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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
The assessee’s appeals for assessment years 2007-08, 2008-09 & 2009-10 and the Revenue’s appeal for the assessment year 2009-10 are directed against the respective orders of the Commissioner of Income Tax (Appeals), Central-I, Chennai. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.
The first common issue arises for consideration is with regard to valuation of closing stock.
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee is valuing the closing stock at cost or realizable value, whichever is less, when the substantial portion of the old stock was lying as on 31st March of relevant assessment year. After examining the market condition and the quality of the old stock, the assessee estimates the realizable value on the market in respect of the old stock. The estimation made by the assessee with regard to realizable market value on the old stock amounts to 50% in the second year and 25% of the original cost in the third year it was considered as very old stock and the same was valued at `100/- per item in order to prevent pilferage. The assessee, in fact, undertook this exercise from time to time at the end of the financial year. The value assigned for the old stock on the basis of the realizable market condition, was continuously valued year after year. The assessee has not changed the method of valuing the closing stock. The assessee’s estimation of realizable market value of these stocks are substantially found to be correct whenever the old stocks are sold and net realized valued was taken as raised in the books of account. According to the Ld. counsel, every valuation of stock will have the consequence of postponing the profit or loss to the year of sale of such stock which is inevitable and unavoidable depending upon whether the sale price realized is more or less than the estimated value of the closing stock. According to the Ld. counsel, the realizable market value of the stock was based upon the assessee’s perception which was gained over a period of time in the business. According to the Ld. counsel, valuation of closing stock at the realizable market value is one of the methods permitted under the provisions of Income-tax Act.
2009-10, more particularly at para 6 and 7, the Ld.counsel for the assessee submitted that the Assessing Officer himself admitted that there is no inventory of individual break up of physical stock identified with reference to by-numbers made out on the date of search. Therefore, it is not possible at this point of time to verify with the items with specific by-numbers formed part of the physical inventory on the date of search but subsequently either sold before 31.3.2009 or continue to remain unsold as on 31.03.2009. In view of the admission made by the Assessing Officer that there is no inventory of breakup of individual stock identified with reference to by-numbers, according to the Ld. counsel, it is not possible for the Assessing Officer to examine the same. The Ld.counsel further submitted that the experience gained by the assessee over the period of time in the business cannot be just brushed aside by the Assessing Officer and determine value of closing stock. According to the Ld. counsel, unless the stocks were sold within four years period, the realizable value would be very less than the cost price.
Therefore, in order to avoid pilferage, the old stocks were valued at a price of ` 100/-. The Ld.counsel further submitted that the assessee is the right person to value the material remains unsold Officer cannot just ignore the valuation made by the assessee based upon the experience in the business.
On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that there was search in the premises of the assessee on 17.02.2009. During the course of search operation, the closing stock valued as per the books of account as on 17.02.2009 was `20,15,05,458/-. However, the physical inventory for stock was found to be less as compared to the stock as per books of account to the extent of `1,27,64,281/- for the assessment year 2009-10. The managing partner Shri Shiva Kumar was examined by the Assessing Officer. He admitted that there was an error in the figure declared in the books of account.
One Shri Ponanand was also examined in respect of the stocks found at Tirunelveli branch of the assessee. However, he did not agree to the difference found during the course of search operation, in the stocks. Post search investigation was made by the Assessing Officer. At the time of inventory, stock with specific by-numbers lying unsold was not included in the physical stock taken on the date of search and the stock with specific by-numbers sold assessee claimed before the Assessing Officer that if the above claims are considered, the excess stock would come only to `35,96,618/-. The Assessing Officer, after examining the claim of the assessee, found that the veracity of claim made by the assessee cannot be tested at this point of time. Therefore, the explanation of the assessee is only an afterthought. Accordingly the Assessing Officer determined the deficit stock at `1,09,82,464/- at Chennai branch of the assessee and the excess stock at Tirunelveli was determined at `29,22,060/-.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee is engaged in textile business and there was search in the premises of the assessee under Section 132 of the Act on 17.02.2009. From the orders of the lower authorities it appears that the physical inventory of stock was taken at the business premises of the assessee at Chennai and Tirunelveli on 17.02.2009. The inventory taken by the Revenue was compared with the books of account and the Revenue authorities found that there was variation between the books of account and the physical inventory taken. At 17.02.2009 was `20,15,05,458/-. The Revenue authorities found that the physical stock was less than what was disclosed in the books of account to the extent of `1,27,64,281/-. Even though the managing partner Shri Shiva Kumar appears to have admitted the stock difference for Chennai and another partner at Tirunelveli branch claimed before the authorities that the stock taken is not correct. The assessee explained before the Assessing Officer that they are in the retail business of textiles and readymade dress.
