Architect Fees paid for Construction of Building is Capital Expenditure: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the architect fees paid by the assessee for the construction of the building which was not used for the purpose of the business for the relevant assessment year would be treated as capital expenditure. The bench further noted that depreciation was allowed to the assessee on the amount.

In the instant case, the assessee, while filing its income tax returns for the relevant period, has claimed that the legal and professional fees of Rs. 16.60 Lacs paid for the construction of the building is revenue in nature. However, the Assessing Officer rejected the claim by finding that the same amount to capital expenditure. It was observed that the Assessee did not make any specific submission on this issue and as assessee is undertaking the construction of a building.

The Tribunal noted that before the learned CIT(A), the assessee could only submit that AO has not allowed the depreciation in respect of expenses capitalized having the direct nexus with the building. It was also requested by the assessee that direction might kindly be given to the learned AO for allowance of depreciation under Section 32 of the Income Tax Act.

“In view of above, facts we do not find any infirmity in the order of learned CIT (A) who has held that legal and professional expenditure incurred by the assessee were incurred in relation to construction of a building is a capital expenditure , which was not used for the purpose of the business during the year under consideration. The assessee during appellate proceedings have admitted for allowance of depreciation on the above amount, therefore, it is apparent that the expenditure incurred by the assessee in the form of legal and professional fees paid to an architect is for the purpose of construction of the building and is capital in nature. Before the lower authorities, the assessee could not show that how the architect fee paid is not a capital expenditure. In view of this ground number 2 of appeal of assessee is dismissed,” the Tribunal said.