Allowability of Interior Decoration Work in Rented Office as Revenue Expenditure

Harmuny Entertainment Pvt. Ltd. Vs DCIT (ITAT Kolkata)

ITAT Kolkata held that expenditure incurred towards interior decoration work of a rented office premises is allowable as revenue expenditure. Accordingly, disallowance of such expenditure unjustified.

Facts- AO noticed that the assessee has shown amount payable to Sampark Advertisement and Media Pvt. Ltd. (SAMPL), in the balance sheet as a sundry creditors at Rs.3,12,26,294/-. AO found that SAMPL has already written off the said sum in its books and thus AO came to a conclusion that since the liability is not existing it falls under the provision of Section 41(1) r.w.s. 28(iv) of the Act and is liable to be taxed in the hands of the assessee and made an addition of Rs.3,12,26,294/-. AO also noticed that the assessee has claimed pandel decoration expenditure at Rs.3,13,010/-and the said sum was payable to M/s. Amit Agencies, Kolkata, and the notice u/s 133(6) of the Act was returned unserved and this brought the AO to the conclusion that the assessee has claimed bogus expenditure and proceeded to disallow the sum of ₹ 3,13,010/-.

AO observed that the assessee has claimed an amount of ₹ 9,99,856/-on account of interior decoration of office premises paid to Unique Technicon India Pvt. Ltd.. The assessee claimed it as revenue expenditure but as per AO it was in the nature of capital expenditure and thus not deductible as expenses during the year and disallowed the repairs and maintenance charges at ₹ 999,856/-.

Conclusion- All documentary evidence have been placed before us to prove that the liability is active and the action is from both the sides i.e., the sundry creditor is trying hard to recover its amount and the assessee is trying hard to collect the sum from sundry debtors and repay the sundry creditors. Under these facts and circumstances, we do not find any justification at the end of both the lower authorities of having invoked the provisions of Section 41(1) of the Act pertaining to cessation of liability and treating it as income in the hands of the assessee. Accordingly, the finding of the ld. CIT(A) is set aside, addition of Rs.3,12,27,393/- is deleted.

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