Itta/1/2004 Of M/S. F.d.khan And Co v. The Commissioner Of Income-Tax

*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND*THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM+I.T.T.A.No.1 of 2004 % Dated 19.11.2014 M/s. F.D.Khan & Co. ….Appellant $ The Commissioner of Income-Tax, Hyderabad. ….Respondent ! Counsel for the appellant : Sri B.Ravindra^ Counsel for respondent : Sri J.V.Prasad < GIST: > HEAD NOTE: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A.No.1 of 2004 ORDER: (Per LNR,J) This appeal is presented against the order, dated09.01.2003 passed by the Hyderabad Bench of the Income TaxAppellate Tribunal in I.T.A.No.147/Hyd/2002, referable to theassessment year 1998-99.The appellant is a firm undertaking the business inTextiles. In the returns submitted for the assessment year 1998-99, the appellant has shown a sum of Rs.3,77,290/- asexpenditure for office modification. The Assessing Officer treated that as ‘capital expenditure’ and did not allow deduction. Aggrieved by the order passed by the Assessing Officer, theappellant approached the Commissioner (Appeals). The appealwas rejected through order, dated 07.02.2002. Thereafter, hefiled I.T.A.No.147/Hyd/2002 before the Tribunal and that wasalso dismissed. Heard Sri B.Ravindra, learned counsel for the appellantand Sri J.V.Prasad, learned counsel for the respondent.The only controversy is as to whether the expenditureincurred by the appellant for modification of the office premisesmust be treated as ‘capital expenditure’ or ‘revenueexpenditure’. The Assessing Officer treated as the former andthe same was affirmed by the Commissioner and the Tribunal. The difference between the ‘revenue expenditure’ on theone hand and the ‘capital expenditure’ on the other hand isclearly discernible in many cases. The test is the endurability ofthe asset that is acquired through the amount concerned. Manya time, it becomes difficult to differentiate between the two inrelation to certain activities. For example, the alteration to anexisting item of immovable property is prone to be treated aseither of them, depending upon the perception of the concernedofficer or the predominant object underlying the expenditure. Even if it is an alteration, if it is going to endure and become partof the immovable property, it deserves to be treated as ‘capitalexpenditure’. If on the other hand, the modification or addition issuch that it can be detached and taken away or substituted withanother with a little effort, it has to be treated as ‘revenueexpenditure’, notwithstanding the amount involved. The assessee is a reputed cloth showroom at Hydeabad. The effecting of modifications in the premises became necessaryon account of the retirement of one of the partners. The record isnot clear as to whether the premises are owned by firm orwhether the left over partners are conferred with absolute rightsover the property. That fact becomes relevant since the repairsundertaken by the owner of premises assume a substantiallydifferent legal character compared to those, which areundertaken by the lessee of the premises. There was no findingby the Assessing Officer that the modification was of a permanent nature of the premises. It is well established thateven where two views are possible, on a set of facts, the onethat helps the assessee must be adopted. We therefore allow the appeal and set aside the order ofassessment as confirmed by the Commissioner and theTribunal. The amount involved shall be treated as ‘revenueexpenditure’. The miscellaneous petition filed in this appeal shall alsostand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date:19.11.2014Note: L.R.Copy to be marked.JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM JSU I.T.T.A.No.1 of 2004 Date: 19.11.2014