The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has granted relief to Hindustan Times by allowing expenditure incurred on paintings, deeming it essential for creating a conducive business environment.
The assessee during the year incurred expenditure of Rs 61,49,308/- towards paintings, which were meant for display in the office of the assessee. The said paintings were capitalized as furniture and fixtures in the fixed assets schedule and depreciation @ 10% was claimed by the assessee depending upon the date on which they were put to use in accordance with provisions of section 32 of the Income Tax Act.
The Assessing Officer disallowed the depreciation claimed by the assessee on the ground that the paintings were “personal effects” and not “capital assets”.
The CIT(A) held that though the paintings are used in the business premises of the assessee, depreciation thereon is not allowable as the same constitutes “personal effects” and the value of paintings increases with the passage of time rather than diminishing. The assessee had challenged the disallowance of depreciation before us and had also raised an additional ground alternatively that the said cost of paintings which is being used in the business premises of the assessee would be eligible for deduction as revenue expenditure.
The bench found that the assessee rents out office / commercial space and provides facility management services to its tenants. During the year under consideration, the assessee had earned service income of Rs 6.81 crores. It was submitted that the paintings / works of art constitute part of interior decoration to improve aesthetics of the reception and common area of the buildings, which are regularly visited by its clients and from the assessee is deriving income.
The bench of Sakti Jit Dey ( Vice President ) and M. Balaganesh ( Accountant member ) observed that the cost of paintings are meant for aesthetic purpose and for having better environment and accordingly to be construed as expenditure wholly and exclusively incurred for the purpose of business of the assessee herein
Hence, the ITAT has no hesitation in allowing the cost of paintings as a revenue expenditure. Accordingly, the Additional Ground raised by the assessee in this regard was allowed.
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