TaxTMI 
TaxTMI 
2002 (4) TMI 29
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....Appellate Tribunal was justified in holding that the sum of Rs. 5,30,503 incurred on old wing of the hotel building owned by the assessee was not a capital expenditure?" 2. The assessee-company, namely, The Lake Palace Hotels and Motels P. Ltd., Udaipur, is running two hotels, namely, Lake Palace Hotel and Garden Hotel. The hotels of the company are being operated by the Indian Hotels Co. Ltd. (Taj Group). As per the agreement 50 percent of the net operative profit is being paid to the assessee by the said group. The assessee filed the returns for the assessment year 1984-85 declaring a loss of Rs. 10,03,560. The company was given a notice under section 143(2). In response to the notice a detailed reply was submitted. The company also cl....
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.... articles as such there was no addition or embellishment of capital assets. The Tribunal relying on various decisions of the apex court and High Courts held that the provision of carpets, room mattresses, lamp shades, decorative lamps, galichas, etc., could not be treated as a capital expenditure. The Income-tax Appellate Tribunal also accepted the position that no major repairs and renovations had been carried out since its inception and the repairs and renovations were necessitated as the Common wealth Foreign Ministers' Conference at one time was proposed to be held in the Lake Palace Hotel. As such in the opinion of the Income-tax Appellate Tribunal the disallowance of Rs. 5,30,503 was not sustainable. 4. The Revenue made an appl....
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....ka Hotels Ltd. v. CIT [1969] 72 ITR 306 (Delhi) and Hylam Ltd. v. CIT [1973] 87 ITR 310 (AP). On the other hand, it is submitted by Mr. Rajendra Mehta, learned counsel for the respondent-assessee, that at the first instance securing the benefit for the business would prima facie fall in the category of capital expenditure. It is also submitted that if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite time. Learned counsel has placed reliance on a....
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....sset which has an element of permanency about it and which is capable of being a source of income and "capital expenditure" must, therefore, generally mean an acquisition of an asset and the asset must be intended to be of lasting nature; while income or revenue expenses are generally running expenses incurred in earning profit or expenses incurred with the primary object of an immediate return or acquisition of assets which are not of lasting value and are likely to get exhausted or consumed in the process of the return. 8. At this stage, it may be apposite to refer some of the judicial decisions, wherein broad tests have been laid down to distinguish capital expenditure from revenue expenditure. In Empire Jute Co. Ltd. v. CIT [1980] 12....
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....otel and the uniforms for its employees for the first time at or before the commencement of the hotel business. The court found that the expenditure was incurred by the assessee on linen and blanket and uniforms for its employees as a part of the initial equipment of the hotel and that a five star modem hotel cannot be said to be fully equipped without the linen, blankets and uniforms which form an integral part of the income earning apparatus. The case is clearly distinguishable on facts. In the instant case because of the order placed to accommodate the guests in the Foreign Ministers' Conference of international level purchasing was made of carpets, mattresses, folding tables, lamp shades, etc., by no stretch of imagination can such ....