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| The Tax Publishers2020 TaxPub(DT) 3001 (Mad-HC) : (2020) 273 TAXMAN 0256 INCOME TAX ACT, 1961
Section 37(1)
Expenditure incurred in renovation and redecoration of rooms in assessee's hotel was revenue expenditure because number of rooms in assessee's hotel did not increase and renovation and repairs neither increased hotel's capacity nor did it empower assessee to revise basic room tariff.
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Business expenditure - Capital or revenue expenditure - Expenditure incurred in renovation and redecoration of rooms in assessee's hotel -
Assessee was engaged in business of running a three star hotel. Issue was as to whether expenditure incurred in renovation and redecoration of rooms in hotel would amount to capital expenditure or revenue expenditure. Held: Number of rooms in assessee's hotel remained at 57 and that there was no increase in number of rooms. Only 18 rooms out of 57 rooms were renovated and repaired. Assessee specifically contended that renovation and repairs neither increased their capacity nor did it empower to revise basic room tariff because it could be done only after considering further facts such as market condition remaining in city and with concurrence of franchisee agreement (with ITC). Granite and marble used by assessee would not last long and there was no guarantee and they may develop cracks and lose their shine and even become obsolete in a couple of years. Expenditure incurred by assessee was revenue expenditure and not a capital one.
Followed:Empire Jute Company Limited v. CIT (1980) 124 ITR 1 (SC) : 1980 TaxPub(DT) 1083 (SC), CIT v. Saravana Spinning Mills P. Ltd. (2007) 293 ITR 201 (SC) : 2007 TaxPub(DT) 1442 (SC), CIT v. Cama Hotels Ltd. (2015) 235 Taxman 0206 (Guj) : 2015 TaxPub(DT) 4431 (Guj-HC), CIT v. Mac Charles (India) Limited (2015) 233 Taxman 0177 (Karn) : 2015 TaxPub(DT) 0550 (Karn-HC), M/s. Comfort Living Hotels P. Ltd. v. CIT -III (2014) 363 ITR 182 (Del) : 2014 TaxPub(DT) 1561 (Del-HC), CIT v. Ooty Dasaprakash (1999) 237 ITR 902 (Mad) : 1999 TaxPub(DT) 0422 (Mad-HC), CIT (Central) v. Dasaprakash (1978) 114 ITR 210 (Madras) : 1978 TaxPub(DT) 0360 (Mad-HC) and Dy. CIT v. Pandyan Hotels Ltd. [ITA No.1020/Mds/2016, dt. 16-10-2017].Distinguished:Ballimal Naval Kishore & Anr. v. CIT (1997) 224 ITR 414 (SC) : 1997 TaxPub(DT) 0992 (SC) and CIT v. Viswams (2019) 105 Taxman.com 289 (Mad) : 2019 TaxPub(DT) 2833 (Mad-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
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