Furniture and Maintenance Expenditure does not amount to Capital Expenditure: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal(ITAT) has held that Furniture and Maintenance expenditure does not amount to capital expenditure.

T. Banusekar, CA appeared for the appellant and P. Sajit Kumar appeared for the respondent.

M/s. Kirtilal Kalidas Jewellers Private Limited, the Assessee/Appellant Company is engaged in the business of trading in gold ornaments, diamonds and other precious stones.  The Assessee/Appellant had filed its return of income for the Assessment Year 2013 – 2014 on 25.11.2013 admitting a total income of Rs.37,05,68,010/-. 

During the course of the assessment proceedings, the Assessing Officer noticed that the Assessee has debited huge expenditure under the head “Furniture Maintenance” and therefore called upon the Assessee to file necessary details. 

The Assessee filed details of expenditure under the head “Furniture Maintenance” which includes plywood purchases, hardware items and payment for carpentry works amounting to Rs.1,12,16,205/- and claimed that these are temporary repairs for the renovation of the branch office of leased premises and the same cannot be capitalized, as the Assessee is not creating an asset which gives enduring benefit.

The Assessing Officerrejected the arguments of the Assessee and made an addition towards the said expenditure after allowing depreciation at the rate of 5%.  On appeal, the Commissioner of Income Tax (Appeals) after considering the Assessee’s contentions, relied upon certain judicial proceedings, and sustained the additions made by the Assessing Officer towards the disallowance of furniture maintenance expenditure on the ground that the expenditure incurred by the Assessee is like capital expenditure which gives enduring benefits. 

It was observed that although the Assessing Officer has considered the said expenditure as capital in nature which gives enduring benefit to the Assessee but has not given any reasons for the said conclusion.

In the case of Redington (India) Limited  Vs. Additional Commissioner of Income Tax, it was held that office cabins, wooden partitions, plastering, waterproofing treatment, installation charges, flooring charges, etc for leased premises are current repairs which cannot be considered as capital expenditure which gives enduring benefits to the Assessee. 

A bench comprising of Shri Mahavir Singh, Vice President and Shri G Manjunatha, Accountant Member viewed that, if certain expenditures incurred to make the leasehold premises functional like partitions works, temporary repairs, flooring, etc., then the said expenditure should be allowed as revenue in nature.

The Tribunal while allowing the appeal of the assesseeset aside the order passed by the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to delete the addition made towards the furniture maintenance expenditure as capital in nature.

To Read the full text of the Order CLICK HERE

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