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TMI Blog2001 (3) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure furnished before him, he treated the part of the expenditure incurred on repairs and maintenance to furniture and fixture as capital expenditure to the extent of Rs. 5 lakhs and Rs. 3 lakhs for asst. yrs. 1990-91 and 1991-92, respectively, observing that no evidence was produced before him to show that the entire expenditure was incurred by the assessee exclusively on the repairs and maintenance. The matter was carried before the learned CIT(A) who upheld the action of the AO observing that a perusal of the details of such expenditure clearly shows that some of the expenditure is capital in nature. Aggrieved by the same, the assessee is in appeal before us. 4. The learned counsel for the assessee submitted before us that the assessee-company is running a renowned and reputed hotel which is managed by the famous Taj group. He further submitted that the interior decoration of the hotel is required to be maintained as per the international norms for which substantial expenditure has to be incurred on repairs and replacement. He also submitted that the assessee-company is a private limited company, which is managed by the independent management and the books of account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account of the assessee-company are maintained in which expenses incurred on repairs and maintenance to furniture and fixture have been duly recorded. The said books of account are audited by a chartered accountant and a perusal of the auditors' report shows no adverse comments on the nature of such expenditure claimed by the assessee as revenue expenditure. It is also observed that details in respect of each and every entry appearing in the repairs and maintenance account were furnished by the assessee-company before the AO and no specific instance of any capital expenditure has been painted out by the AO in his order. It is also observed that the assessee-company has accounted for the capital expenditure incurred on furniture and fixture separately in its books of account and accordingly additions to the extent of Rs. 6,80,437 to the furniture and fixture has been duly reflected in the relevant balance sheet, for asst. yr. 1990-91. Although such details for asst. yr. 1991-92 are not available on record before us, the reflection in the balance sheet relevant to asst. yr. 1990-91 makes it abundantly clear that the assessee-company has given separate treatment to the expenses inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to agree with the learned counsel for the assessee. As such considering all the facts of the case, we are of the view that no cogent evidence has been brought on record before us to establish that the expenditure was incurred on the replacement of cable in the present case. In that view of the matter, we do not find any mistake in the impugned order of the learned CIT(A) treating the cost of cable as capital expenditure. 9. Ground No. 4 of ITA No. 421/Jp/1993 and Ground No. 6 of ITA No. 484/Jp/1993 relate to a common issue of disallowance of Rs. 30,000 each out of miscellaneous expenses. 10. Rival contentions on this issue are heard and relevant material on record is also perused. It is observed that disallowance out of miscellaneous expenses has been made by the AO on ad hoc basis on account of non-availability of complete details, unverifiable nature and element of non-business purpose involved in the said expenses. It is, further observed that the AO has not given any finding in support of this disallowance, nor he has pointed out any specific instance to justify the said disallowance. The learned CIT(A) has also given a very general observation that some of these expenses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the case of the assessee-company in earlier years and there being no change in the year under consideration as compared to the earlier years such depreciation should be allowed. He also submitted that the use of imported cars for the purpose of running the same on hire for tourists has been established by the assessee-company and contended that the assessee is fully entitled for depreciation on such cars as per the aforesaid circular of the CBDT. For this contention he also relied on the decisions of Hon'ble Kerala High Court reported in CIT vs. Dr. K.R. Jayachandran (1995) 124 CTR (Ker) 11 : (1995) 212 ITR 637 (Ker) and CIT vs. Balakrishna Transports (1999) 152 CTR (Ker) 142 : (1998) 233 ITR 133 (Ker) and also that of Delhi Bench of the Tribunal in Sita World Travel (India) (P) Ltd. vs. IAC (1993) 45 ITD 623 (Del). 13. The learned Departmental Representative, on the other hand, contended that if the depreciation on imported cars has been allowed in the assessee's case, in earlier years, on the basis of wrong connotation, such a mistaken act cannot be the basis for allowing depreciation in the subsequent years. He further referred to the details of vehicle hire charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided the facility to such tourists staying in its hotel of transportation from airport to hotel and back for which the cars of foreign mark are mainly used. It is observed that the said car have been imported by the assessee-company under the taxi quota with the approval of the RBI. It is also observed that a fixed amount has been charged to all the customers availing this facility towards the hire charges and details in respect of the same have been separately maintained by the assessee. From the perusal of such details, it is evident that the imported cars were used for transportation of the tourists throughout the year under consideration and hire charges for the same have also been collected during this period. Although the use of such imported cars on hire was restricted only for the customers of the assessee-company, we are of the view that such restricted use does not change the nature and character of the activities of the assessee-company which essentially involved the running of imported cars on hire on regular basis. The concept of business involves some kind of regularity in the activity involved in the business and the existence of such regularity in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has been made in the case of foreign motor cars used in a business of running them on hire for tourists with the objective of promoting tourism industry. Obvious as it is, the facts of the present case clearly fall within the purview of the legislative spirit spelt out in the said circular inasmuch as the imported vehicles were used by the assessee-company for providing transportation service to the tourists which ultimately resulted in the promotion of tourism industry. As such, considering all the facts and circumstances of the case and in view of the reasons given hereinbefore, we are of the considered opinion that the imported cars were used by the assessee-company in a business of running them on hire for tourists and accordingly the assessee was entitled for depreciation on such imported cars at full rate. We order accordingly. 