GEM HOSPITAL AND RESEARCH CENTRE PRIVATE LIMITED ,COIMBATORE vs. ACIT CORPORATE CIRCLE 2 , COIMBATORE

This is an appeal filed by the assessee , directed against the order of the Commissioner of Income Tax (Appeals) 1, Coimbatore, in dated 30.03.2017 for the assessment year 2014-15.

M/s. Gem Hospital and Research Centre Private Limited, Coimbatore had taken two adjacent buildings on lease at Tiruppur, which were also used for running hospital, incurred ₹.43,66,888/- and claimed them under the head “repairs & maintenance” of the building. While making the assessment 2 I.T.A. I.T.A. No. I.T.A. I.T.A. No. No.1620 No. 1620 1620/M/1 1620 /M/1 /M/17 /M/1 for the assessment year 2014-15, after examining the issue, the Assessing Officer held that the impugned expenses are having enduring benefit to the assessee and hence, disallowed them treating it as capital expenditure.

Aggrieved, the assessee filed this appeal, By its revised grounds, it challenged the decision of the ld. CIT(A)’s on this issue alone. The ld. AR submitted that the assessee, in order to establish a branch hospital at Thiruppur, took a property on lease for a period of 59 months. As per the lease deed, the assessee has to carry out all the repairs at its cost and in order to make the building suitable for running the hospital, it spent ₹.43.67 lakhs in carrying out various expenses viz., false ceiling, painting, replacement of flooring tiles, glass doors, plastering of walls, carpentering, interior decoration, etc. All these expenditures were incurred at a rented building, which was taken on lease for a very short period of 59 months i.e., less than five years. The nature of expenditure itself clearly showing that it is of revenue in nature and no new capital asset came into existence. The ld. CIT(A) failed to take note of the facts that the assessee was permitted by the lesser to carry out the alteration and interior decoration work to the building at its cost and the assessee was required to handover the building with them on expiry of lease period. Further, the assessee merely effected 3 I.T.A. I.T.A. No. I.T.A. I.T.A. No. No.1620 No. 1620 1620/M/1 1620 /M/1 /M/17 /M/1 necessary repairs, modification and alterations to the leased building for making it suitable for running the hospital and no new structure was built and no plinth area was added to the existing building. In this regard, the assessee took us through the paper book and relied on the Jurisdictional High Court decisions in the case of Thiru Arooran Sugars Ltd. v. DCIT [2013] 31 taxmann.com 3 (Mad) and CIT v. Ayesha Hospitals (P.) Ltd. [2007] 292 ITR 266 (Mad). The ld. AR submitted that the ratio laid in the case of CIT v. Ayesha Hospitals (P.) Ltd. (supra) perfectly applies to this case. Per contra, the ld. DR supported the orders of lower authorities.

We heard the rival submissions and gone through the relevant materials. The undisputed facts are that the assessee has taken the buildings on lease for a short period of 59 months and incurred the impugned expenditure to make it suitable for running the hospital. On expiry of the lease period , the assessee was required to handover the buildings with them. The nature of expenditures are such as false ceiling, painting, replacement of flooring tiles, glass doors, plastering of walls, carpentering, interior decoration, etc. By incurring them, the assessee has not created any new capital asset for itself, the benefit of it could be reaped over a period so that one can say that there is an enduring benefit for the assessee. They were incurred probably for making the hospital workable. Thus, the claim made by the assessee falls within the ratio laid 4 I.T.A. I.T.A. No. I.T.A. I.T.A. No. No.1620 No. 1620 1620/M/1 1620 /M/1 /M/17 /M/1 down by the Hon’ble Jurisdictional High Court in the case of CIT v. Ayesha Hospitals (P.) Ltd. (supra) and accordingly, its appeal is allowed.

In the result, the appeal of the assessee is allowed.