TaxTMI 
TaxTMI 
2023 (10) TMI 567
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....ax Appellate Tribunal [in short, "Tribunal"] in ITA No.3372/Del/2002. 2. Insofar as the above-captioned appeal is concerned, the following questions of law were framed by the court via order dated 18.09.2007: "(i) Whether the finding of the Income Tax Appellate Tribunal that the "renovation and repair" expenses, partly capitalized in the books of account of the Assessee is not the revenue expenditure admissible under Section 37 of the Income Tax Act, 1961 is correct? (ii) Whether the Income Tax Appellate Tribunal is correct in law in holding that the expenses incurred on replacement of door shutters, bus bar and MS frames for fixing false ceiling forming part of the existing hotel of the Assessee is capital expenditure?....
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....n and improvement of the hotel premises and f or installation of a completely new air-conditioning system. The expenses of Rs.60098/- are accordingly to be capital expenses and the AO's order on this respect is upheld. In the case of replacement of door shutters, fixing of Bus Bars, replacement of basin of the cooling tower and fabrication of frame for fixing the false ceiling, the AO has not disputed the claim of the appellant that the expenses were entirely on account of replacement of fixture and fittings and no new assets was brought into existence. The AO is accordingly directed to allow the following expenses as revenue expenses. Replacement of Door shutters Rs.71,45,416/- Fixing of Bus Bars Rs.32,000/- Replacement ....
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....the expenditure is merely on replacement of an existing item that had been damaged or worn out or it is an expenditure incurred with a view to bring in a substantially superior item in place of the existing item. From the bills furnished by the assessee in the paper book it is seen that the assessee purchased 300 guest room door shutters, 50 mm thick consisting of 3 mm teak veneer on both sides with melamine lacquer polish on both sides @ Rs.9,550/- and the assessee purchased 300 toilet door shutters of similar nature of 30 mm thick @ Rs.8,250/- per shutter from M/s. New Era Industries. Cost included hinges and fixing of locks etc. Similar expenditure was incurred by the assessee by way of payment of Rs.9,59,400/- to M/s Juneja Associates P....
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....auditor. In matters like this, principles of accountancy have to be attached due importance. That has been stated by Hon'ble Supreme Court itself in relation to an issue of capital or revenue expenditure in the case of Challapali Sugars Ltd. Vs. CIT, 98 ITR 167 (SC) in the following words:- "It would appear from the above that the accepted accountancy rule for determining the cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money can be capitalized and ....
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....diture by the auditor of the company. The learned counsel for the assessee argued that these items purchased by the assessee were utilized in the nature of replacement. No material has been relied upon in this behalf. From the facts recorded by the Assessing Officer, it is seen that the expenditure of Rs.35,784/- is on replacement of the basin of the cooling tower, whereas the expenditure of Rs.32,000/- on bars and expenditure of Rs.36,283/- on fabricating a frame of mild steel for fixing the false ceiling do not appear to be in the nature of replacement. We, therefore, restore the disallowance of Rs.32,000/- and Rs.36,283/, also as made by the learned Assessing Officer. 8. First ground in assessee's appeal relates to the expen....