Commissioner of Income Tax Del v. M/S Hi Line Pens P.Ltd

BADAR DURREZ AHMED, J

RAJIV SHAKDHER, J

September 15, 2008 mb

1 of 12 * THE HIGH COURT OF DELHI : NEW DELHI + ITA No. 1202/2006 % Judgment delivered on: 15.09.2008 THE COMMISSIONER OF INCOME TAX, DELHI-IV. ..... APPELLANT Versus M/S HI LINE PENS PVT. LTD. ..... RESPONDENT Advocates who appeared in this case: For the Appellant : Ms Prem Lata Bansal For the Respondent : Mr Rakesh Gupta, Ms PoonamAhuja & Ms Aarti Saini CORAM : HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to Reporters or not ? Yes 3. Whether the judgment should be reported in the Digest ? Yes Badar Durrez Ahmed, J. (Oral) 1. Admit. 2. The following substantial question of law arises for our consideration:- 2 of 12 "Whether the Income Tax Appellate Tribunal was correct in accepting the assessee"s claim of expenditure of Rs.14,03,835/- towards renovation of rented premises under Section 30(a)(i) of the Income Tax Act, 1961 and in holding that the Assessing Officer had wrongly disallowed the same on the ground that the same was allowable as a deduction towards depreciation under Section 32 of the said Act?" 3. The counsel for the parties agreed that no paper books would be necessary and that this appeal be heard straight away. 4. The facts of the case are that the assessee had claimed the aforesaid expenditure of Rs.14,03,835/- as a deduction under Section 30(a)(i) of the said Act. The expenditure was in respect of tenanted premises which had been taken by the assessee on lease for the purposes of its business. The expenditure was towards false ceiling, fixing tiles, replacing glasses, wooden partitions, replacement of electric wiring, earthing, replacement of GI pipes etc. As per the assessee since the premises were not in use for a long time, the assessee was required to make these expenditures to make the premises usable for the purposes of its business. The assessee"s contention was that these expenses were not incurred for creating any new asset but for making the premises usable for the purposes of its business. The assessee"s claim was also that the expenditure was in the nature of 3 of 12 revenue expenditure and was not of a capital nature as no new asset was brought into existence. 5. The said expenditure was disallowed by the Assessing Officer because in his view Explanation (1) to Section 32(i) of the said Act would come into play. According to the Assessing Officer, the expenditure was to be treated as capital expenditure as it had been incurred on improvement of rented premises as it was the first year of the business of the assessee. 6. Being aggrieved by the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner Income Tax (Appeals) who decided in favour of the assessee by holding that the expenses incurred by the assessee on the rented premises did not bring into existence any new asset and that the same were allowable as revenue expenses. Consequently, the CIT (Appeals) deleted the disallowance made by the Assessing Officer. 7. The revenue took the matter in appeal before the Tribunal, which also agreed with the view taken by the Commissioner Income Tax (Appeals) and held in favour of the assessee. The Tribunal found that the assessee had incurred expenditure on renovation of rented premises. The expenditure was incurred in relation to the fixing of false ceiling, 4 of 12 tiles, replacing glasses, partitions, electrical wiring replacements, internal wire replacement, earthing and GI pipe replacement etc. The Tribunal returned a finding that the advantage obtained by the assessee was for the purpose of the business of the assessee and was not for the acquisition of a capital asset. The Tribunal placed reliance on the decision of this Court in the case of Installment Supply Pvt. Ltd. v. Commissioner of Income-Tax, Delhi-II; 149 ITR 52 (Delhi) and held in favour of the assessee and against the revenue. 8. It is against this order of the Tribunal dat