Ashok Bhushan, C.J.

A Division Bench hearing these appeals entertained a doubt regarding the correctness of an earlier Division Bench judgment of this Court in Joy Alukkas India Pvt. Ltd. v. Assistant Commissioner of Income Tax (ITA No.230 of 2013). By reference order dated 18.08.2015, the Division Bench opined that the judgment in Joy Alukkas case (supra) requires reconsideration, consequently the Income Tax appeals have been placed before this Full Bench for consideration.

2. The brief facts giving rise to these appeals need to be noted for appreciating the issues which are up for consideration before us. These three appeals have been filed by the assessee (Indus Motor Company Pvt. Ltd) against the common order dated 25.07.2014 of the Income Tax Appellate Tribunal, Cochin Bench by which order the three Income Tax appeals filed by the Deputy Commissioner of Income Tax (Revenue) were decided. The three appeals arose out of different assessment years; 2007-08, 2008-09 and 2009-10. It shall be sufficient to refer to the facts in ITA No.4 of 2015 arising out of assessment year 2007-08 for answering the reference.

3. The assessee is a dealer in vehicles, spares and accessories of Maruti Suzuki and an authorised service centre for its vehicles. To carry on its business, the assessee has various show rooms/workshops in different Districts of Kerala and in the State of Tamil Nadu. The return of income for the year 2007-08 was filed on 30.10.2007 which was processed under Section 143(1) of Income Tax Act, 1961(hereinafter referred to as 1961 Act'). Subsequently the case was selected for scrutiny and scrutiny assessment was completed on 30.12.2009 making certain disallowances/additions. The expenditure of Rs.3,12,34,772/- was treated as capital expenditure out of which the assessee had incurred expenditure of Rs.2,23,09,152/- for construction of superstructures on leasehold lands/premises and another expenditure of Rs.89,25,620/- for setting up of workshop facilities in the leasehold premises. The assessee filed an appeal challenging the assessment order dated 30.12.2009. The assessee claimed the aforesaid expenditure as a revenue expenditure and placed reliance on a Division Bench judgment of Madras High Court in the case of Commissioner of Income Tax v. TVS Lean Logistics [(2007) 293 ITR 432 (Mad)]. The Commissioner of Income Tax (Appeals), Kozhikode allowed the appeal directing deletion of addition of Rs.3,12,34,772/-.

4. The Revenue, aggrieved by the order of Commissioner of Income Tax(Appeals), filed appeal No.2012/2014. The Revenue before the Tribunal contended that the expenditure incurred by the assessee were all capital expenditure. Reliance was also placed on Explanation 1 of Section 32 of the Income Tax Act, 1961. With regard to the expenditure incurred on superstructure on leasehold land it was contended by the assessee that Section 32 speaks only about 'building' taken on lease and not land, hence the said explanation has no relevance. With regard to the expenditure incurred for setting up of show rooms/workshop facilities, it was contended by the assessee that expenses were incurred for the purpose of providing partition, flooring, interior works etc for making the premises ready for functional use and no asset or benefits of enduring nature is achieved from such expenditure, hence that expenditure is only a revenue expenditure. Before the Tribunal both the parties placed reliance on different judgments of Apex court, this Court and different other High Courts. The Tribunal after hearing the parties held that the case of assessee very much falls within the ambit of Section 32 of the 1961 Act. The Tribunal further held that construction activities carried out by the assessee if put on to the test of Explanation 1 would show that construction made by the assessee on the leased out premises would amount to capital expenditure. The appeals filed by revenue were allowed. Aggrieved by that order these three appeals have been