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TMI Blog2022 (12) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenditure incurred by the assessee have been made to provide the same benefit as were available at the time of their initial installation. There have been no addition to the number of rooms of the resorts/hotel or any other space to generate the additional income from that place. Thus, respectfully following the decision of Goa Tourism Development Ltd. [ 2019 (3) TMI 287 - BOMBAY HIGH COURT] and Mac Charles (India) Ltd. [ 2015 (1) TMI 476 - KARNATAKA HIGH COURT] we hold that the expenses which have been treated as capital in nature by the Ld. CIT(A) are to be allowed as revenue expenditure. We also find force from the decision of Pandiyan Hotels Ltd [ 2020 (7) TMI 688 - MADRAS HIGH COURT] wherein similar issue was dealt holding it in favour of the assessee as revenue expenditure. Thus expenditure incurred by the assessee is revenue expenditure and not a capital expenditure and thus answered the substantial question of law in favour of assessee and against the revenue. - ITA No.191/PAN/2018 - - - Dated:- 30-8-2022 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER Appellant by : Smt. Pratibha R. Respondent by : Shri Mayur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented the Department. 4. Brief facts as culled out from the records are that the assessee is running a hotel under the name and style of M/s Sankamtal Hotel Pvt. Ltd. It filed return of income on 24.09.20008 reporting total income of Rs. 42,58,410/-. Assessment u/s 143(3) of the Act was completed on 24.12.2010. Subsequently, the case was reopened by invoking the provision of Section 147 read with Section 148 of the Act, for which the notice u/s 148 of the Act was issued on 31.03.2015. In response to the said notice, return was filed on 04.06.2015 reporting the same total income as was reported originally. In the course of reassessment proceedings, Ld. AO noted that assessee has incurred expenditure on restaurant renovation amounting to Rs. 10,57,901/- out of which Rs. 3,76,563/- were in respect of purchase of tiles and the balance in relation to labour cost and other materials including sand, cement, plumbing material etc. Ld. AO also noted that the assessee has incurred expenditure on Neon Light Sign Board of Rs. 80,000/-. Assessee made submissions in respect of claim of these expenditures as revenue expenditure allowable u/s 31 and 37 of the Act. However, Ld. AO completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs given by the Hon ble High Court by holding the expenses as revenue in nature is dealt with in para 9 which is reproduced as under: 9. Merely because the income of the hotel has increased, it does not necessarily follow it is because of the refurnishing or repair work done to the hotel rooms. That may be one of the factor. The real test is whether all those acts constitute replacing the existing asset. The existing asset is the hotel building and its rooms. When no extra flooring space or extra room capacity is added on account of such repairs, it cannot be said that a new asset has come into existence. All these repairs are done to preserve and maintain an already existing asset. In the course of such repairs, if they have upgraded the facilities to international standards, then that would not constitute a new asset. Therefore, the Tribunal was justified in holding that the expenditure incurred towards repairs and replacement of old parts would be in the nature of revenue expenditure and not capital expenditure. 8.2. Ld. Counsel further placed strong reliance on the decision of Hon ble Jurisdictional High Court of Bombay, Bench at Goa in the case of PCIT, Panaji vs. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT, on facts, have held that this was not a case where some new asset was brought into existence or new advantage of enduring nature was obtained. Such concurrent findings of fact do not suffer from any perversity, so as to give rise to any substantial question of law. 8.3. Reference was also made by the Ld. Counsel to the decision of Hon ble High Court of Madras in the case of Pandiyan Hotels Ltd. vs. DCIT in Tax Case Appeal No. 226 of 2018 dated 16.07.2020. 9. Per contra, Ld. Sr. D.R pointed out to the decision of Hon ble Supreme Court in the case of Saravana Spinning Mills Pvt. Ltd. reported in [2007] 293 ITR 201(SC) relied upon by the Ld. CIT(A) and submitted that the findings given by the Ld. CIT(A) are to be upheld as the expenses are towards renovation of rooms which are for over hauling the entire set up of the assessee and therefore such renovation do not qualify to be called as repair or replacement and allowed as revenue expenditure. 10. We have given our thoughtful consideration to the material placed on record and find force in the submission made by the assessee including through its written submission. Admittedly, fact is that assessee is in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the decision of Hon ble High Court of Karnataka in the case of CIT vs. Mac Charles (India) Ltd. [2015] 233 Taxman 177, Hon ble Delhi High Court in the case of Comfort Living Hotels Pvt. Ltd. vs. CIT [2014] 363 ITR 182, Hon ble Gujarat High Court in the case of CIT vs. CAMA Hotels Ltd. [2015] 235 Taxman 206 and also considered the decisions of Hon ble Apex Court in the case of Ballimal Naval Kishore [1997] 221 ITR 414 and CIT vs. Saravana Spinning Mills Pvt. Ltd. [2007] 293 ITR 201. The Hon ble Court held that the expenditure incurred by the assessee is revenue expenditure and not a capital expenditure and thus answered the substantial question of law in favour of assessee and against the revenue. Accordingly, the grounds of appeal of the assessee in this respect are allowed. 10.2. Since we have dealt with the merits of the case by allowing the appeal to hold the expenditure incurred as revenue in nature in the given facts and circumstances, the legal issues raised in ground no. 2 and 3 are not adjudicated upon and hence dismissed as such. 11. In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the IT (AT) rules, 1963 on 30.08.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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