Over a period of time, the technology and fashion are changing and the model of the dress material is also fast changing. If the assessee could not sell the product within 2-3 years, then in the fourth year there cannot be any value for the products at all. The assessee claimed before the authorities that in the second year, the value of the property was taken at 50% of stock and in third year, it was taken at 25% of stock. The assessee also explained before the Assessing Officer that they are valuing regularly cost or market value, which is less, as per the method approved by the law. From the material available on record, it appears that the assessee has categorized the stock into various categories, such as slow moving 25%, 50% and 100% on notional basis was adopted by the assessee for the purpose of valuing the closing stock. From the orders of the authorities below it appears that silk sarees constitute major segment. At the end of the third year, if the silk sarees could not be sold, the same was valued at `100/- being the realizable market value of the stock. This claim of the assessee appears to have been rejected by the Assessing Officer on the ground that the assessee could not substantiate the claim.
In the textile market, the fashion in dress material is fast changing. If the assessee could not sell the products in the year it was purchased and introduced, the next year the value of the stock may be reduced and the assessee could not sell the products for the same price for which it was targeted in the year of purchase. It is a well settled principle of law that closing stock has to be valued as per the market price or cost whichever is less, at the discretion of the assessee. In this case, the assessee admittedly following the cost or market price, whichever is less, uniformly in all the earlier assessment years. The assessee valuing the realizable value based upon the past experience in the business. The Assessing valuation made. This Tribunal is of the considered opinion that the Assessing Officer is not an expert in textile business. The Assessing Officer unless otherwise has material to suggest that the valuation made by the assessee is not correct, he cannot dispute the valuation made by the assessee. If the textile material could not be sold in the second or third year, then the assessee has to realise the value as per the market condition prevailing at that point of time.
Therefore, when the assessee estimates the market value based upon their experience, the Assessing Officer cannot step into the shoes of the assessee to say that it was not substantiated. If the Assessing Officer finds that the assessee could not substantiate the realizable value estimated, then the Assessing Officer ought to have referred the issue of estimation to the experts in the field to study the market condition of textiles at the relevant point of time before disapproving the claim made by the assessee. Unfortunately, the Assessing Officer has not made any such exercise. This Tribunal is of the considered opinion that the valuation of stock has to be necessarily made on the realizable market value on the basis of the experience in the business. When the assessee valued the old stocks on their past experience, the Assessing Officer cannot have are available on record. In this case, no such material is available on record. Therefore, this Tribunal is of the considered opinion that the Assessing Officer cannot doubt the value made by the assessee. The CIT(Appeals) has confirmed the order of the Assessing Officer on the ground that the assessee agreed for difference on closing stock valuation at the time of search and post search proceeding. However, by a letter dated 10.08.2009, the assessee explained before the Assessing Officer that there was an error in the physical inventory of stocks taken by the Revenue authorities. The assessee specifically claimed that specific by- numbers inventorised as part of year end stock was not included in the inventory taken on the date of search. The stock which was lying unsold with specific by-numbers was also not included in the stock taken on the date of search. So, the assessee’s claim before the authorities below that the stocks lying unsold on the date of search was not taken into consideration by the Revenue authorities.
In fact, the Assessing Officer has observed as follows at page 16 of his order:-
“….There is no inventory of individual break up of physical stock identified with reference to by-numbers made out on the date of search. Therefore, it is not possible at this point of time to verify whether the items with specific by-numbers claimed by the assessee formed part of the physical inventory on the day of search by subsequently either sold before 31.3.2009 or continue to remain unsold as on 31.3.2009…...”
