2015 (1) TMI 476

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..... The Tribunal partly allowed the appeal and held that the expenses incurred by the assessee are to be allowed under the provisions of Section 37 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short), and setting aside the orders passed by the authorities below. 2. The assessee is a Public Limited Company carrying on the business of hotel. The Assessing Authority disallowed a sum of Rs. 4,45,10,181/- towards expenditure incurred under repairs and Maintenance of the hotel building. The appeal by the assessee was dismissed. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals)-III, Bangalore (hereinafter referred to as 'the First Appellate Authority'....

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....r the following substantial questions of law:            1. Whether the Tribunal was correct in holding that the expenditure incurred by the assessee towards interior decoration and refurnishing should be treated as a revenue expenditure when the assessee gained a enduring advantage and the same constitute capital expenditure?           2. Whether the Tribunal was correct in not taking into consideration that after incurred of expenditure towards interior decoration and refurnishing the total receipts of the assessee from room rents, restaurants, banquets and other services were increased from Rs. 21.64 Crores to Rs. 28.29 Crores and hence e....

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....have been incurred for purchase of a new asset. In that context, it was held that each machine in a segment has an independent role to play in the mill and the output of each division is different from the other. "Repair" implies the existence of a part of the machine which has malfunction. The textile plant consists of about 25 machines. One of such machines is the ring frame and thus machinery is replaced by a new machine. Therefore, it was held that the expenditure incurred for replacement of the new machine would not come within the meaning of the words "current repairs" 7. There cannot be any quarrel with the said proposition. In the aforementioned case, the Apex Court has prescribed the test. It is stated that the basic test to fin....