HIGH
COURT OF RAJASTHAN
Commissioner
of Income-tax
v.
Dr. A.M. Singhvi
P.B. Majmudar and Manak Lall
Mohta, JJ.
IT Appeal No. 16 of 2004
August 23, 2007
Section 37(1) of the Income-tax Act 1961 – Business expenditure - Allowability of – Assessment year 1996-97 – Assessee, an advocate, occupied a rented premises for office use – During relevant year, assessee carried out certain repairs and renovations in order to see that office premises was kept in a proper condition and professional activities were carried out effectively and smoothly – Whether since expenditure incurred by assessee was in connection with profession/business and for smooth working thereof, leaving fixed capital untouched, expenditure in question was revenue expenditure and, hence, allowable under section 37(1) – Held, yes
The assessee was a practicing advocate. He occupied a rented premises as his office. During the assessment year 1996-97, the assessee incurred expenditure on certain repairs and renovations carried out in his office premises used for the profession and claimed same as deduction under section 37(1). The Assessing Officer treated the said expenditure as capital expenditure and disallowed the same under section 37(1). On appeal, the Commissioner (Appeals) held that the expenditure in question was a revenue expenditure eligible for deduction under section 37(1). On revenue’s appeal, the Tribunal confirmed the order of the Commissioner (Appeals).
On appeal under section 260A:
In the instant case, the assessee, who was lessee of the premises, had carried
out certain renovations in order to see that the office premises was kept in a
proper condition and the professional activities were carried out effectively
and smoothly for which certain repairs were carried out by the assessee in the
rented premises. The quantum of expenditure was not relevant for determining
the issue in question. On appreciation of evidence both the fact-finding
authorities, i.e., Commissioner (Appeals) as well as the Tribunal had
found that the expenditure in question was a revenue expenditure. The
expenditure incurred by the assessee was not for the purpose of bringing into
existence any such asset or advantage but, incurred for running the profession
effectively and in smooth manner. It could not be said that the expenditure was
incurred for the purpose of acquiring and appreciating capital assets. (
It was not in dispute
that the assessee was holding the premises as lessee at the relevant time and
he carried out extensive repairs/renovation in the leasehold premises. Further,
in order to have reasonable facilities for running his office, the assessee had
made certain renovations. Considering the facts of the case, it could not be
said that the expenditure in question was of capital in nature. The finding
arrived at by the Commissioner (Appeals) as well as by the Tribunal was
essentially a finding of fact and the said finding was therefore, not required
to be disturbed in the appeal. (
Further it could not be said that the finding
arrived at by the Commissioner (Appeals) as well as by the Tribunal was
contrary to law. It could not be said that the impugned order of the Tribunal
suffered from any infirmity or that the Tribunal had committed any substantial
error of law which was required to be corrected by the High Court in the
instant appeal which was maintainable only on a substantial question of law.
There was no error of law much less any substantial error of law in the
impugned order of the Tribunal. The expenditure, which was incurred by the
assessee was in connection with the profession/business and for smooth working
of the business of the assessee and was incurred with an object to see that the
business/profession could be carried out more effectively and more profitably, leaving
fixed capital untouched. Therefore, the same was rightly treated as revenue
expenditure by the Tribunal as well as by the Commissioner (Appeals). [