ACIT, NEW DELHI vs. M/S. ROCKWELL AUTOMATION INDIA PVT. LTD., DELHI

The facts in brief are that the assesse had debited sum of Rs.4,00,17,141/- on account of leasehold improvements. During the course of assessment proceedings, the assesse was asked to justify allowability of 100% depreciation claimed on leasehold improvement. In response it was submitted that the assesse had incurred leasehold expenditure in the nature of interior and electrical works in leasehold office premises. The assessee claimed the said expenditure as revenue in nature as the company did not obtain any enduring benefit and such expenses were not in the nature of capital expenses. The nature of these expenditure is of repairs of internal layouts such as repairing of floors, plastering & painting of walls, redoing of roof plastering & false ceiling, and to improve the internal aesthetics and ambience of office premises taken on rent, so that business office space becomes worthy of business occupancy and thereby provide safety & proper working condition for employees. Such expenditure does not fall within the meaning of capital expenditure. The details of leasehold improvements during the year were furnished. After considering the enduring benefit and that improvements were addition to asset, the expenditure was treated by the AO as capital expenditure and depreciation was granted @ 10% on Rs.54,86,620/- and 5% on Rs.3,45,30,521/- which comes to Rs.5,48,662/- and Rs.17,26,526/-, respectively. Hence, depreciation amounting to Rs.22,75,188/- was allowed and addition of remaining Rs.3,77,41,953/- was made. For the above disallowances made, the penalty proceedings u/s. 271(1)(c) were initiated. The said addition however stood confirmed by the ITAT.

Before the ld. CIT (A) it was submitted that the Tribunal in assessee’s own case for the Assessment Year 2006-07, precisely on the same issue on account of similar addition of leasehold improvement which was claimed as Revenue expenditure and treated as capital in nature by the Assessing Officer has deleted the said penalty. Ld. CIT (A) following the said order of the Tribunal dated 27.07.2012 has deleted the penalty.

After hearing both the parties, we find that precisely on the same reasoning penalty has been deleted in assessee’s own case for the Assessment Year 2006-07 by the Tribunal in the following manner: “We have heard the rival submissions of both the parties and have gone through the material available on record. We have noted that assessee had furnished all the particulars of income and specifically to cover up the point of revenue or capital expenditure, the assessee vide point no.9 of Notes to computation of income had brought the fact before AO. The expenditure claimed by the assessee as revenue expenditure and held by AO as capital expenditure is a matter of opinion and courts had given different opinions in respect of such items at different opinions in respect of such items at different times. So we can say with certainly that expenses claimed by the assessee as revenue expenditure was based upon the nature of expenses and assessee had relied upon various judicial pronouncements in support of its claim and from any angle it cannot be said that assessee had furnished inaccurate particulars of income. The facts of the case law relied upon by CIT(A) relating to CIT v. Zoom Communication Pvt. Ltd. (supra) are not comparable with the facts of present case as in that case there was no difference of opinion with regard to amounts debited by the assessee in its P&L a/c which were income tax & equipment written off and which were not clearly allowable whereas in the present case it was a clear case of difference of opinion with respect to claim of assessee. Mere non filing of appeal by assessee against the additions made by AO cannot be said to be admission by assessee of having submitted wrong claim. In view of the above, we are of the considered opinion that penalty imposed by AO and upheld by the Ld. CIT (A) is not justified.”

Since there is no change in the facts and circumstances of the case, following the same precedence, we confirm the deletion of penalty and accordingly, Revenue’s appeal is dismissed.

In Cross Objection, the assesse has challenged the penalty on technical grounds that Assessing Officer in the show-cause notice has not specified the charge under which limb he is initiating penalty proceedings. Since he has already deleted the penalty, therefore, the grounds raised in the Cross Objection have become purely academic and same is treated as infructuous. 7. In the result, the appeal of the Revenue as well as the Cross Objection of the assesse is dismissed. Order pronounced in the open Court on 31st July, 2019.