The Commissioner Of Income Tax, Chennai v. N.ragunath

In the High Court of Judicature at MadrasDated : 28.11.2017 The Honourable Mr.Justice T.S.SIVAGNANAM The Honourable Mr.Justice M.SUNDAR Tax Case Appeal Nos.515 to 517 of 2017& CMP.Nos.12742 & 12743 of 2017 The Commissioner of IncomeTax, Chennai...Appellant in all VsN.Ragunath...Respondent in all APPEALS under Section 260A of the Income Tax Act, 1961against the orders of the Income Tax Appellate Tribunal Madras'C'BenchChennaidated29.6.2016passedinI.T.As.2280/Mds/2015, 2281/Mds/2015 and 2282/Mds/ 2015 for theassessment years 2008-09, 2009-10 and 2010-11. against the Order of the o/o the Commissioner of Income Tax(Appellant) -2 Chennai -34, dated 30/09/2015 and made inITA.No.235 & 237/CT(A)-2/2014-15, and against the DeputyCommissioner of Income Tax-Non corporate -Circle -2, Chennai,dated10/02/2015,23/02/2015&11/02/2015inPAN.No.GIR.No.ACCPR4059E assessment year 2007-08, 2008-09 &2009-10. Mr.R.Kumar, learned counsel accepts notice for therespondent. 2. These appeals are directed against the common orderpassed by the Income Tax Appellate Tribunal in I.T.A.Nos.2280,2281 and 2282/Mds/2015 dated 29.6.2016. 3. The respondent - assessee is a retailer in garments anda commission agent and is deriving income from house property.He filed return of income for the relevant assessment years. Theassessments were taken up for scrutiny under Section 143(3) of https://hcservices.ecourts.gov.in/hcservices/ the Income Tax Act, 1961 and the assessable income was arrivedat. Subsequently, notices under Section 148 of the said Act wereissued and the assessments were reopened. The reasons forreopening were communicated to the assessee and thereafter, thenotices under Section 143(2) of the said Act were served on theassessee. During the course of assessment proceedings, theassessee claimed depreciation allowable at 100% on temporarywooden structure for interior decoration effected to thebuildings and the showrooms, in which, the assessee was carryingon his ready made garments business. 4. In the books of accounts maintained, the assesseeclaimed depreciation of 10% of such decoration. During thecourse of re-assessment proceedings, the assessee furnisheddetails regarding the nature of expenditure and the AssessingOfficer was of the view that interior decoration including thefalse ceiling, partition, tiles, etc., would give enduringbenefit to the assessee, as these structure would never bedismantled at frequent intervals and rejected the claim of theassessee for 100% depreciation in view of Explanation (1) toSection 32(1), which was inserted by the Taxation Law (Amendmentand Miscellaneous Provisions) Act,1986 with effect from01.4.1988. 5. The assessee carried the matter on appeal before theCommissioner of Income Tax (Appeals), who decided the issue infavour of the assessee. The Revenue filed the appeals before theIncome Tax Appellate Tribunal, which were dismissed, as againstwhich, these appeals have been filed before this Court, raisingthe following substantial questions of law :"1. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the large sums ofmoney incurred towards interior decoration,which gives enduring benefit to the assesseeare revenue expenditure in nature ?2. Is not the finding of the Tribunalbad, since the assessee, in its books ofaccounts maintained, had claimed only 10%depreciation, but however, for the purposeof income tax had claimed 100% depreciationontemporarypartitionsadoptingdifferential treatment, which is not proper?and3. Whether the reasoning and finding ofthe Tribunal are proper in holding that theexpenditure incurred on temporary woodenstructureareallowableasrevenueexpenditure and not capital?"6. The issue which falls for consideration is as to whetherthe Commissioner of Income Tax (Appeals) and the Tribunal were right in holding that the assessee is entitled to 100%depreciation on the interior decoration work done, as theassessee does not derive an enduring benefit nor it can bestated to be a capital asset. 