The Tax Publishers2019 TaxPub(DT) 1619 (Bom-HC) : (2019) 261 TAXMAN 0500

INCOME TAX ACT, 1961

Section 37(1)

Where expenditure towards dismantling tiles, laying laterite stones, laying plaster, waterproofing, plumbing ,etc., was incurred by assessee for the purpose of repairing and renovating the existing assets, such expenditure incurred for repair/renovation would be treated as revenue expenditure as assessee did not gain any substantial advantage of enduring nature.

Business expenditure - Allowability of - Repairs and renovations -

Assessee-company incurred expenditure towards dismantling tiles, laying laterite stones, laying plaster, waterproofing, plumbing ,etc. in its hotel properties. Revenue alleged that expenditure incurred on repairs and maintenance ultimately, resulted in renewal and upgradation of hotels, therefore, the same was required to be treated as capital expenditure and not revenue expenditure. Further, it was alleged that as assessee secured new advantage of an enduring nature by bringing into existence a new asset, such expenditure would be of capital nature. Held: Since existing assets were repaired, or to some extent renovated, the expenditure incurred in respect of such repair/renovation would be treated as revenue expenditure as assessee did not gain any new advantage of an enduring nature. Further, merely because the income of hotel might have increased on account of repairs, renovation and modification, it did not necessarily follow that the repairs and renovation amounted to replacing the existing assets with new capital assets. The existing asset was the hotel and merely because the same could be used in a better manner or more profitably on account of repairs and renovation, it could not be said that the expenditure incurred towards such repairs or renovation was capital expenditure and not the revenue expenditure.

Distinguished:Ballimal Naval Kishore v. CIT (1997) 224 ITR 414 (SC) : 1997 TaxPub(DT) 0992 (SC) New Shorrock Spg. & Mfg. Co. Ltd. v. CIT (1956) 30 ITR 338 (Bom.) : 1956 TaxPub(DT) 0138 (Bom-HC)

REFERRED : Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1 (SC) : 1980 TaxPub(DT) 1083 (SC) CIT v. Ooty Dasaprakash (1999) 237 ITR 902 (Mad.) : 1999 TaxPub(DT) 0422 (Mad-HC) CIT v. Lake Palace Hotels & Motels (P.) Ltd. (2002) 258 ITR 562 (Raj) : 2002 TaxPub(DT) 0705 (Raj-HC) CIT v. Cama Hotels Ltd. (2015) 235 Taxman 206 (Guj) : 2015 TaxPub(DT) 4431 (Guj-HC)

FAVOUR : In assessee's favour

A.Y. : 2008-09


INCOME TAX ACT, 1961

Section 32

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