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Expenditure on Lease premises towards Civil Works, Furniture, etc. can’t be Capital Expenditure: Madras High Court [Read Judgment]

Expenditure - Lease premises - Civil Works - Furniture - Capital Expenditure - Madras High Court - Taxscan

The Madras High Court held that expenditure on the leased premises towards civil works, furniture, etc. can not be capital expenditure.

The matters arose pursuant to an order under Section 254 of the Act and the business concern, in which, the assessee was a partner, was subjected to search and seizure operations, in the appeals before him, the CIT(A) followed the orders passed by Tribunal in the earlier cases.

The tribunal held that the expenditure incurred by the assessee on the leased premises towards civil works, furniture, etc., is a revenue expenditure, when Explanation 1 to Clause (ii) of Sub-Section (1) of Section 32 of the Income Tax Act, 1961 provides that any capital expenditure on the leased premises is to be taken as capital expenditure.

These appeals, filed by the Revenue under Section 260A of the Income Tax Act, 1961 are directed against the common order on the file of the Income Tax Appellate Tribunal, Chennai ‘B’ Bench respectively for the assessment years 2008-09 and 2009-10.

The Division Judge Bench of T.S. Sivagananam and Justice V. Bhawani Subbarayan observed that the Assesses had incurred substantial expenditure towards renovation leading to enduring benefit. They are not merely repairs. The Assessees had also incurred expenditures towards the improvement and construction of the building. These cannot be termed as ‘repairs’.

Therefore, the court while answering in favor of the Revenue and against the Assessee held that expenditure on the leased premises towards civil works, furniture, etc. can not be capital expenditure.

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