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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
These two appeals are filed by Revenue against the common order of the Commissioner of Income Tax (Appeals)-2, Chennai dated 19.09.2016 for the assessment years2010-11, 2011-12 and 2012-13. Since, the issue involved in :-2-: I.T.A. N0. 3223 & 3224/Mds/2016 these appeals are common in nature, they are clubbed together, heard together and disposed off by this common order for the sake of convenience.
The common grounds of appeals are extracted as under:
2.1 The Learned CIT(A) erred in holding that the expenditure incurred on interior decoration of Show Rooms, involving huge sums are allowable as revenue expenditure/temporary partitions eligible for 100% depreciation, without appreciating the fact that the modifications effected provides enduring benefit to the assessee and further the interiors are not temporary structures, but capable of lasting for many years? 2.2 The Learned CIT(A) ought to have appreciate the fact that the interior work involving designing of showrooms with electrical installations and the material used therein have an enduring value and enduring benefit for enhancement of assessee’s business activity and are akin to Capital asset under “Furniture and Fittings” only. 2.3 The learned CIT(A) failed to appreciate the fact that in the books of accounts the assessee had claimed depreciation at 10% only on such interior decoration, and only for the purpose of computation of total income, the assessee has claimed depreciation at 100% from which it is evident that the assessee has claimed deduction under the I.T. Act only to diminish the tax burden. 2.4 The learned CIT(A) ought to have appreciated the decision of the Hon’ble Apex Court in the case of CIT Vs. Sri Mangayarkarasi Mills P Ltd (224 CTR 513 (SC), rational of which is squarely applicable to the facts of this case with regard to differential treatment of expenditure for the purpose of profit in the books and for the purpose of Income-tax, in the income computation statement.
:-3-: I.T.A. N0. 3223 & 3224/Mds/2016
2.5 The learned CIT(A) erred in applying the decision of the Hon’ble ITAT relating to the earlier years (2008-09 to 2010-11), wherein the Hon’ble ITAT had relied on the Jurisdictional High Court whereas the facts of this case are distinguishable from the facts that of M/s. Armour Consultants Private Limited in as much as in the present case, the assessee had treated the interior decoration as capital in the books for the purpose of profit, with a claim of 10% depreciation, whereas for the purpose of Income-tax, the interior decoration was treated as temporary partitions eligible for 100% depreciation, and such a differential treatment was not involved in the relied decision of the Hon’ble High Court in the case of M/s. Armour Consultants Private Limited.
Shri N. Raghunath, the assessee, an individual, is a retailer in readymade garments in the name of M/s. Vaishnavis, M/s. Narayans, M/s. Vinayas, M/s.
Viswarags. In the assessments made for the assessment years 2011-12 and 2012-13, the assessee claimed Rs. 2,15,27,833/- and Rs. 2,00,36,508/- in the respective years 100% depreciation on temporary wooden structures, although, in the books of account he had claimed depreciation @ of 10% only. The temporary wooden structure is nothing but interior decoration effected to the buildings and showrooms in which the assessee is carrying on readymade garment business. The nature of expenses and the major heads of expenses incurred were false ceiling work, tiles, carpentry work, woods & plywoods, painting, interior work and toughened glass in the leased premises. The AO held that the interior decoration which may include partition, false ceiling etc., would give enduring benefits to the assessee and as these structures are never
:-4-: I.T.A. N0. 3223 & 3224/Mds/2016 dismantled at regular intervals. Placing reliance on the decision of the Hon’ble ITAT, Chennai in & 1558/Mds/2011 dated 03.01.2013 in the case of M/s. A B T Ltd. Vs. ACIT and the Supreme Court’s observation in the case of CIT Vs. Mangayarkarasi Mills Pvt. Ltd., (224 CTR 513) (SC), the AO treated the expenditure as capital in nature and allowed depreciation @ of 10%.
