Case Law Details

Case Name : ACIT Vs Rm. K.V. Silks (ITAT Chennai)
Appeal Number : ITA No. 2705/Chny/2016
Date of Judgement/Order : 07/03/2022
Related Assessment Year : 2012-13

ACIT Vs Rm. K.V. Silks (ITAT Chennai)

The assessee being resident firm is stated to be engaged as retailer of silk goods. It incurred expenses in the nature of general stores changes, additional gondolas fittings, room alteration, civil and interior work etc. The same were claimed as revenue expenditure. However, Ld. AO held that the same were towards creation of new assets and therefore, the same was disallowed.

During appellate proceedings, it was submitted that the expenditure was incurred on a leased property for smooth conduct of the business as the property could not be put to use for business purposes as such. Expenses such as reflooring, painting of walls, false ceiling, temporary wooden structures were incurred to produce the right ambience to attract customers. Therefore, the same were revenue expenditure as held by Tribunal in assessee’s own case for AY 1995-96 as well as for AYs 2006-07 to 2009-10. The revisional jurisdiction on this issue for AYs 2002-03 & 2003-04 was also quashed by the Tribunal on the ground that the expenditure was revenue in nature. Concurring with the same, Ld. CIT(A) allowed the expenditure against which the revenue is in further appeal before us.

We find that the fact that similar issue, in other years, has been held by Tribunal in assessee’s favor, remain undisturbed before us. Even otherwise, we note that the expenditure has been incurred on leased property to produce the right ambience to attract customers. Therefore, the expenditure would be revenue in nature. Respectfully following the consistent view of the Tribunal, we dismiss this ground raised by the revenue.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

1. Aforesaid appeal by revenue is a recalled matter since the appeal was dismissed vide common order dated 26.07.2017. However, the order was recalled for limited purpose vide MP No.398 /Chny/2017 dated 12.10.2018 since two grounds raised by the revenue were not adjudicated. These were-(i) Renovation / repair expenses treated as capital expenditure- Rs.118.26 Lacs & (ii) Disallowance u/s 36(1)(va). The same are adjudicated as under: –

2. Nature of renovation / repair expenses

The assessee being resident firm is stated to be engaged as retailer of silk goods. It incurred expenses in the nature of general stores changes, additional gondolas fittings, room alteration, civil and interior work etc. The same were claimed as revenue expenditure. However, Ld. AO held that the same were towards creation of new assets and therefore, the same was disallowed.

Expense on leased property to produce right ambience to attract customers allowable

During appellate proceedings, it was submitted that the expenditure was incurred on a leased property for smooth conduct of the business as the property could not be put to use for business purposes as such. Expenses such as reflooring, painting of walls, false ceiling, temporary wooden structures were incurred to produce the right ambience to attract customers. Therefore, the same were revenue expenditure as held by Tribunal in assessee’s own case for AY 1995-96 as well as for AYs 2006-07 to 2009-10. The revisional jurisdiction on this issue for AYs 2002-03 & 2003-04 was also quashed by the Tribunal on the ground that the expenditure was revenue in nature. Concurring with the same, Ld. CIT(A) allowed the expenditure against which the revenue is in further appeal before us.

We find that the fact that similar issue, in other years, has been held by Tribunal in assessee’s favor, remain undisturbed before us. Even otherwise, we note that the expenditure has been incurred on leased property to produce the right ambience to attract customers. Therefore, the expenditure would be revenue in nature. Respectfully following the consistent view of the Tribunal, we dismiss this ground raised by the revenue.

3. Disallowance u/s 36(1)(va)

The assessee delayed the payment of employees’ contribution to welfare funds for Rs.0.79 Lacs and therefore, the same were added back to assessee’s income u/s 36(1)(va). The Ld. CIT(A) deleted the same since the payment was made well before due date of filing of return of income. Aggrieved, the revenue is in further appeal before us.

We find that this issue is covered in assessee’s favor by the decision of Hon’ble High Court of Madras in CIT v. Industrial Security & Intelligence India (P.) Ltd. [TCA No. 585 of 2015, dated 24-7-2015]. Therefore, finding no infirmity in the impugned order, on this issue, we dismiss the ground raised by the revenue.

4. The appeal stands dismissed.

Order pronounced on 07th March, 2022.

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