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2019 (3) TMI 287 - HC - Income TaxNature of expenditure - revenue or capital expenditure - expenditures towards repairs and renovations of Assessee s hotel properties - HELD THAT - Here it cannot be said that the expenditure incurred was for the purpose of bringing into existence a new asset or obtaining a new advantage. This was as simple case where the existing assets were repaired or to some extent renovated. The CIT Appeals as well as the ITAT on facts have held that this was not a case where some new asset was brought into existence or new advantage of enduring nature was obtained. Such concurrent findings of fact do not suffer from any perversity so as to give rise to any substantial question of law. Depreciation on UPS - @60% OR 15% - UPS is the component/ equipment connected with the computers - HELD THAT - Both the CIT Appeals as well as the ITAT have relied upon the decisions in the case of CIT vs. BSES Yamuna Powers Ltd 2010 (8) TMI 58 - DELHI HIGH COURT Pentair Water India (P) Ltd. vs. ACIT 2014 (5) TMI 1068 - ITAT PANAJI and Macawber Engineering System (I) P. Ltd. vs. ACIT (2013 (11) TMI 131 - ITAT MUMBAI) in which it is clearly held that the UPS is the component/ equipment connected with the computers and is therefore entitled for the depreciation @ 60%. Again the contention as raised does not give rise to any substantial question of law.
Issues:
Challenge to ITAT order on treatment of hotel property expenditures as revenue or capital expenditure, depreciation rate on UPS purchases. Analysis: 1. The appeal challenged the ITAT order dismissing the appeal filed by the Revenue against the CIT's order regarding the treatment of hotel property expenditures for the Assessment Year 2008-09. Both the CIT Appeals and ITAT held that the repairs and renovations expenses should be treated as revenue expenditure, not capital expenditure. 2. The Appellant argued that the expenditure resulted in the creation of a new asset or securing a new enduring advantage, citing the Ballimal Naval Kishore case. They contended that the expenses should be treated as capital expenditure. Additionally, they raised a concern about the depreciation rate on UPS purchases set by the ITAT at 60% instead of 15% by the Assessing Officer. 3. The High Court examined the submissions and reviewed the orders and material on record. Considering the factual aspects, concurrent findings, and legal precedents, the Court concluded that no substantial questions of law arose in the appeal. The Court found no infirmity in treating the expenditure as revenue based on the nature of repairs and renovations done on the hotel properties. 4. Referring to legal precedents like Empire Jute Co. Ltd. case and decisions from Madras High Court and Rajasthan High Court, the Court emphasized that not all enduring advantages automatically qualify as capital expenditure. The nature of the advantage in a commercial sense must be considered. The Court highlighted that repairs and renovations enhancing business operations without altering fixed capital are revenue expenditures. 5. The Court distinguished the Ballimal Naval Kishore case, stating that it did not apply to the present scenario where existing assets were repaired or partially renovated. The Court upheld the findings of the CIT Appeals and ITAT that no new asset was created or enduring advantage obtained, leading to the conclusion that the expenses were revenue in nature. 6. Regarding the depreciation rate on UPS purchases, the Court cited precedents supporting the 60% depreciation rate for UPS as equipment connected with computers. The Court found no substantial question of law in this regard. Consequently, the Court dismissed the appeal, stating it raised no substantial legal issues and ordered no costs to be paid.
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