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TMI Blog2018 (3) TMI 1570X X X X Extracts X X X X X X X X Extracts X X X X ..... ead to the increase of the revenue of hotel and it will also enhance its sale-ability and cannot be treated as capital expenditure of enduring nature. - Decided in favour of assessee No illegality or perversity in the deletion of the disallowance made by the CIT (A) by treating the same as expenditure incurred wholly and exclusively for the purpose of business on account of directors foreign travelling expenditure. - ITA No.6024/Del./2014, ITA No.6025/Del./2014, ITA No.6097/Del./2014, ITA No.6098/Del./2014 - - - Dated:- 23-3-2018 - Shri R. K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member Assessee By : Shri Ajay Vohra, Senior Advocate and Shri Aditya Vohra, Advocate Revenue By : Shri Atiq Ahmad, Senior DR ORDER Per Kuldip Singh, Judicial Member The aforesaid cross appeals filed by the assessee company and the Revenue are being disposed of by way of consolidated order to avoid repetition of discussion 2. The appellant, Rambagh Palace Hotels Pvt. Ltd. (hereinafter referred to as the assessee company ) by filing the present appeals, sought to set aside the impugned orders both dated 29.08.2014 passed by Ld. CIT(Appeals)-XVIII, New Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year is considered a separate year for assessment. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the above disallowance by ignoring the fact that it is unfair to extrapolate the inference drawn by the AO in one assessment year into the reasoned conclusion drawn by another AO for an earlier year. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the above disallowance by not appreciating the fact that as per the agreement all the expenses related to the business / foreign travel of the company will be borne by M/s. India Hotels Co. Ltd. 4. Briefly stated the facts necessary for adjudication of the controversy at hand in all the aforesaid appeals are : Assessing Officer made disallowance of ₹ 1,38,00,058/- ₹ 1,91,75,850/- being 50% of ₹ 2,76,00,116/- ₹ 3,83,51,701/- for AYs 2003- 04 2005-06 respectively on account of repair and maintenance expenses qua which vendors were not produced for verification on ad hoc basis. AO further made disallowance on account of repair and maintenance expenditure paid to Chandra Singh Contractor and National Sanit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of expenditure on repair and maintenance. 10. In the backdrop of the aforesaid undisputed facts and arguments addressed by ld. Authorized Representatives of the parties to the appeals, the question arises for determination is :- as to whether disallowance of repair and maintenance expenses on ad hoc basis can be made by the Revenue authorities for not producing vendors for verification? 11. The ld. AR for the assessee company drew our attention towards the decision rendered by the Hon ble High Court of Delhi in CIT vs. Fancy International 166 taxman 183 (Delhi HC), available at pages 62 63 of the paper book. Hon ble jurisdictional High Court while deciding the identical issue, wherein assessee had failed to produce the parties qua which the expenditure were claimed, held as under :- Section 37(1) of the income-tax Act, 196 1 - Business - expenditure - Allowable as - Assessment year 1997-98 - Assessee, a 100 per cent. export-oriented unit dealing in garments, claimed certain expenditure towards fabrication charges - Assessing Officer issued summons to some of parties,' to Whom payment was allegedly made by assessee - Said summons, however, came ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UND NO.2 OF ASSESSEE S APPEALS IN ITA NOS.6024/DEL/2014 6025/DEL/2014 15. The ld. CIT (A) confirmed the disallowance of repair and maintenance expenditure paid to Chandra Singh Contractor and National Sanitation to the tune of ₹ 2,13,76,928/- ₹ 9,68,237/- for AY 2003-04 and ₹ 2,36,00,765/- ₹ 19,93,220/- for AY 2005-06 respectively made by the AO by treating the same capital in nature. There is no dispute as to the genuineness of the payment made to Chandra Singh Contractor and National Sanitation. The only dispute is, as to whether the expenditure are capital or revenue in nature . 16. Assessee company has brought on record the documents as to work done by Chandra Singh Contractor and copy of agreements available at pages 66 to76 84 of the paper book. 17. Perusal of the nature of the work done by aforesaid contractor apparently shows that the expenses are qua change in floor and replacement of marble, repair work in Gem Palace, replacement of fixed wood work art work, changes/repair of rooms including dismantling masonry, water proofing, flooring, finishing, tiles/cladding etc., changing of ceiling/floor in corridor, repair work in ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotel. In view of the several judicial pronouncements cited above as well as failure of revenue to show any increase in the capacity of the room or any new facility, merely because repairs expenditure are on higher side as per perception of the revenue, it cannot be held to be capital expenditure. In view of this we do not find any infirmity in the order of the ld CIT(A) in allowing the expenditure of ₹ 51154867/-. Ground No. 1 of the appeal of the assessee, which is also on the same point wherein, the ld CIT(A) has upheld the disallowance of ₹ 2943060/- on account of renovation of floor. Issue is now squarely covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in 233 Taxman 177 wherein, expenditure on refurnishing on hotel rooms is held to be revenue in nature. The expenditure disallowed by the ld CIT(A) were wooden purchases for renovation of floor. It does not meet the test of increase in any additional capacity in the hotel. Therefore, the order of the ld CIT(A) to the extent of disallowance confirmed of ₹ 2943060/- cannot be upheld. In view of our above finding, ground No. 1 of the appeal of the revenue is dismissed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the ld. AR for the assessee company contended that the issue in controversy has been decided in favour of the assessee in assessee s own case for AYs 1997-98, 2006-07 2009-10 wherein the issue was initially set aside to AO for verification and re-adjudication which was treated as business expenditure by the AO while giving effect to the appeal order. 24. Ld. CIT (A) has treated the foreign travel expenses as business expenses by examining the details and following the assessment order passed in assessee s own case (supra) passed by giving appeal effect to the order of the Tribunal. So, we find no illegality or perversity in the deletion of the disallowance made by the CIT (A) by treating the same as expenditure incurred wholly and exclusively for the purpose of business on account of directors foreign travelling expenditure. So, Ground Nos.2, 3 4 of Revenue s appeals in ITA Nos.6097/DEL/2014 6098/DEL/2014 are determined against the Revenue. 25. In the result, the appeals of the assessee being ITA Nos.6024/Del/2014 6025/Del/2014 are allowed whereas appeals of the Revenue in ITA Nos. 6097/DEL/2014 6098/DEL/2014 are dismissed. Order pronounced in open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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