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TMI Blog2009 (1) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred by the assessee in construction of the Ghosunda Dam as revenue expenditure is affirmed. However the order for reducing the guest house expenses disallowed by the assessing officer from Rs. 15,40,667 to Rs. 4,07,522 is set aside and the order passed by the Assessing Officer is restored. - 52 of 2002. - - - Dated:- 30-1-2009 - A.M. KAPADIA AND SANGEET LODHA JJ. K.K. Bissa for the appellant Anajay Kothari for the respondent JUDGMENT The judgment of the court was delivered by 1. SANGEETA LODHA J. - This appeal under section 260A of the Income-tax Act, 1961 (in short "the Act of 1961" hereinafter) is directed against the order dated October 16,2001, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur (in short "the ITAT" hereinafter), whereby an appeal filed by Revenue against the order dated February 20,1994 passed by the Commissioner of Income-tax (appeals, Udaipur (in short "CIT(A)" hereinafter) setting aside the order passed by the Assessing Officer (in short "the AO" hereinafter) dated October 28, 1993, to the extent of disallowing certain expenditure, stands dismissed. 2. The return for the assessment year 1991-92 was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the various High Courts, the expenses incurred by the assessee-company in respect of the guest house were also held to be allowable deduction by the Income-tax Appellate Tribunal. Hence, this appeal at the instance of Revenue. 5. The appeal was admitted by this court on the following substantial questions of law arising from the order impugned passed by the learned Income-tax Appellate Tribunal: "(1) Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting the disallowance of Rs. 15,21,30,864 being expenditure on construction of Gosunda Dam holding that the expenditure was of revenue nature ignoring the facts brought on record by the Assessing Officer including the fact that the expenditure in question related to period prior to commissioning of Chandana Smelter and the judgment of the Supreme Court reported in Devidas Vithaldas and Co. v. CIT [1972] 84 ITR 277? (2) Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the business should go no more profitably, therefore, by all means, the expenditure incurred deserves to be treated a revenue expenditure. In support of his contentions, the learned counsel has relied upon the decisions of the hon'ble Supreme Court in the matters of CIT v. Associated Cement Companies Ltd. [1998] 172 ITR 257, CIT v. Bombay Dyeing and Manufacturing Co. Ltd. [1996] 219 1TR 521 (SC) and a decision of this court in the matter CIT v. Raj Spinning and Weaving Mills Ltd. [2005] 272 ITR 487 (Raj). In regard to the guest house expenses, the learned counsel for the respondent-assessee also does not dispute that the matter stands covered by the decision of the hon'ble Supreme Court in Britannia Industries Ltd. 's case [2005] 278 ITR 546. 8. We have considered the rival submissions and perused the material on record. 9. There is no quarrel with the proposition of law advanced by the learned counsel for the Revenue that where expenditure is made for bringing into existence a new asset or an advantage of an enduring nature and is made once and for all for procuring enduring benefits shall be treated to be expenditure of capital nature. The word "cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 (SC) and the decision of the hon'ble Supreme Court in the matter of CIT v. Madras Auto Service (P) Ltd. [1998] 233 1TR 468, opined as under (page 495 of 272 ITR): "From the aforesaid judgments of the Supreme Court, it is apparent that merely because the amount spent has been used for construction of a building or structure of permanent nature is not the decisive test for holding the expenses to be capital outlay or revenue outlay. The two tests emerging from the aforesaid decisions are that firstly where the building or construction of any permanent structure is brought into existence that is by itself not sufficient to hold the expenses to be capital nature invariably. Where such construction does not result in acquisition of any capital assets to the trade of the assessee or the property does not become the property of the asses- see, it does not result in acquisition of capital assets of enduring nature by the assessee. Secondly, it is also clearly discernible that if such expenses are incurred for the purposes of business for deriving any benefit whether to preserve the business or to facilitate the running of the business more smoothly or to make the business more pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Ltd.'s case [2005] 278 ITR 546. In the said case, the hon'ble Supreme Court, while considering the question as to whether the expression "premises and buildings" referred to in sections 30 and 32 and used for the purposes of business operation would include within its scope and ambit, the expression "residential accommodation in the nature of guest house" used in sub-sections (3), (4) and (5) of section 37 of the Act of 1961, observed as under (page 558): "While the two expressions can be similarly interpreted, a distinction has been sought to be introduced for the purposes of section 37 by specifying the nature of building to be a guest house. In our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest house of the nature indicated in sub-section (4) of section 37. When the language of a statute is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that ded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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