4. Aggrieved, the assessee filed an appeal before the CIT(A)-2, Chennai. The CIT(A) held that identical issue arose for consideration in the appellant’s case for assessment year 2008-09, 2009-10 and 2010-11 in 236 & 237/CIT(A)-2/2014-15, in which she uphold the appellant’s claim that the nature of interior works carried out in the various premises taken on lease to bring the showroom into existence are in the nature of revenue expenditure and allowed these appeals. The revenue filed appeals before the Hon’ble ITAT, Chennai against these orders. The Jurisdictional ITAT vide order dated 29.06.2016 in ITA No. 2280, 2281 & 2282/Mds/2015 dismissed the appeals of the revenue, confirming the CIT(A) order. In view of that, she held that the expenditure incurred on lease premises on temporary wooden structure (interior decoration) for assessment years 2011-12 & 2012-13 at Rs. 2,15,27,833/- and Rs. 2,00,36,508/- are revenue expenditure. Aggrieved, the Revenue filed these appeals.
5. The DR argued the case on the lines of the Assessing Officer and on the grounds of appeal. Contra, the AR invited our attention to the CIT(A) order in :-5-: I.T.A. N0. 3223 & 3224/Mds/2016 , 236 & 237/CIT(A)-2/2014-15 dated 30.09.2005, wherein the CIT(A) relying on the following decisions
a) CIT Vs Ayesha Hospitals P. Ltd (2007) 292 ITR 266 (Mad) b) Thiru Arooran Sugars Ltd. Vs. DCIT (2013) 350 ITR 324 (Mad) c) CIT Vs Armour Consultants P. Ltd (2013) 355 ITR 418 (Mad) d) CIT Vs. Amrutanina Ltd. (2011) 15 Taxmann.com 392 (Mad) e) M/s. Sundaram BNP Paribas Asset Management Company Ltd. Vs.
ACIT & 519/Mds/2010 f) M/s. Emdee Apparels Vs. ACIT (2012) 28 Taxmann.com 10 (Bang.) and on a detailed order allowed the appeal after distinguishing the case of M/s. A B T Ltd. The CIT(A) while allowing the appeal took cognizance of how the Jurisdictional High Court discussed and distinguished the case of CIT Vs. Sree Mangayarkarasi Mills P Ltd, 224 CTR 513 (SC) in CIT Vs. Armour Consultants P Ltd in 355 ITR 418 (Mad). Further, the AR sought our attention to this Tribunal decision in 2281 & 2282/Mds/2015 dated 29.06.2016.
6. We heard the rival submissions and gone through the material. The relevant portion of the order of the ITAT, (supra) is extracted as under:
We have heard both the parties and perused the material on record. We have carefully gone through the order of the Ld. CIT(A). In our opinion, the issue is squarely covered in favour of the assessee by the judgment of jurisdictional High Court in the case of CIT Vs. Armour Consultant (P) Ltd. reported in (2013) 355 ITR 418(Mad.) wherein held that:-
:-6-: I.T.A. N0. 3223 & 3224/Mds/2016
The expenditures were made by the assessee mainly towards charges for design, layout and material construction, fabrication works. Both the appellate authorities had pointed out that the assessee-company was required to incur such expenditure for providing partitions, vinyl flooring and the interior decoration in order to provide business ambience and achieve functional utility. The Commissioner of Income-tax (Appeals) had specifically pointed out that the expenditure made by the assessee to make the premises more useful and enhance its functional utility will not come under the purview of capital expenditure and by following the decision of this court reported in CIT v. Sanco Trans Ltd. [2006] 284 ITR 51 (Mad) the Commissioner (Appeals) found that those expenditures areto be allowed only as a revenue expenditure… and also held that the assessee was only a lessee in respect of the premises in which it was setting up its office at Mumbai. The lease period was 30 months. The deduction was sought in respect of the expenses made towards designing and lay out as well as other temporary partition and construction made for making the office functional. Therefore, the expenditure on setting up of a new office at Mumbai of Rs.57,25,036 was allowable as revenue expenditure.
Being so, in our opinion the CIT(A) has taken correct view of the facts of the case and decided that the expenditure incurred on leased premises on temporary wooden structure (interior decoration) is a revenue expenditure. Accordingly, the ground raised by the Revenue in all these appeals is dismissed.
:-7-: I.T.A. N0. 3223 & 3224/Mds/2016
In the result, all the three appeals of the Revenue are dismissed.”
Since this Tribunal has examined the impugned issue in this case in the earlier years and allowed the appeals and when there is no change in fact or in law, following the above decision, the appeals of the revenue for assessment years 2011-12 & 2012-13 are dismissed.
In the result, the revenue’s appeals are dismissed.
Order pronounced on Wednesday, the 07th day of June, 2017 at Chennai.