7. Firstly, we wish to point out that the issue raisedbefore this Court is a factual issue and cannot be treated as aquestion of law, much less a a substantial question of law. 8. We have heard the learned counsel for both the partiesand perused the materials on record. 9. Though in the books of accounts, the assessee claimeddepreciation at the rate of 10% only, during the course ofassessment proceedings, the assessee explained the nature ofexpenses and the major heads of expenses, which have been notedby the Commissioner of Income Tax (Appeals) in paragraph 3.2.1of the order dated 30.9.2016. The assessee placed reliance onthe decisions of the jurisdictional High Court in the cases of(i) CIT Vs. Ayesha Hospitals (P) Ltd.[reported in 292 ITR 266];(ii) Thiru Arooran Sugars Ltd. Vs. DCIT[reported in 350 ITR 324];(iii) CIT Vs. Armour Consultants P. Ltd.[reported (2013) 355 ITR 418];(iv) CIT Vs. Amrutanjan Finance Ltd.[reported in (2011) 15 Taxmann.com 392] and(v) M/s.Sundaram BNP Paribas AssetManagement Co. Ltd. Vs. ACIT, Chennai [ITA.Nos.518 & 519/Mds/2010 of the Income TaxAppellateTribunal'B'Benchdated07.1.2011]. 10. After considering the factual matrix and examining theterms and conditions in the letter of intent issued by M/s.TitanIndustries Limited dated 15.3.2012, the Commissioner of IncomeTax (Appeals), on facts, concluded that in order to bring intoexistence the showroom of a particular brand, the assesseecarried out certain specific interior works involving interiors,furniture and equipment in the premises, which was leased out tothe assessee and that the interior decoration works were carriedout in line with the specifications of the brand, whose productswere sold by the assessee as a retailer-franchisee dependingupon the terms of the agreement. 11. After knowing the factual position, the Commissioner ofIncome Tax (Appeals) took into consideration the decisionsreferred above and came to a conclusion that for the interiordecoration works done by the assessee in the leased premises, itcannot be stated that the assessee is deriving any enduringbenefit nor it can be stated that any capital asset has beencreated in favour of the assessee. This factual finding wasaffirmed by the Tribunal in the impugned order. 12. Thus, we find no question of law, much less,substantial question of law, in these appeals. 13. In this regard, useful reference can be made to thedecision of the Hon'ble Supreme Court in the case of Hero VinothVs. Seshammal [reported in 2006 (5) SCC 545] wherein the Hon'bleSupreme Court explained in paragraph 24 as to what would be asubstantial question of law. If we apply this decision to the facts of this case, the onlyconclusion that can be arrived at is that no substantialquestion of law arises for consideration in these appeals. 14. It will be worthwhile to mention that the principles oflaw applicable to cases under Section 100 of the Civil ProcedureCode would equally apply to appeals under Section 260A(7) of thesaid Act as held by the Hon'ble Supreme Court in the case ofM.Janardhana Rao Vs. Jt. CIT [reported in (2005) 273 ITR 50]. 15. For all the above reasons, we see no grounds toentertain these appeals. Accordingly, the above tax case appealsare dismissed. No costs. Consequently, the connected CMPs arealso dismissed. Sd/-Assistant Registrar(CO) //True copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal Madras 'C' Bench, Chennai. 2.The Commissioner of Income Tax (Appeals)-2, Chennai-34. 3.The Deputy Commissioner of Income Tax, Non corporate, Circle-2, Chennai. +1cc to Mr.T.N.Seetharaman Advocate SR.No.84680 +2cc to Mr.T.Ravi Kumar, Advocate SR.No.84622 TCA.Nos.515 to 517 of 2017 andCMP.Nos.12742 & 12743 of 2017 Sd/-Assistant Registrar(CO) //True copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal Madras 'C' Bench, Chennai. 2.The Commissioner of Income Tax (Appeals)-2, Chennai-34. 3.The Deputy Commissioner of Income Tax, Non corporate, Circle-2, Chennai. +1cc to Mr.T.N.Seetharaman Advocate SR.No.84680 +2cc to Mr.T.Ravi Kumar, Advocate SR.No.84622 TCA.Nos.515 to 517 of 2017 andCMP.Nos.12742 & 12743 of 2017 RR(CO)GN(31/01/2018)