1989 (7) TMI 38 - HC - Income Tax

Summary

Issues involved:
The judgment involves a petition u/s 256 of the Income Tax Act, 1961, seeking clarification on the classification of expenditure incurred on maintaining a hotel as capital or revenue expenditure.

Issue 1 - Classification of Expenditure:
The petitioner, operating a hotel under a lease, claimed Rs. 17,24,480 as revenue deduction for expenses on repairs and renovations. However, the Income-tax Officer and subsequent authorities considered one-fourth of this amount as capital expenditure. The petitioner argued that the expense was for the business's purpose and not of an enduring nature, citing a previous case. The court noted the applicability of section 32(1A) which allows depreciation on capital expenditure by a tenant for construction, renovation, or extension of a building. The authorities concluded that a portion of the expenditure qualified as capital, based on the nature of repairs and renovations. The Tribunal's decision was upheld as a factual determination, dismissing the petition.

Conclusion:
The court dismissed the petition, affirming the authorities' classification of one-fourth of the total expenditure as capital expenditure under section 32(1A) of the Income Tax Act, 1961.