In view of specific observation of the Assessing Officer at page 16 in the assessment order for the assessment year 2009-10, it is obvious that the inventory taken by the Revenue authorities could not be identified with the physical stock with reference to by- numbers. If the Assessing Officer could not identify the stocks with reference to by-numbers, it is not known how the Revenue authorities claim that the stock was taken properly on the day of search. This observation of the Assessing Officer clearly indicates that the stocks were not taken properly as claimed by the assessee.
This Tribunal is of the considered opinion that there is no justification on the part of the Assessing Officer to ignore the old stocks which could not be sold and remain in the stocks on the date of search during the course of inventory. Therefore, this Tribunal is unable to uphold the orders of the authorities below. Accordingly, the orders of the lower authorities are set aside and the entire addition made by the Assessing Officer is deleted. lease commitment charges. This ground of appeal arises for consideration for assessment years 2008-09 and 2009-10.
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that a piece of land, adjacent to the assessee’s show room, was taken on lease for using the same as car park.
According to the Ld. counsel, the land, in fact, belonged to Hindu Religious and Charitable Endowments Department. The tenants of the property agreed to transfer the tenancy in favour of the assessee for an agreed consideration. In order to do the business effectively and for the convenience of the customers who are visiting the assessee’s show room, the assessee was under tremendous pressure to expand the car parking area. The Ld.counsel further submitted that in fact the land in question was dedicated to temples around Tirunelveli. The income from the land was to be spent for performing Pooja in those identified temples.
According to the Ld. counsel, even though the tenants of the landed property agreed for transfer of tenancy in favour of the assessee, the Hindu Religious and Charitable Endowment Department intervened claiming that the tenants have no right to transfer the tenancy right in favour of the assessee. The Ld.counsel further
13 to 1783/Mds/14 I.T.A. No.1874/Mds/14 submitted that the HR&CE Department further clarified that the assessee has to pay donation to the extent of `1 Crore to various temples for taking the property on lease. Having left with no other way, for the purpose of business of the assessee, the assessee has paid a sum of `1 Crore for acquiring the lease holding right over the property. According to the Ld. counsel, the assessee, in fact, paid the amount as directed by the HR&CE Department for acquiring the tenancy right. Accordingly, the lease holding right was transferred in favour of the assessee by lease agreements dated 09.06.2008.
The Ld.counsel for the assessee further submitted that the amount paid to various temples in the form of donation was on the direction of HR&CE Department for acquiring the lease holding right over the landed property. According to the Ld. counsel, the assessee is not acquiring any title over the property. In fact, the payment was made for giving consent by the HR&CE Department to transfer the lease in favour of the assessee by the legal heirs of the erstwhile tenants of the landed property. The Ld.counsel further submitted that the land in question is agricultural land and the tenants of the respective temples were cultivating the land. The original tenants were no more alive and the assessee negotiated transfer the tenancy right in favour of the assessee. Since HR&CE Department claimed that the legal heirs of erstwhile tenants has no right to transfer the lease, the assessee has to pay a sum of `1 Crore to the temples and the same was paid to the temples in the form of donation as directed by HR&CE. Though this payment was in relation to taking the property on lease, the assessee has not acquired any right over the property. This is a payment made as donation to the temples which enabled the assessee to take the adjacent land as lease for using the same as parking area.
Therefore, according to the Ld. counsel, this payment is only for the purpose of business of the assessee and no capital asset was acquired. The lease period was initially for two to three years. The assessee cannot claim any right over the property other than using the land for parking of the customers’ vehicles. Apart from that, the assessee has no right over the property, therefore, according to the Ld. counsel, no capital asset was acquired by the assessee.
Therefore, the authorities below are not correct in saying that the donation was given for acquisition of capital asset.
