TMI Blog2012 (9) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant by virtue of incurring of the aforesaid expenditure. The appellant craves leave to add to, amend or vary the above grounds of appeal on or before the date of hearing. 3. In this case Assessing Officer noted that during the current assessment year assessee has incurred of ₹ 58,42,496/- on account of repair and maintenance of building. Further it was noticed that assessee has claimed in the head Office General (Renovation) amounting to ₹ 30,07,465/-. Assessee was asked to submit the details in this regard. Assessee has submitted as under:- Office General (Renovation) in the amount of ₹ 30,07,454/-, we would inform that similar kind of renovation is a continuing process in a hotel industry. The has to be done for various reasons. The main being more foot falls and usage as compared to fabrics, upholstery, curtains etc. used in a domestic house. The other main reason being that the public areas have to be redecorated every so often to maintain the charm and to ensure that customers keep coming and to do not get bored with the same scenario. It is exactly for this reason that a mockup room was prepared based on which other rooms in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsolutely not applicable to the facts and circumstances of the assessee and the case. In the case of Ballimal Nawal Kishore, the repairs and renewal were done on self owned premises and not on leased premises. On the other hand the assessee company has infact followed the principle enunciated in the second case law i.e. all capital expenditure incurred in lease hold premises which can be removed when leaving the premises has been capitalized. The expenditure charged to revenue account as shown in page no. 444 consists of upholstery, fabric, cutlery, rubber mats, napkins, civil work, shower mirror, room chair cloth etc. No additional asset was created, it is only the existing assets which were renewed. As mentioned in the note filed with the assessing officer part of the expenditure was on mockup room based on which the other rooms in the Hotel were to be refurbished. The other part of the expenditure was on redoing the bar in the Hotel called Insomnia Bar. 4.1 Furthermore, the case law relied by the Assessing Officer was distinguished and several other case in support of the case of the assessee were submitted. Assessee further submitted that ITAT decided the similar issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of Hon'ble Supreme Court in the case of BaIlimal Naval Kishore vs. CIT 224 ITR (SC) and also putting reliance on various other judgments, AO has held that expenses are providing enduring benefit and thus enhancing efficiency and effectiveness of the Hotel. So, finding of the Assessing Officer is based on facts that expenses should have been capitalized to fixed assets in the books of accounts of the assessee. By doing so Assessing Officer has worked out disallowance of ₹ 30,07,454/-. The Ld. Ld. Authorised Representative s reliance on this vaorus case laws has been considered and found to be not attracted on the facts of the case. In view of the above discussion ground no. 2 of the appellant deserves to be dismissed. 5. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that in this case the assessee has a hotel premises on lease. Assessee had to incur various expenditure as on-going operations. Assessee s submission is that assessee has a hotel and it has to keep on making changes to its rooms restaurants, lobbies in their decor as well as in the edibles on offer (i.e. the menu) in attracting the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3104 Upholstery leather 9849 Sheer Curtain 5292 Room Chair cloth 2335 Carpet 18975 Carpet for corridor 68724 Cushion pad 9788 Curtain fabric 882 Lamp shade 540 Plants 7600 Curtain fabric 392 Photography 3490 Chilly mini bar 1035 Air ticket for parvathy 10901 CFL Light 124 P. Mandanna 7022 Rectangular Plate and Platter 1075 Table Lamp 6075 Lights 5046 Civil Work for Room 1115992 Total 1349 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively and smoothly. In these circumstances, it was held that the assessee has incurred expenditure in connection with smooth working of the profession and leaving the fixed assets untouched. The expenditure in question was revenue and hence, allowable un/s. 37(1) of the Act. In 237 ITR 902, C.I.T. vs. Ooty Dasaprakash. In this case it was held that the expenditure incurred for repairs, modernizing hotel and replacing existing component of the portion of the building for furniture and fitting with a view to create the consultative and beautiful atmosphere for the purpose of running the hotel business should not be said to be of enduring nature and hence, the same was not capital expenditure. 7. We find that this tribunal in assessee s own case in I.T.A. No. 3464/Del/2005 ors. Vide order dated 28.11.2008 has concluded as under:- In this year, the CIT (Appeals) has taken a contrary view than what he has taken in the year. From the reasons given aforesaid in the earlier year's appeal, we hold that expenditure which are of revenue in nature are not covered in the Explanation 1 to section 32(1) of the Act and it is only the expenditure which are of capital expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of depreciation on construction of work put up on leased premises which in the normal course such an assessee would not have been entitled to, since such an assessee was not the owner. So however, it is clarified that it is not the same thing to state that whatever is spent by a lessee or a tenant, on the leased premises should always be recorded as a capital expenditure. In our view, the said judicial pronouncement rendered by the Hon'ble Karnataka High Court makes the case of the Revenue weak in so far as the reliance on Explanation 1 to Section 32(1) is concerned. From the aforesaid proposition laid down by the Hon'ble High Court, an inference that can be drawn is that the nature of expenditure in question has to be examined in the light of the normal principles of law, as has been done by us in the earlier paragraphs. We may also add here that the rationale laid down by the Hon'ble Karnataka High Court is in consonance with the objects for which the Explanation 1 to Section 32(1) or the erstwhile Section 32(1 A) was put on the Statute. For the above reasons, we therefore, are of the view that Explanation 1 to Section 32(1) does not come in the way of allowi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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