Case Law Details

Case Name : The Commissioner of Income Tax Central­- III V/s. M/s. Urban Infrastructure Venture Capital Ltd. (Bombay High Court)
Appeal Number : Income Tax Appeal No. 65 Of 2015
Date of Judgement/Order : 17/07/2017
Related Assessment Year :
 1] The present appeal pertains to Assessment Year 2008­- 09.

2] Mr. Mohanty, the learned counsel for the Appellant submits that the appeal is filed on following question;

“6.1 Whether, on the facts and in the circumstances of the case and in law, the ITAT, Mumbai, was right in ignoring the provisions of Explanation 1 to section 32(1) of the Income Tax Act, 1961 and thereby holding the Capital Expenditure incurred by the Assessee on leased premises as Revenue Expenditure?”

3] The learned counsel for the Appellant submits that the explanation 1 of Section 32(1) of the Income Tax Act, 1961 (for short “the Act”) has not been properly considered by the Tribunal. The expenses incurred by the Assessee are of capital in nature. The Assessee is a tenant over the premises. By legal fiction, the tenant is deemed owner as per explanation 1 to Section 32(1) of the Act. The expenses cannot be treated as Revenue expenditure. In the present case, the Tribunal has wrongly relied on the judgment wherein explanation 1 to Section 32(1) of the Act was never a subject matter of consideration. The learned counsel submits that bare perusal of expenses would categorically show that the same are capital in nature.

4] Mr. Joshi, the learned counsel for the Respondent supports the order and further relies on the judgment of the Division Bench of this Court in case of Commissioner of Income Tax Vs. Talathi and Panthaky Associates Pvt. Ltd., reported in [2012] 343 ITR 309. 

5] We have considered the submissions.

6] Explanation 1 to Section 32(1) of the Act was a subject matter of interpretation and consideration of this Court in case of Talathi and Panthaky Associates Pvt. Ltd. (supra). This Court has observed that in order that Explanation I is attracted, it is necessary that any capital expenditure is incurred by the assessee. It is necessary to emphasize that what Explanation I brings about is adeeming fiction by which expenditure of a capital nature incurred by the assessee for the purposes stipulated therein including inter alia for the construction of any structure or the work of renovation, extension or improvement can form the basis of a claim for depreciation as if the structure or work is a building owned by the assessee. But for the Explanation, an assessee would not be entitled to the benefit of depreciation even if the expenditure which was incurred was of a capital nature and the effect of the Explanation is to entitle the assessee to the benefit of the provisions of Section 32.

7] It is trite that explanation cannot read dehors the provision. The explanation is in aid to the provision.

8] The expenses as are culled out in the order of the Tribunal are sufficient to imply that same are Revenue in nature and not capital. The expenses are in the nature of building maintenance charges to the society, labor charges, charges for carpenter work, plumbing work, masonry work, pending labor charges and provisional fees.

9] The Tribunal has rightly considered the expenses as Revenue in nature. In the light of the above, no substantial question of law arises. The appeal as such is dismissed. No costs.

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