Departmental Representative, submitted that the land in question to the extent of 69.2 cents was dedicated to the temples around Tirunelveli. The tenancy right was given to one Shri Gopal. On his death, the legal heirs of Shri Gopal transferred the tenancy right in favour of Shri K. Mahesh, who is none other than the partners of the assessee-firm, by a document dated 09.03.2007, for a consideration of `2,43,000/-. Similarly, 82 cents of land was owned by some temples around Tirunelveli and it was given on lease to one Shri Velu. On the death of Shri Velu, his legal heirs transferred the lease holding right to Shri K. Mahesh, for a total consideration of `35,00,000/-, vide registered document dated 04.07.2007.
According to the Ld. counsel, in fact, the lease holding right was transferred in favour of Shri K. Mahesh. After getting respective deeds from the legal heirs of the tenants, the said Shri Mahesh also negotiated with HR&CE Department in order to regularize the lease and consent to make donation to various temples. According to the Ld. D.R., the lease rentals are to be paid in advance to temples.
According to the Ld. D.R., the lease was obtained only by Shri Mahesh, partner of the assessee-firm and not by the assessee-firm itself. Therefore, the payment made by the assessee as donation to Moreover, the tenancy right over the immovable property has to be construed as immovable property acquired by the assessee. Even if it is paid for acquisition of lease right over the immovable property, that has to be necessarily treated as capital in nature. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer treating the payment made by the assessee as capital in nature.
We have considered the rival submissions on either side and perused the relevant material available on record. The subject land in question is an agricultural land and it is adjacent to the show room of the assessee. The assessee claims that the adjacent land is required for assessee’s business for using the same as car park for the customers who are visiting the show room. It is not in dispute that the assessee is engaged in the business of retail textile in the town of Tirunelveli. The adjacent land belonged to various temples and the same was under the control of HR&CE Department, Government of Tamil Nadu. The original tenants of the agricultural land expired and it appears that the assessee negotiated with legal heirs of the original tenants, who in fact executed registered lease deeds in favour of the assessee’s partner the money was paid to the legal heirs of the erstwhile tenants from the account of the assessee-firm maintained at Indian Bank, Tirunelveli Town Branch. Therefore, apparently, the payment was made from the funds of the assessee-firm and the lease deed was executed in favour of Shri K. Mahesh by the legal heirs of the erstwhile tenants of HR&CE Department. It is common knowledge that the tenants of agricultural land under HR&CE Department cannot transfer the land to any other person without the consent of HR&CE Department. Therefore, as rightly contended by the Ld.counsel for the assessee, the HR&CE Department intervened and they directed the assessee to pay donation to various temples.
In fact, the donations were paid to various temples as directed by HR&CE Department. Subsequently, the HR&CE Department directed the Executive Officers of the respective temples to execute lease deed in favour of the assessee. Therefore, it is obvious that the assessee paid money to the legal heirs of the erstwhile tenants of HR&CE Department and obtained registered sale deed. To regularize the lease deed, the assessee in fact paid another sum of `1 Crore to various temples as donation. payment made by the assessee for regularizing the lease obtained from the legal heirs of the erstwhile tenants of HR&CE Department is capital in nature or revenue in nature? We have carefully gone through the conditions imposed by the HR&CE Department for giving the lease of the property, which were extracted at page 13 of the impugned order of the CIT(Appeals). One of the conditions is that the assessee should not sub-lease the land and assessee should use the land only for business. It is also a condition that no permanent structure could be erected. Even the temporary structure was to be erected only with approval. From the above, it is obvious that the assessee cannot use the land other than parking area for customers. The assessee cannot construct any permanent structure on the land. At the best, the assessee can make temporary structure after obtaining necessary approval from HR&CE Department. The assessee has already paid the respective amounts to the legal heirs of the erstwhile tenants. The dispute is with regard to sum of `1 Crore paid to the temples as donation.
