovation expenses confirmed the order of AO. We find that the said contention is contrary to the explanation offered to AO in the assessment proceedings which is at Page No. 3 of the assessment order that the assessee incurred expenses to an extent of Rs.64,03,090/- in terms of addition to its Bombay Office in respect of furniture and interior decoration. Therefore, following the legal position that the expenditure incurred on rented premises in terms of furniture and interior decoration repairs and renovation cannot be treated as revenue. Thus, we find no infirmity in the order of CIT(A) and it is justified. Thus, the ground Nos. 1 and 2 raised by the assessee are dismissed.

5.

In the result, the appeal of assessee is dismissed.

Order pronounced in the open court on 10th March, 2022.

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