Expense Incurred to Construct Bridge on a Culvert in Front of Shop to Provide Access to Customers Is Capital in Nature | ITAT

Case Details: Joginder Singh vs. ACIT - [2024] 159 taxmann.com 425 (Amritsar - Trib.)

Judiciary and Counsel Details

• Anikesh Banerjee, Judicial Member & Dr M.L. Meena, Accountant Member
• Rohit Kapoor and V.S. Aggarwal for the Appellant
• Bharat Bhushan Garg for the Respondent

Facts of the Case

For the relevant assessment year, the assessee constructed a concrete bridge on the culvert in front of the shop so that the customers could have direct access to the shop in order to increase business turnover. During the year under consideration, the assessee sold such shop and showed capital gains in the return of income and the construction cost was claimed as a cost of improvement.

During the assessment proceedings, the Assessing Officer (AO) disallowed said claim on the ground that the assessee had been conducting business since the assessment year 2005-06 and the construction of the shop was completed in said year.

On appeal, the CIT (A) confirmed the additions made by AO. Aggrieved by the order, the assessee filed an appeal to the Amritsar Tribunal.

ITAT Held

The Tribunal held that it was evident that the disputed cost was used for the construction of a bridge in front of the shop for improvement of the shop. The CIT(A) failed to appreciate the vital fact that the amount spent for the construction of the bridge was a capital expenditure and was essential to provide access to the shop from the road and to provide improved accessibility to the shop to facilitate greater footfall and capital value addition in turn.

Further, the source of construction was duly explained and confirmed before the authorities. The material facts of the cost of construction of the bridge are further supported by the assessee with the site plan and the photograph of the shop. However, AO had not brought on record any evidence or findings to prove that the cost of improvement or construction was never incurred. Such cost was disallowed by the AO by merely relying upon the fact and presumption that the assessee had been running the business in the shop. The documentary evidence on record was sufficient to prove that necessary construction was made.

Also, there is no bar to incur the capital expenditure while the business is running. The capital expenditure would not become revenue expenditure merely for the reason that it was incurred in connection with the cost of improvement for the promotion of business activities, which ultimately resulted in efficiently carrying on day-to-day business.

Accordingly, it is held that the cost of improvement to the shop by the construction of the culvert was capital expenditure and would be allowable as cost of improvement as claimed by the assessee.

List of Cases Reviewed

• CIT v. Karnataka Power Corpn. Ltd. [1993] 205 ITR 511 (Kar.) (para 10);
• Asstt. CIT v. Suryaraj Singh [2020] 117 taxmann.com 424 (Jaipur – Trib.) (para 11) and
• India Arvind Mills Ltd. v. CIT [1992] 197 ITR 422 (SC) (para 12) followed.