This Tribunal is of the considered opinion that the payment of `1 Crore as donation to various temples, as directed by the HR&CE Department, is only to regularize the lease obtained from respective
19 to 1783/Mds/14 I.T.A. No.1874/Mds/14 legal heirs of erstwhile tenants of HR&CE Department. This payment of `1 Crore to various temples as donation is not for acquiring any interest over the immovable property. As it is clear from the orders of the lower authorities that a sum of `2,43,000/- was paid by the assessee-firm for obtaining the lease deed on 09.03.2007. Similarly, another sum of `35,00,000/- was paid by the assessee-firm for obtaining a lease deed on 04.07.2007. The assessee has already paid amounts to legal heirs of erstwhile tenants. What was paid by the assessee as donation to various temples is for subsequent regularization as per direction of the HR&CE Department. Therefore, this Tribunal is of the considered opinion that the payment of donation has to be necessarily treated as revenue in nature. Moreover, the land in question cannot be used for any other purpose other than the business. The assessee cannot put up any permanent structure over the land. In those circumstances, this Tribunal is of the considered opinion that the donation given to various tenants as per the direction of HR&CE Department has to be treated as revenue in nature in the hands of the assessee-firm. This Tribunal is of the considered opinion that the payment of donation is only for the purpose of carrying on the business effectively in the course of earning profit. Therefore, it unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the donations and lease commitment charges as revenue expenditure.
The next ground of appeal is with regard to addition towards stock discrepancy.
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that during the course of search operation, the Revenue authorities found difference in the physical stock and stock as per the books of account. The assessee explained before the Assessing Officer that the difference in physical stock was due to valuation of closing stock. According to the Ld. counsel, when the textile goods cannot be sold for more than two to three years, the value of the same would be reduced considerably, therefore, the assessee valued the same at net realizable value as per the market condition prevailing on the last day of relevant financial year.
However, the Assessing Officer has taken the entire stock value as
per the cost price. According to the Ld. counsel, when the assessee was following a regular method for valuing the closing Officer cannot value the closing stock at cost price. The fashion and design are changing very fast in textile industry. Therefore, if the assessee cannot sell the product in the shop within two years, the same cannot be sold at cost price. The assessee has to necessarily clear the stock by giving discount. When the very old stock are available, the same cannot be sold even after three years.
The Ld.counsel further submitted that the entire stock could be identified by by-numbers given by the assessee. The Assessing Officer, even though claims that an inventory was taken at the time of search, he confesses in the assessment order that it is not possible to verify the items with specific by-numbers. According to the Ld. counsel, the difference was due to valuation of stock remain unsold for two / three years on the net realizable value estimated by the assessee. Therefore, the Assessing Officer has no justification for making any addition.
On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the value of inventory, during the course of search operation, was taken at `18,87,41,177/- The closing stock as per books of account was `20,15,05,458/- as to be less than the stock as per the books of account. The Assessing Officer found that there was difference of `1,27,64,281/-.
This difference could have come due to sale of stocks outside the books. Therefore, the CIT(Appeals), according to the Ld. D.R., has rightly confirmed the addition made by the Assessing Officer.
The Ld. Departmental Representative further submitted that the main contention of the assessee before this Tribunal is that the identification of numbers, namely, the by-numbers which confirm part of closing stock was not taken as a stock by the search party.
The assessee during the remand proceeding, filed a list of goods with unique identification numbers which was sold subsequently.
The list furnished by the assessee was, in fact, forms part of Annexure-V to the impugned order of the Assessing Officer. The Ld. D.R. further submitted that there is no inventory of individual break-up of physical stock identified with reference to by-numbers made out on the date of search. Therefore, the Assessing Officer has stated in the assessment order that it is not possible for him at this point of time to verify with the stock with specific numbers claimed by the assessee form part of physical inventory on the date claimed to be sold subsequent to the date of search. To verify the assessee’s claim, the Assessing Officer verified the computers of the assessee. However, for various reasons, the entire thing could not be verified. A random verification was made and found that the list given by the assessee was not found in the system kept in the office of the assessee. Therefore, the claim of the assessee that there was error in the stock could not be proved conclusively. Since the Assessing Officer found that the claim made by the assessee with regard to sale of goods subsequent to the search could not be conclusively proved, the CIT(Appeals) has rightly confirmed the addition.
We have considered the rival submissions on either side and perused the relevant material available on record. Due to difference in stock between the books of account and the physical inventory taken on the date of search, an addition was made as deficient stock. The Revenue claims that this difference in the stock could have arisen due to sale of goods outside the books of account.
