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TMI Blog2002 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the assessee was not a capital expenditure?" The assessee-company, namely, The Lake Palace Hotels and Motels P. Ltd., Udaipur, is running two hotels, namely, Lake Palace Hotel and Garden Hotel. The hotels of the company are being operated by the Indian Hotels Co. Ltd. (Taj Group). As per the agreement 50 percent of the net operative profit is being paid to the assessee by the said group. The assessee filed the returns for the assessment year 1984-85 declaring a loss of Rs. 10,03,560. The company was given a notice under section 143(2). In response to the notice a detailed reply was submitted. The company also claimed Rs. 20,00,000 as revenue expenditure, the amount spent during the year ending on June 30, 1983, for carrying out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 35,600 (f) Miscellaneous furniture 30,778 (g) Lamp shades 11,950 (h) Partition panels 14,616 (i) Partition articles 41,343 (j) 12 decorative brass lamps &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Appellate Tribunal also accepted the position that no major repairs and renovations had been carried out since its inception and the repairs and renovations were necessitated as the Common wealth Foreign Ministers' Conference at one time was proposed to be held in the Lake Palace Hotel. As such in the opinion of the Income-tax Appellate Tribunal the disallowance of Rs. 5,30,503 was not sustainable. The Revenue made an application under section 256(1) of the Income-tax Act for referring four questions as formulated in the application for the opinion of this court. In para. 10, the Income-tax Appellate Tribunal declined to refer the proposed question No. 1. In para. No. 11, the Income-tax Appellate Tribunal declined to refer questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also submitted that if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite time. Learned counsel has placed reliance on a large number of cases, viz., Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC); CIT v. Dasaprakash [1978] 114 ITR 210 (Mad); CIT v. Indian Woollen Textile Mills P. Ltd. [1978] 112 ITR 441 (P&H); Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. CIT [1965] 56 ITR52 (SC); CIT v. Polyolefins Industries Ltd. [1988] 169 ITR 538 (Bom); Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses incurred with the primary object of an immediate return or acquisition of assets which are not of lasting value and are likely to get exhausted or consumed in the process of the return. At this stage, it may be apposite to refer some of the judicial decisions, wherein broad tests have been laid down to distinguish capital expenditure from revenue expenditure. In Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, the apex court has laid down that every advantage of enduring nature acquired by an assessee, it would not be treated as a capital expenditure, that it was material to consider the nature of the advantage in the commercial sense and that it was only where the advantage was in the capital field that the expenditure would be disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inen, blankets and uniforms which form an integral part of the income earning apparatus. The case is clearly distinguishable on facts. In the instant case because of the order placed to accommodate the guests in the Foreign Ministers' Conference of international level purchasing was made of carpets, mattresses, folding tables, lamp shades, etc., by no stretch of imagination can such items be said to be durable. Such expenses cannot be treated as capital expenditure. In fact the decision of the Madras High Court in CIT v. Dasaprakash [1978] 114 ITR 210 is more close to the facts of the instant case. In the said case the assessee was carrying on the business of running a hotel. The assessee made an expenditure in a sum of Rs. 37,390 on variou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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