2015 (8) TMI 514 - HC - Income Tax

Expenditure incurred on laying marble flooring - allowable as revenue expenditure/current repairs or capital expenditure - Held that - In Comfort Living Hotels P. Ltd. v. Commissioner of Income Tax 2014 (3) TMI 585 - DELHI HIGH COURT it was held by this Court that the expenditure incurred on removing the walls to increase the sitting capacity of a bar in a hotel should be treated as revenue expenditure since it was incurred to enhance the business profit. The court is of the view in the facts of this case that the ITAT has rightly affirmed the order of the CIT (A) treating the cost of the marble used to replace the flooring as revenue expenditure. The question is, therefore, answered in the affirmative i.e. in favour of the Assessee

Summary

Issues:
1. Assessment Year 1996-97
2. Classification of expenditure as revenue or capital

Analysis:
1. The appeal pertains to the Assessment Year 1996-97. Most issues in this appeal are similar to a previous judgment involving the same parties. The questions from the previous judgment will be answered similarly in this case.

2. The main issue in this Assessment Year is whether the expenditure of Rs. 28,40,587 incurred on laying marble flooring should be classified as revenue expenditure or capital expenditure. The Assessing Officer initially categorized it as capital expenditure, but the CIT (A) and ITAT disagreed.

3. The assessee explained that the marble was used to replace flooring in heavily used areas of the hotel, such as toilets, lobby, banquet hall, and restaurants. The Assessing Officer argued that this was not day-to-day maintenance and treated it as capital expenditure. However, labor and cutting costs were allowed as revenue expenditure.

4. Referring to a previous case, the court held that expenses incurred to enhance business profit should be treated as revenue expenditure. In this case, the court agreed with the ITAT and CIT (A) that the cost of marble for flooring replacement should be considered revenue expenditure, affirming the decision in favor of the Assessee.

5. The judgment concludes by stating that the appeal is disposed of, indicating that the court's decision on the classification of the expenditure as revenue expenditure stands.