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In a recent Judgment, the Income Tax Appellate tribunal, Chandigarh has ruled that purchase of air-conditioner to keep the showroom cool is the requirement for day-to-day running of the business and it cannot be considered a capital in nature.
Case Details:
Facts of the Case: Aggrieved, the assessee preferred appeal and before the CIT (Appeals) it submitted the assessee firm is not the owner of the showroom shop and has taken it on rent. It was also contended that the expenses incurred on shop renovated by the assessee are of revenue in nature. (Appeals) found himself in agreement with the submissions of the assessee and he was of the view that no capital asset has come into existence as the premises in question are rented and not self owned. Further, it was held that the judicial pronouncements relied upon by the assessee are squarely on the issue and there is nothing to hold that the said enduring benefit would amount to capitalization. Accordingly, the Assessing Officer was directed to delete the additions made.
Contentions of the Revenue:
Contentions of the Assessee: Excerpts from the ITAT Order: We have heard the rival content ions and perused the material available on record. It is an admitted fact that the assessee is engaged in the business of fashionable readymade garments. I t also runs retail show room of these garments. The fact that the business was being run at the rental premises is immaterial to decide the issue whether the expenditure is capital or revenue in nature. In the retail business of garments, in today’s time of tough competition, one has to maintain the showroom in quite a presentable state in order to attract the customers. Keeping the mannequins to display the garments, stereo to play the music and air conditioner to keep the showroom cool are the requirements for day- to-day running of the business. Looking to the nature of business carried on by the assessee, it cannot be said that the expenditure on things like stereo systems, mannequins and airconditioner will bring any asset of any enduring nature. On this basis alone, these expenses cannot be treated as capital in nature. Download Full Order Click Here >>
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