DR. S.S.LAKSHMANAN,CHENNAI vs. ACIT, CHENNAI

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ITA 297/CHNY/2017Status: DisposedITAT Chennai25 September 2017AY 2011-124 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since no structural changes were made and the building remained the same, the expenditure was in the revenue field and not capital in nature. Therefore, the disallowance made by the lower authorities was not upheld.

What were the facts?

The assessee, running a hospital for over 30 years in a leased property, incurred expenditure for renovating parts of the premises like flooring, false ceiling, and fittings. The Assessing Officer treated this as capital expenditure, while the assessee claimed it as revenue expenditure.

What were the issues?

The key issue was whether the expenditure incurred for renovating a leased hospital premises constituted revenue or capital expenditure.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

For Respondent: Ms. S. Vijayaprabha, JCIT
Hearing: 25.09.2017Pronounced: 25.09.2017

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -5, Chennai, dated 11.05.2016 and pertains to assessment year 2011-12.

2.

The only issue arises for consideration is disallowance of expenditure incurred by the assessee for renovating the leased hospital premises.

3.

Shri M. Karunakaran, the Ld.counsel for the assessee, submitted that the assessee has taken a property on lease 30 years ago. During the year under consideration, the assessee incurred certain expenditure for renovating the building. According to the Ld. counsel, the expenditure was incurred by the assessee for replacing flooring, false ceiling, bathroom fittings, electricals fittings, etc.

These expenditures were claimed as revenue expenditure while computing the total income. However, according to the Ld. counsel, the Assessing Officer disallowed the expenditure on the ground that they are capital expenditure. According to the Ld. counsel, no structural change was made, building remained the same and the building was made fit for continuing the profession of the assessee.

According to the Ld. counsel, the hospital should be maintained in a clean and good sanitary conditions so that the patients would like to visit the hospital for treatment.

4.

On the contrary, Ms. S. Vijayaprabha, the Ld. Departmental Representative, submitted that the expenditure incurred by the assessee on lease building gives an enduring benefit to the assessee. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

5.

We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee took a premises on lease and is running a hospital for more than 30 years. The assessee has now incurred certain expenditure for changing the flooring, false ceiling, electrical fittings, etc. No structural change has been made. No new construction has been made. Therefore, this Tribunal is of the considered opinion that the expenses incurred by the assessee are in revenue field. Therefore, it cannot be construed as capital expenditure. In view of this, we are unable to uphold the orders of the authorities below. Therefore, the orders of both the authorities below are set aside and the addition made by the assessee is deleted.

6.

In the result, the appeal filed by the assessee is allowed.

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