2020 (7) TMI 688
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....g Counsel assisted by Mrs.V.Pushpa, learned Standing Counsel and Mrs.R.Premalatha, learned Standing Counsel appearing for the respondent - Revenue. 2. This appeal by the Revenue under Section 260A of the Income Tax Act, 1951 (for short, the Act) is directed against the order dated 16.10.2017 made in ITA.No.1020/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment year 2012-13. 3. The appeal has been admitted on 10.4.2018 on the following substantial question of law : "Whether expenditure incurred in the renovation and redecoration of rooms in a hotel would amount to capital expenditure or revenue expenditure ?" 4. The appellant is engaged in the business of running a three star hotel and for t....
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....ppeal primarily holding that the expenses were incurred only to preserve the existing asset and that the assessee had to renovate the old rooms in order to attract foreign customers and to maintain the standard of a three star hotel. With regard to its enduring benefit as applied by the Assessing Officer, the CIT(A) opined that the test of enduring benefit might fail on certain occasions, that the correct test was to see as to whether there was creation of any new asset and that admittedly, the assessee had not created any new asset, but had undertaken repairs and renovation only in the existing rooms and that too, only in 18 rooms out of 57 rooms available in the hotel. 7. The Revenue carried the matter on appeal to the Tribunal by conten....
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....penditure or revenue expenditure. 10. In our considered view, the test to be applied to decide as to whether the expenditure is revenue or capital expenditure has been brought out in the decision of the Hon'ble Apex Court in the case of Empire Jute Company Limited Vs. CIT [reported in 124 ITR 1], wherein it has been held that there may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none-the-less, be on revenue account and the test of enduring benefit may break down. It was pointed out that it is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. It was further held that what is material to consider is the nature of ....
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....xisting components of the building, furniture and fittings, with a view to create a conducive and beautiful atmosphere for the purpose of running of a business of a hotel and it goes without saying that the expenditure incurred by the assessee for the relevant assessment years in repairing and modernising the hotel and replacing the existing components of a portion of the building, furniture and fittings cannot at all be stated to be of enduring in nature, in the nature of being a "capital expenditure"; but, definitely such an expenditure would fall under the category of "revenue expenditure" in nature to be allowed, as a deduction under Section 37 of the Income Tax Act. In the aforementioned decision, the Division Bench followed the said a....
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.... Living Hotels P. Ltd. Vs. CIT [reported in (2014) 363 ITR 182], the Court applied the decision of the Hon'ble Supreme Court in the case of Empire Jute Company Limited that an action that merely facilitates the assessee's business by making it more profitable, while leaving the fixed capital untouched, is a revenue expenditure. 16. In the decision of the Gujarat High Court in the case of CIT Vs. CAMA Hotels Ltd. [reported in (2015) 235 Taxman 0206], an identical question arose for consideration. The Court, after referring to the decisions in the cases of Empire Jute Company Limited, Ballimal Naval Kishore and Comfort Living Hotels P. Ltd., held that the expenditure incurred by the assessee for renovating a hotel, rooms, conference halls, e....