Case Law Details
CIT Vs E.T.A. Travel Agency (P) Ltd. (Madras High Court)
It was pointed out that so far as the expenditure incurred as contemplated in the explanation is concerned, a legal fiction is created, by which, the assessee, enjoying a leasehold right on a building, is treated as the owner of the building. It was further pointed out that after the introduction of Explanation 1 to Section 32 of the Act, there is no scope left out at all for any interpretation since, by a legal fiction, the assessee is treated as a owner of the building for the period of his occupation and this would mean that by refurbishing, decorating or by doing interior work in the building, an enduring benefit was derived by the assessee for the period of occupation and therefore, it is a capital expenditure and not revenue expenditure.
Whether an expenditure incurred by assessee in a particular case is a capital expenditure or revenue expenditure has to be decided on the facts of that case by applying the relevant tests. Explanation 1 to Section 32(1)(i) does not intend to lay down that whenever expenditure has been incurred by the assessee for the purpose of business or profession on the construction of any structure or doing of any work in or in relation to or by way of renovation or improvement to the building, then such expenditure has to be mandatorily treated as capital expenditure. The explanation only meant that in the event any capital expenditure is incurred by the assessee, the provisions of Section 32 (1) shall be applicable as if the said structure or work is a building owned by the assessee.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
We have heard Mr. Karthik Ranganathan, learned Standing Counsel for the Revenue assisted by Mr. S. Rajesh, learned counsel and Ms. Sree Lakshmi Valli, learned counsel appearing for the respondent – assessee.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
