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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI LALIET KUMAR & SHRI B.R.R.KUMAR
ASSESSEE BY : Sh. C.S.Anand, CA REVENUE BY : Shri P.V.Gupta, Sr. DR Date of Hearing : 11.04.2019 Date of Order : .04.2019
O R D E R PER LALIET KUMAR, JUDICIAL MEMBER :
This appeal is preferred by the assessee against order dated 27.04.2015 passed by the Ld. CIT (Appeals)-19, New Delhi for assessment year 2012-13 on the following grounds reads as under :- “1. That on the facts of the case and under the law, the ld. CIT(A) has erred in upholding the ld. A.O.’s action to treat certain revenue expenses as capital expenditure, to the extent of Rs. 9,74,956/-. ./2016 (Narendre Kumar Chopra)
2. That on the facts of the case and under the law, the ld. CIT(A) has erred in sustaining the addition of Rs. 87,560/- made by the ld. A.O. u/s 14A. 3.That on the facts of the case and under the law, the ld. CIT(A) has erred in sustaining the disallowance of Rs. 4,37,450/- made by the ld. A.O. u/s 40A(3).
4. That on the facts of the case and under the law, the ld. CIT(A) has erred in not fully allowing the expenses incurred / claimed under the head Festival Expenses.
5. That on the facts of the case and under the law, the ld. CIT(A) has erred in not fully allowing the expenses incurred / claimed under the head office Décor & Other expenses, Office Furnishing Expenses, Entertainment Expenses, Hospitality Expenses and Business Marketing Expenses. The ld. CIT(A) had failed to appreciate that in the immediately preceding year, no disallowance was made out of office Décor & Other Expenses, Office Furnishing Expenses, and Business Marketing Expenses.
6. That on the facts of the case and under the law, the ld. CIT(A) has erred in not fully allowing the expenses incurred / claimed under the head telephone and cellular expenses.”
It was submitted by the Ld. AR that the assessee not pressing the ground No. 2, 4, 5 and 6 before tribunal and is only was made by the Ld. AR for the assessee court file in this regard.
We will first consider the 1st ground raised before us which 2. is with respect to certain expenditure incurred & claimed as revenue expenditure by the assessee, however, ld AO treated it as capital expenditure. Ld. AR submitted that the expenditure were incurred by the assessee on POP, electric wiring, marble flooring, false ceiling, gate and grill. It was submitted by the Ld. AR that expenditure incurred by the Assessee were in the nature of repair and renovation of the existing work and no new capital asset came into existence on account of their expenditure. It was further submitted that the premises in which the work was done is leased premises and this repair and renovation of the premises was necessary with a view to cater to the needs of the high-profile client to whom the assessee was providing the legal/paralegal services. It was submitted that there expenditure were not in the nature of capital expenditure and were in the nature of revenue expenditure.
On the other hand the Ld. DR for revenue submitted that the case of the assessee falls under the explanation to section 37 of the Act and therefore the expenditure incurred by the assessee is nature.
We have heard the rival contention of the parties and perused the material available on record and the Judgments relied upon by the parties before us.
The expenditure incurred by the assessee are primarily in the nature of renovation of the existing premises which is apparent from the nature of the Head of expenses under which the expenditures were incurred namely Plaster of Paris, false ceiling, fixation of gate, putting marble slabs etc. By incurring such expenses, no new capital assets came into existence rather the assessee would be able to use the existing assets more effectively & commercially ( i.e leased premises & Office). Further the expenditure incurred by the assessee was wholly and exclusively for doing with business / profession of rendering of legal services for which Assessee had renovated / repaired the existing office keeping in mind the requirement of clients of Assessee , hence these expenses are required to be treated as revenue nature rather than capital nature. Hence considering the totality of circumstance and legal submissions raised before us by the assessee, the Ground we allow ground No. 1 of the assessee appeal.
The ground No. 3 of the assessee appeal pertains to the disallowance made by the assessing officer and confirmed by the CIT(A) for Rs. 4,37,450 on account of violation of section 40A(3) .
In this regard it was submitted by the AR that the expenditure was incurred by the assessee a week prior to the Festival of the Diwali , for the purchase of Mobile Hand sets slated to be given to employess and associactes on the occasion of Diwali , further there was on going scheme given by the agent, AND there was no bank working day prior to Diwali so as to enable the assessee to pay the amount by cheque or by RTGS. Further it was submitted that for buying the mobile phone on the festival season the assessee or any other person were required to pay the amount in cash so as to enable the assessee to have early delivery of the apparatus. In these facts the expenditure were incurred in cash. It was the case of Assessee though the amount was incurred by the assessee was more than 20,000 but on account of above necessity expenditure was incurred in cash.
On the other hand the DR had submitted that there is a violation of section 40 A (3) of the act and therefore the assessee is provision is to curb the expenditure made in cash, beyond the ceiling limit.
We have heard the rival contention of the parties and perused the material available on record and the Judgments relied upon by the parties before us. Undoubtedly purchases were made through the agent, as the purchase are likely to get more discount to the buyer, if purchased from the agent . In the present case, the purchases were made in cash through bills / vouchers and details were also submitted to the authorities. The authorities have not doubted veracity, legality or genuineness of the bills received by the assessee on A/c of purchase of Marble. It is also not disputed that the bills were received during the festival season and considering the human probabilities and likelihood of purchasing the apparatus in cash on account of festival pressure, we do not find any infirmities in the conduct of the assessee however considering the fact that assessee being large company, and is supposed to know the law and is also expected to arrange its affair, in advance, in an anticipation of the festival, hence it is not expected from the assessee to incur the expenditure in cash at the 11th hours of the festival. However considering that the revenue and also the fact that the invoices were raised prior to the festival season. We feel that this issue of incurring the expenditure in cash is required to be partly allowed and accordingly we restrict the disallowance to an amount of Rs. 1 lakh only on lump sum basis and hence the assessee gets the relief of Rs. 3,37,450/-.
In the result the appeal of the assessee is partly allowed.
Order pronounced in open court on this 12th April, 2019.