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2023 (10) TMI 514 - HC - Income TaxNature of expenses - Renovation and repair expenses - whether not the revenue expenditure admissible u/s 37? - treatment of expenses incurred on renovation and refurbishment of Hotel - HELD THAT - Having regard to the judgment rendered in 2023 (10) TMI 467 - DELHI HIGH COURT the instant appeal is disposed of with the following directions, as the view taken in the said appeal will apply mutatis mutandis to the instant case as well Appellant/assessee will be entitled to claim the deduction, as, in our opinion, it is in the nature of revenue expenditure as incurred on payment of fees to GEL.
Issues:
The judgment concerns the Assessment Year (AY) 1991-92 and involves the following substantial questions of law: 1. Whether the “renovation and repair” expenses, partly capitalized in the books of account of the Assessee, are revenue expenditure admissible u/s 37 of the Income Tax Act, 1961? 2. Whether the payment made to Gherzi Eastern Ltd., an interior architect, for consultancy and supervision of interior décor under “renovation and refurbishment” is capital expenditure? Summary: In this case, the High Court addressed the appeal challenging the order passed by the Income Tax Appellate Tribunal for AY 1991-92. The Tribunal had disallowed the payment made by the appellant/assessee to Gherzi Eastern Ltd. (GEL) as a professional/technical fee. The Commissioner of Income Tax (Appeals) and the Tribunal upheld this decision. However, based on a previous judgment concerning AY 1992-93, the High Court allowed the deduction of Rs.11,00,000/- incurred on fees to GEL as revenue expenditure. The court held that this amount was admissible u/s 37 of the Income Tax Act, 1961. The court noted that the substantial questions of law framed were answered in favor of the appellant/assessee and against the revenue. Therefore, the appellant/assessee was entitled to claim the deduction for the fees paid to GEL. The judgment provided directions based on the previous decision and disposed of the appeal accordingly.
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