However, the assessee claims that these are items with specific identification numbers and it was not taken for the closing stock valuation by the Revenue authorities during the course of search specific identification numbers. It is not in dispute that the assessee is having specific identification / by-numbers to identify each and every item which was exhibited for sale in the show room. The Assessing Officer himself claims in the remand report that due to various factors, the list given by the assessee could not be verified.
It is not the case of the Revenue that the details given by the assessee could not be verified because of any deficiency or negligence on the part of the assessee. The other factors, which prevented the Assessing Officer to go through the details given by the assessee, cannot be a reason for making any addition. This Tribunal is of the considered opinion that the assessee’s claim that certain inventories, which are identified with by-numbers, could not be taken as closing stock by the Revenue authorities would go to show that the difference is because the Revenue has not taken into consideration the items which were lying in the show room for sale.
The assessee has claimed that the stocks were sold subsequent to search operation. In fact, the assessee has produced all the details to identify those goods which are sold subsequent to search. In view of these reasons, merely because the Assessing Officer could not verify that cannot be the reason to make addition. Therefore, Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition made on the stock discrepancy.
Now coming to Revenue’s appeal for assessment year 2009- 10, the only issue arises for consideration is with regard to expenditure incurred by the assessee for renovation and repair of the building taken on lease.
Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee claimed expenditure incurred in the building taken on lease. According to the Ld. D.R., the expenditure incurred by the assessee in renovation / repair of the building has to be capitalized and the assessee at the best is entitled for depreciation. Referring to Explanation 1 to Section 32 of the Act, the Ld. D.R. submitted that the assessee at the best can claim depreciation and definitely it cannot be allowed as revenue expenditure. Therefore, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee.
On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee has taken the building assessee incurred expenditure in interior decoration, flooring and other miscellaneous work. The expenditure incurred by the assessee was claimed as revenue expenditure. The CIT(Appeals), by placing reliance on the order of this Tribunal in the assessee's own case for the assessment year 2003-04 in & 2164/Mds/2007 dated 14.03.2008, allowed the claim of the assessee. The CIT(Appeals) has also placed his reliance on the judgment of Madras High Court in Hari Vignesh Motors Pvt. Ltd. According to the Ld. counsel for the assessee, the CIT(Appeals) has rightly allowed the claim of the assessee.
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 the building on lease and incurred expenditure on temporary wooden structure, false ceiling, flooring, painting, etc. The assessee claimed the same as revenue expenditure. The CIT(Appeals) by placing reliance on the order of this Tribunal in the assessee's own case for assessment year 2003- 04 and the judgment of Madras High Court in Hari Vignesh Motors Pvt. Ltd. (supra), allowed the claim of the assessee. The only contention of the Revenue now before this Tribunal is that in view of capitalized and the assessee is entitled for depreciation.
We have carefully gone through the nature of expenditure incurred by the assessee. It is not in dispute that the assessee incurred the expenditure for interior decoration, temporary wooden partition, flooring, etc. An identical issue was examined by the Kerala High Court in Joyallukas India Pvt. Ltd. v. ACIT (2016) 282 CTR 0551. The Kerala High Court found that the expenditure incurred by the assessee, irrespective of creating enduring benefit or advantage even if it is a profit earning effort, unless at the end of the term of the lease, the item on which the expenditure was spent could be retrieved by the assessee, it shall not amount to capital expenditure but it can be termed only as revenue expenditure. The Kerala High Court has elaborately examined the issue on the subject by referring to various case laws on the subject including the judgment of Apex Court in Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1. In view of the above, when the assessee incurred expenditure and it cannot be retrieved after expiry of term of lease, it has to be treated as revenue in nature. In this case, admittedly, the expenditure was incurred in interior decoration, flooring, painting and temporary partitions, etc. These expenditures cannot be 28 to 1783/Mds/14 I.T.A. No.1874/Mds/14 retrieved by the assessee at the expiry of lease term. Therefore, such expenditure cannot be treated as capital in nature as found by Kerala High Court. It has to be necessarily treated as revenue expenditure. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, appeals of the assessee in 1782 & 1783/Mds/2014 are allowed. However, Revenue’s appeal in I.T.A. No.1874/Mds/2014 is dismissed.