Decided on October 27,2014

Jayakrishna Flour Mills Pvt. Ltd. Appellant
The Assistant Commissioner of Income Tax Respondents


Vikas Awasthy, Member (J) - (1.) THE appeal has been filed by the assessee against the order of Commissioner of Income Tax(Appeals), Salem dated 24 -01 -2013 relevant to the Assessment Year (AY) 2009 -10.
(2.) THE assessee is running a floor mill. In the AY under consideration, the assessee spent an amount of Rs. 53,88,776/ - for the construction of storage shed on the lease -hold land and claimed the same as expenditure in Profit & Loss A/c. During the course of assessment proceedings, the Assessing Officer held that the sheds were constructed on lease -hold land, therefore, the case of assessee falls within the ambit of Explanation -1 to Section 32(1) of the Income Tax Act, 1961 (herein after referred to as 'the Act'). The amount spent by the assessee on construction of sheds is capital expenditure allowable for depreciation and is not a revenue expenditure. Against the assessment order dated 30 -11 -2011, the assessee preferred an appeal before the CIT(Appeals). The CIT(Appeals) vide impugned order upheld the findings of the Assessing Officer and dismissed the appeal. Aggrieved by the order of First Appellate Authority, the assessee has come in second appeal before the Tribunal. Shri V.S. Jayakumar, appearing on behalf of the assessee submitted that four storage depots were allotted to the assessee on lease -hold basis for the period of twenty nine years in Integrated Storage cum Marketing Yard Complex by Tamil Nadu Foodgrains Marketing Yard Limited., a special purpose vehicle formed by Ministry of Commerce and Industry, Govt. of India. The assessee contributed for the construction of sheds. This did not result in creation of any asset or benefit of enduring nature to the assessee. However, these contributions for integrated storage facilities helped the assessee to secure lower monthly lease rents. Apart from providing storage depot, the Tamil Nadu Foodgrains Marketing Yard Limited., is providing other facilities viz., Warehouse, Solar Tunnel, Dryer Pro -processing Centre, R&D Laboratory, Agri -business Sourcing Centre, Cold Storage Unit, Container Terminal, Training Centre etc. The land does not belong to the assessee and after the completion of lease period, the sheds shall be transferred to the Lessor. Therefore, the amount contributed towards the construction of shed is a revenue expenditure, as no capital asset has come into existence. Explanation -1 to Section 32(1) has no application in the case of the assessee. The ld. AR in order to support his contentions relied on the decision of Hon'ble Supreme Court of India in the case of Empire Jute Co. Ltd., reported as : 124 ITR I (SC) and the decision of Hon'ble Madras High Court in the case of CIT Vs. TVS Lean Logistics Ltd., reported as : 293 ITR 432 (Madras).
(3.) ON the other hand, Shri Guru Bhashyam, representing the Revenue vehemently defended the order of CIT(Appeals). The ld. DR submitted that the assessee has placed reliance on the decision of Hon'ble Supreme Court of India in the case of CIT Vs. Madras Auto Service (P) Ltd. reported as : 233 ITR 468. The said decision is prior to insertion of Explanation -1 to Section 32(1) in the year 1986. There has been substantial shift in treatment of expenditure incurred on leased premises after insertion of Explanation -1. The ld. DR in order to support his submission relied on the following decisions: i. L.H. Sugar Factory & Oil Mills (P) Ltd., Vs. CIT reported as : 125 ITR 293 (SC); ii. Indian Aluminium Co. Ltd., Vs. CIT reported as : 198 ITR 202 (Calcutta); and iii. Decision of co -ordinate bench of the Tribunal in the case of ABT Ltd., Vs. ACIT reported as : 21 ITR (T) 634;;

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