The Income Tax Appellate Tribunal (ITAT) Delhi bench held that expenses incurred for the infrastructure development of leased property are revenue expenditure. Therefore the bench upheld the addition deleted by the Commissioner of Income Tax (Appeals).
Assessee, Ball Beverage Packaging (India) Pvt. Ltd entered into the infrastructure development agreement with M/s Sri City (P) Limited to provide and maintain common facilities and amenities outside the leased property of Assessee Company used for its business/factory.
In consideration of aforesaid common facilities and amenities, the assessee company paid Rs.13,36,15,059/- to M/s Sri City (P) Limited and during the assessment proceedings. The assesse submitted that it was revenue expenditure. However the AO concluded that Infrastructure development expenses are capital expenditure thus made addition upon that.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) [CIT(A)] who allowed the appeal filed by the assessee and deleted the addition made on the infrastructure development expenses incurred by the assesse.
Thereafter aggrieved by the order revenue filed an appeal before the tribunal.
Before the tribunal Salil Agarwal, counsel for the assessee relied upon the decision of the ITAT Mumbai in the case of Kellogg India (P) Ltd. vs. ACIT and submitted that the issue was decided in favour of assessee and has held that “consideration paid for maintenance of common area will be revenue expenditure”.
P. Praveen Sidharth, Counsel for the revenue, supported the order of the Assessing Officer.
It was observed by the tribunal that the AO had erred in taking the property as ownership property of the assessee. As per the agreement agreement of Infrastructure Development assessee company entered into a separate infrastructure development agreement with Sri City Pvt. Ltd. to maintain common facilities and amenities outside the owned property of the assessee company.
Further, the bench observed that Even though the benefit may last forever, such expenditure would be on the revenue account if the benefit simply involves making the assessee’s business operations easier to run or allowing management to operate more effectively. In this scenario, fixed capital would remain untouched.
After reviewing the facts submitted by both parties, the two member bench of Shamim Yahya (Accountant Member) and Yogesh Kumar US (Judicial Member) upheld the order of CIT(A) and observed that expenses incurred for the infrastructure development of leased property are revenue expenditure.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