16. Ground No. 6 of ITA No. 421/Jp/1993 and ground No. 8 of ITA No. 484/Jp/ 1993 relate to a common issue of disallowance of depreciation on Indian cars. 16A. In this case the assessee-company claimed a depreciation at higher rate on the Indian cars on the basis that the same were used in the business of running them on hire. The AO, however, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew this fact does not change the nature and character of the relevant assets inasmuch as the functional and actual use of the boats remain one and the same. It is observed that under the rules governing allowance of depreciation, boats like inland vessels, speed boats and other vessels are all classified under broad head of "ships" and these rules framed under s. 32 are relevant for the interpretation of the word "ship" appearing in that section. The learned counsel for the assessee has contended that these boats should be considered as plant, but this contention of the learned counsel for the assessee, in our opinion, is far fetched keeping in view the use for which these boats were put to. As such, considering all the facts and circumstances of the case, we uphold the impugned order of the learned CIT(A) on this issue allowing depreciation on boats considering the same as ships and not plant. 21. Ground No. 8 of ITA No. 421/Jp/1993 and ground No. 10 of ITA No. 484/Jp/1993 relate to a common issue of depreciation on woollen rugs and carpets. 22. The learned counsel for the assessee submitted that the expenditure on woollen rugs and carpets is in fact revenue in nature and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icularly when expenses on these items have been held as revenue expenditure by the Hon'ble Tribunal in appellant's own case in the asst. yrs. 1984-85 and1985-86." From the perusal of the aforesaid grounds, it is apparent that the assessee has disputed the rate of depreciation allowed by the AO on woollen rugs and carpets. However, the learned counsel for the assessee has raised a new alternative plea before us that the expenditure on purchase of woollen rugs and carpets is of revenue nature and as the same has already been allowed as such by the Tribunal in assessee's own case for asst. yrs. 1984-85 and 1985-86, the assessee is entitled to full deduction of such expenditure and even if no specific claim has been made by the assessee before the authorities below to this effect, the Tribunal is empowered to grant such relief admissible to the assessee, as the same is relevant to the assessment as well as to the computation of taxable income of the assessee. In support of this contention, he has relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Mahalaxmi Textiles wherein it has been held by the Hon'ble apex Court that the Tribunal is competent to pass such orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating the woollen rugs and carpets as items of furniture and fixture. 26. Ground No. 4 of ITA No.484/Jp/1993 relates to the disallowance of Rs. 1,40,000 paid to M/s Abhikram towards professional charges holding the same as expenditure of capital nature. 27. The learned counsel for the assessee submitted before us that a sum of Rs. 1,40,000 was paid by the assessee-company to M/s Abhikram, a renowned architect firm for renovation and design services rendered by it. He further submitted that the expansion and extension of the hotel building was proposed and planned by the assessee-company and for this purpose, the job of design work was assigned to the said firm of architect. He, therefore, contended that this expenditure having been incurred for the expansion of the existing business ought to have been allowed in full as revenue expenditure. For this contention, he relied on the various decisions in CIT vs. Shah Theatres (P) Ltd. (1988) 67 CTR (Raj) 120 : (1988) 169 ITR 499 (Raj), Challapalli Sugars Ltd. vs. CIT 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC), CIT vs. Western Bengal Coal Fields Ltd. (1999) 151 CTR (Cal) 680 : (1998) 233 ITR 139 (Cal) and CIT vs. Kasthuri & Sons (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred by the assessee-company. However, as the material available on record before us is not sufficient to draw any final conclusion in the matter, we find it appropriate to restore back this issue to the file of the AO for reconsideration on the basis of actual verification of the relevant record and also as per the directions given below: 1. If the professional charges paid to the architect are not linked to the actual cost incurred by the assessee on account of building expansion and extension work, the entire expenses be allowed as revenue expenditure; 2. If the professional charges are directly related to the actual cost incurred by the assessee-company and such cost has been allowed as repairs and maintenance expenditure, the professional fees attributable thereto be allowed as revenue expenditure, and the balance amount of fees attributable to capital expenditure, if any, be disallowed treating the same as capital expenditure. 30. Ground No. 5 of the ITA No. 484/Jp/1993 relates to the disallowance of Rs. 1,03,000 incurred on sponsoring a cricket match. 31. After considering the rival submissions and perusing the relevant material on record, it is observed that the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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