C. I. T. Kolkata - II v. Norinco (P) Ltd
[Citation -2015-LL-0206-31]

Citation 2015-LL-0206-31
Appellant Name C. I. T. Kolkata - II
Respondent Name Norinco (P) Ltd.
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 06/02/2015
Judgment View Judgment
Keyword Tags business or profession • right of occupancy • revenue nature • land revenue • new asset
Bot Summary: Goa laboratory of the assessee was badly damaged by flood and cyclone which was also required to be repaired and in doing so the assessee incurred an expenditure of a sum of Rs.3 lakhs approximately. The question arose whether the aforesaid expenditure was deductible by way of revenue expenditure. The assessing officer was of the opinion that a very insignificant part of the total expenditure was permissible by way of expenses under section 30 of the Income Tax Act and the balance sum was to be treated as an expenditure of a capital nature. A) Whether on the facts and in the circumstances of the case, and on a proper interpretation of the provisions of Section 30 of the Income Tax Act, the learned Tribunal was right in upholding the order of the Commissioner of Income Tax on the ground that the expenditure under the head repairs were incurred to preserve and maintain an already existing asset and not to bring a new asset into existence b) Whether on the facts and in the circumstances of the case the order of the learned Tribunal is perverse in the eye of law We have heard Mrs. Das De, learned advocate appearing for the revenue and have not been impressed by her submission. The assessing officer had applied Explanation 1 to section 32 which reads as follows : 5 Explanation 1.- Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, the building the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. The question for consideration is whether the expenditure was incurred by the assessee for the purpose of enhancing the value of its capital assets. The assessing officer has no-where pointed out that by incurring expenditure the assessee has enhanced his capital assets.


ORDER SHEET ITA 622 OF 2004 IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE COMMISSIONER OF INCOME TAX,KOL-II Vs. NORINCO (P) LTD. BEFORE: Hon'ble JUSTICE GIRISH CHANDRA GUPTA Hon'ble JUSTICE ARINDAM SINHA Date : 6TH February, 2015. Appearance : For appellant/revenue : Mrs.Smita Das De,Advocate For respondent/assessee : Mr.M.K.Lodh, Advocate. Court : subject matter of challenge in this appeal is judgement and order dated 29th April, 2004 by which learned Tribunal agreeing with CIT(Appeals) held that expenses incurred by assessee 2 were allowable under section 30 of Income Tax Act. facts and circumstances of case briefly stated are as follows. assessee had office at Kolkata and laboratory at Goa. office at Kolkata was gutted by fire. fire, as matter of fact, continued for four days. Damages were of extensive nature. assessee after obtaining permission from Fire Brigade Department entered into burnt down office after four days. In repairing office it incurred little over sum of Rs.7 lakhs. Goa laboratory of assessee was badly damaged by flood and cyclone which was also required to be repaired and in doing so assessee incurred expenditure of sum of Rs.3 lakhs approximately. question arose whether aforesaid expenditure was deductible by way of revenue expenditure. assessing officer was of opinion that very insignificant part of total expenditure was permissible by way of expenses under section 30 of Income Tax Act and balance sum was to be treated as expenditure of capital nature. 3 assessee preferred appeal. CIT(Appeals) held that entire expenditure was of revenue nature and therefore, deductible. In appeal preferred by revenue, learned Tribunal has concurred with views of CIT(Appeals). It is this order of learned Tribunal which is under challenge. following questions of law have been proposed by revenue. a) Whether on facts and in circumstances of case, and on proper interpretation of provisions of Section 30 of Income Tax Act, learned Tribunal was right in upholding order of Commissioner of Income Tax (A) on ground that expenditure under head repairs were incurred to preserve and maintain already existing asset and not to bring new asset into existence ? b) Whether on facts and in circumstances of case order of learned Tribunal is perverse in eye of law ? We have heard Mrs. Das De, learned advocate appearing for revenue and have not been impressed by her submission. Section 30 permits deduction of expenses on account of rent, rates, taxes, repairs and insurance of rented accommodation. explanation has been added to section 30 which reads as follows : 4 30. Rent, rates, taxes, repairs and insurance for buildings.-In respect of rent, rates, taxes, repairs and insurance for premises, used for purposes of business or profession, following deductions shall be allowed (a) where premises are occupied by assessee (i) as tenant, rent paid for such premises; and further if he has undertaken to bear cost of repairs to premises, amount paid on account of such repairs; (ii) otherwise than as tenant, amount paid by him on account of current repairs to premises; (b) any sums paid on account of land revenue, local rates or municipal taxes; (c) amount of any premium paid in respect of insurance against risk of damage or destruction of premises. learned Tribunal concurring with CIT (Appeals) held that expenses were incurred to bring back office and laboratory in its original position, that is to say, before fire took place. Such repairs were necessary to carry on business smoothly. assessing officer had applied Explanation 1 to section 32 which reads as follows : 5 Explanation 1.- Where business or profession of assessee is carried on in building not owned by him but in respect of which assessee holds lease or other right of occupancy and any capital expenditure is incurred by assessee for purposes of business or profession on construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, building, then, provisions of this clause shall apply as if said structure or work is building owned by assessee. question for consideration is whether expenditure was incurred by assessee for purpose of enhancing value of its capital assets. If that question is answered in affirmative then expenditure shall become expenditure of capital nature. But if answer to that question is in negative, then expenditure shall be of revenue nature. assessing officer has no-where pointed out that by incurring expenditure assessee has enhanced his capital assets. On contrary, finding is that expenditure was necessary to repair damage caused by fire. It was, therefore, clear case of revenue expenditure. 6 For aforesaid reasons, question no.(a) is answered in affirmative and question no.(b) is in negative and in favour of assessee. appeal, thus, is disposed of. (GIRISH CHANDRA GUPTA, J.) (ARINDAM SINHA, J.) ssaha AR(CR) C. I. T. Kolkata - II v. Norinco (P) Ltd
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