Exp. on construction of temporary structure on leasehold land to meet business needs was revenue exp.

Expenditure on construction of temporary structure was allowable as revenue expenditure if such structure was made by assessee on leasehold land to run its business.

Facts:

a)  The assessee had entered into lease agreement with Ahmedabad Urban Development Authority [‘AUDA’] to run its AMUL milk parlour in the land of AUDA. As per the agreement,  the assessee would maintain a small garden and would permit access to the public.

b)  On such structure put up by assessee, it claimed depreciation at the rate of 100 per cent. The Assessing Officer held that the parlour was run in a pukka constructed building. He, therefore, reduced depreciation to 10 per cent;

c)  The Tribunal allowed full depreciation at the rate of 100 per cent to the assessee. The aggrieved-revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)  Part A of Appendix I to the Income-tax Rules, 1962 provides for 100 per cent deduction on 'purely temporary erections such as wooden structures';

2)  The arrangement between the assessee and AUDA was purely temporary in nature. It did not derive any enduring benefit from putting up such construction;

3)  Under the agreement, the assessee was given certain rights by the AUDA to use land on the terms and conditions set out therein. Combined reading of the said conditions would establish that the assessee had the right to use the land for putting up its parlour for a period of five years;

4)  Thereafter, only upon mutual agreement between the assessee and the AUDA, the period could be extended. During the period of the agreement, the assessee had to maintain the garden and permit full access to the members of the public. The assessee did not have any right to develop any part of the land or put up construction without the permission of AUDA;

5)  Such conditions would establish that the assessee had a limited right to use the land for the limited purpose and the limited period. In the next year due to non-renewal of the agreement, the assessee's structure was demolished;

6)  Therefore, expenditure incurred on construction of structure was allowable as revenue expenditure. – CIT v. Gujarat Co-op Milk Marketing Federation Ltd [2014] 43 taxmann.com 398 (Gujarat)