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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The Assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-5, Chennai, in dated 27.12.2018 for the assessment year (AY) 2015-16.
2 -: 2. M/s. G.P Strategies India Pvt. Ltd., the assessee, is engaged in the business of training and technical services. While making the assessment for AY 2015-16, the Assessing Officer (AO) found that the assessee had written off Rs. 71,93,801/- as leasehold improvements.
The assessee submitted that it shifted its office premises from Annamalaipuram to Kandhanchavadi in Old Mahabalipuram Road on a leased premises and it spent them towards materials purchased for the interior decoration and other electrical installations to accommodate all work stations and staff. The AO held that though initially, the lease was for a period of three years, the assessee had renewed the lease after three years and the offices are presently functioning from there only.
Therefore, he held that there is an enduring benefit and hence the impugned sum has to be capitalized. Accordingly, he granted depreciation @ 10% on the sum and disallowed the balance sum of Rs. 64,74,421/-. Further, the AO found that the assessee purchased software for the use of its business and claimed depreciation @ 60% which was categorized as an intangible asset. Therefore, the AO held that this asset is eligible for depreciation @ 25% accordingly disallowed the balance 35% and completed the assessment. Aggrieved, the assessee filed an appeal before CIT(A). The ld. CIT(A) dismissed the appeal.
Aggrieved against that order of ld. CIT(A), the assessee filed this appeal.
3 -: 3. The case was heard through video conferencing. The ld. AR inviting our attention to page No.10 of the paper book submitted that the Ld. CIT(A) did not consider revenue expenditure, per se, and erred in holding that the repairs and renovation expenses incurred on the leased premises as capital expenditure. On the restriction of depreciation claim on the computer software, inviting our attention to the relevant entry under old appendix I Clause III(5) and relying on the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Computer Age Management Services (P.) Ltd. [2019] 109 taxmann.com 134 (Mad.) submitted that the appeal may be allowed. Per contra, the ld. DR submitted that the Ld. CIT(A) on examination of relevant material upheld the capitalization of expenditure and allowance of depreciation and on the 60% depreciation claim, the assessee has not placed relevant material before the Ld. CIT(A) and thus supported the orders of the lower authorities.
We have heard the rival submissions and gone through the relevant material. It is seen from the assessment order that the AO decided the issues cryptically. Though the assessee submits that it has placed relevant material before the lower authorities, it is clear that the assessee has not clarified before the lower authorities which are the items in its view are revenue expenditure, per se, and which items of 4 -: expenditure could be considered for capitalization etc. Similarly, the nature of software purchased, its use, basis of assessee’s treatment in the books etc. are not examined and brought on record by the lower authorities. The Ld. CIT(A) records a finding on the first issue, however on the second issue holds that necessary material is not placed before him. In the facts and circumstances, we deem it fit to remit these issues back to the AO for a fresh examination. The assessee shall lay relevant evidence/material in support of its contention before the AO and comply with his requirements in accordance with law. The AO on due examination after affording due opportunity to the assessee and on due consideration of the Hon’ble Jurisdictional High Court’s decision supra, would decide the issues in accordance with law.
In the result, the appeal filed by the assessee is treated as partly allowed.