TaxTMI 
TaxTMI 
2012 (9) TMI 801
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....ance treating as capital in nature of Rs.17,38,395/- made by the Assessing Officer on account of capital expenditure. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 147 of the IT Act dated 06/11/2009 were that the assessee-company is in hotel business. It was noted by the AO that under the head "repairs to furniture and fixture" a sum of Rs.17,38,395/- was debited to P&L Account. The nature of expenditure was stated to be replacement of mirrors in rooms, replacement of plywood panels and repair of plaster moulded roof, etc. within the hotel premises. The necessity to replace the wooden work was on account of damage caused by white-ants. The assessee has placed reliance on (i) CIT vs. ....
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....appellant. The basis of drawing inference of treating repair expenses as disallowable being capital expenditure by the A.O. solely on presumption that by purchase & utilization of plywood, its polish or colour were meant for creating of new wooden panels and new glass work. First of all this inference is not supported by any independent inquiry in this regard and no material whatsoever has bee brought on record to show that new wooden panels were created by the appellant. The bills of glasses produced before me clearly shows purchase of mirror and no hotel industry can function from day one without mirrors being fitted in rooms & bathrooms. Therefore, new mirrors purchased are obviously for replacements. Thus, factually, the presumption or ....
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....d wooden panel as informed by the assessee. He has therefore contested that by reversing the order of the CIT(A), the action of the AO may be confirmed. 5. From the side of the respondent-assessee, ld.AR Mr.Manish Shah appeared and explained that the hotel is in existence since last 25 years. The hotel is having about 45 rooms and due to heavy rains and flood in some areas of Ahmedabad the damage was caused in the wooden furniture and wooden panels. It was a business requirement because the hotel industry being a service industry, therefore should look neat and clean. In addition to the case laws cited before the lower authorities, ld.AR has also placed reliance on (i) CIT vs. Dasaprakash (1978) 114 ITR 210(Mad.), (ii) CIT vs. Kalyanji M....
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....sset has been created. By the study of the nature of expenditure, it can be ascertained whether the assessee has started a new line of revenue generation or started getting an altogether new advantage of enduring benefit. Therefore, we are of the view that substantial repair may be advantageous for retaining an existing asset but such an enduring benefit may not lead to a conclusion that a capital asset has been created through which a new enduring advantage was created. At this juncture, we have to keep in mind that the assessee's business is such that the hotel premises should not look shabby, rather should look attractive. Therefore, we can undisputedly hold that the expenditure in question was a business requirement as decided by the....