The Income Tax Appellate Tribunal (ITAT) Mumbai, has ruled that lease-holder’s expenses are not liable to be considered as capital expenditure for the purpose of taxation.
The assessee, Shree Nirmal Commercial Ltd. was the owner of premises Nirmal Building and acts as a mutual association for managing the property for the benefit of the unit holders cum shareholders of the company who contribute by the way of compensation charges and out of the same various expenses of the building were made. They filed its return of income declaring a total income of Rs.55,58,990 and the case was selected for scrutiny. The assessee has shown the interest income in the sum of Rs.1,58,25,633 which was treated as income from other sources.
The assessee has shown the repair & maintenance charges of Rs.50,03,041 but was treated as capital expenditure and disallowed. The total income of the assessee was assessed to the tune of Rs.1,04,58,500 which was appealed before the Commissioner of Income Tax (Appeals)(CIT(A)) who partly allowed the claim. The CIT(A) and the assessing officer were of the view that the disputed expenditures had not been incurred in relation to annual maintenance cost for normal wear and tear and that such expenses are expected to give long-lasting benefit to the appellant.
Judicial Member Amarjit Singh and accountant member M. Balaganesh held, “it is quite clear that the assessee is not the owner of the building he is only lease-holder, hence, expenses are not liable to be capitalized. Moreover, the claim of the assessee has been accepted in the previous and subsequent year also, therefore, in the said circumstances, the finding of the CIT(A) is not justifiable, hence is liable to be set aside.”