TMI Blog2015 (5) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 37(1) of the Act. - Decided against revenue. - ITA No.1726/PN/2013 - - - Dated:- 10-4-2015 - Shri G.S. Pannu And MS. Sushma Chowla JJ For the Appellant : Mr. C. H. Naniwadekar For the Respondent : Mr. Rajesh Damor ORDER Per G. S. Pannu, AM The captioned appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-V, Pune dated 10.07.2013 which, in turn, has arisen from an order dated 29.01.2013 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short the Act ) pertaining to the assessment year 2010-11. 2. In this appeal, the solitary issue relates to the action of the lower authorities in disallowing expenditure of ₹ 1,44,03,077/- incurred by the assessee on renovation or maintenance of a part of the hotel building. 3. In brief, the relevant facts are as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, interalia, engaged in the business of locomotive and running of a hotel unit located at Khandala. The Assessing Officer noted that in relation to the hotel unit, assessee claimed expenditure of ₹ 1,58,21,689/- u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wardrobes, and luggage racks, removal of toilet walls, false ceiling and parapet wall in corridor etc. 5,40,400 Painting work 3,89,313 Flooring in corridor in front of the existing rooms, including breaking and removing existing flooring tiles and existing plastering of parapet wall, providing and laying Andhra stone flooring and skirting in corridor and staircase, construction of 600 mm wall, plastering, waterproof plastering, providing and fixing of marble skirting. 11,33,704 Bathroom fittings including concealed cistern flush, showers, health faucets, stop cocks, basin mixer, angle valves, bottle trap, WC toilet seat with covers, wash basins 12,82,461 Purchase of various types of steel plates and bars mainly used for RCC intermediate band on brick wall, extended support to balcony enclosed, roof area outside rooms and windows 12,00,856 MDF skirting and MDF T-profile 1,05,348 MS Sheets, polycarbonate sheets and fabrication charges for pergola (small fitti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions viz. Empire Jute Company Ltd. vs. CIT, 124 ITR 1 (SC), Alembic Chemical Works Co. Ltd. vs. CIT, 177 ITR 377, as also the decision of the Kolkata Special Bench of the Tribunal in the case of Peerless Security Ltd. vs. JCIT, 94 ITD 89. 6. On the other hand, the Ld. Departmental Representative appearing for the Revenue pointed out that the impugned expenditure was related to addition/expenses of the hotel building renovation which provided enduring benefit to the assessee, and was to be understood as capital in nature. 7. We have carefully considered the rival submissions. It s a trite law that the question as to whether a particular expenditure is capital or revenue in nature is a mixed question of law and facts and no universal principle is applicable in all situations. In-fact, there are a plethora of judicial rulings on the subject but a singular refrain is that each case has to be decided on the basis of its own peculiar facts. In the present case, assessee is running a hotel at Khandala and during the year under consideration, the impugned expenditure of ₹ 1,44,03,077/- has been incurred by way of renovation of the existing rooms. The details of such expenditure h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh look and have the new and modern facilities, the existing hotels also required to change on a continuous basis. f. The last major renovation of the hotel was undertaking in the year 2000/2001 which is a very long period by the general industry standards and considering the fact that the hotel is a three star hotel. Further, as stated above, there was a significant amount of wear and tear due to passage of time, usage and weather (rainy conditions) g. In view of above factors, the management realized that it was high time to create a new ambience in order to retain the faithful customers and to attract new customers. 9. All the aforesaid aspects of commercial expediency brought out by the assessee before the lower authorities have not been disputed. The assertions made by the assessee clearly point out that what the assessee sought to achieve by incurring the expenditure was to retain its business by offering and upgrading its facilities for existing as well as new customers. In-fact, the detail of the expenditure also reveal that it has been incurred on upgrading the facilities, change of ambience and renovation of the infrastructure including rooms, restaurant, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city so as to render the expenditure capital in nature. The Hon ble High Court disagreed with the Revenue by noticing that it was only an increase in seating capacity of the existing bar which did not result in creation of any new asset. By following the aforesaid proposition, the Hon ble High Court in the case of Comfort Living Hotels Pvt. Ltd. (supra), held the expenditure to be revenue in nature. In our considered opinion, the ratio of the aforesaid decision is squarely applicable in the present context and therefore a mere increase in the room size due to inclusion of balcony area would not result in creation of any new asset or increased profit yielding capacity so as to render the expenditure capital in nature. 11. In-fact, the benefit to the assessee accruing as a result of the impugned expenditure, though spread over a number of years, is certainly in the revenue field and therefore such an expenditure provides the assessee with an advantage in a commercial sense and therefore the expenditure has to be held to be revenue in nature, following the principles laid down by the Hon ble Supreme Court in the case of Empire Jute Co. (supra). As a consequence, we therefore set-as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
