High Court Of Uttaranchal
CIT & Anr. vs. Hotel Control (P) Ltd.
Section 37(1)
S.H. Kapadia, C.J. & M.M. Ghildiyal, J.
IT Appeal No. 124 of 2001
14th October, 2003
Counsel Appeared :
Maulkhi, for the Appellant : None appeared for the Respondent
JUDGMENT
S.H. kapadia, C.J. :
Being aggrieved by the decision of the Tribunal dt. 16th Aug., 1999, in ITAT No. 2842/D/1992 the Department has come by way of appeal under s. 260A of the IT Act, 1961. Facts : The assessee is a private limited company. It runs a hotel by the name “Hotel Savoy” at Mussoorie. The assessee claimed Rs. 6,32,718 as revenue expenditure incurred on repair and maintenance of the building, compound, furniture and maintenance of the hotel. However, the AO granted deduction of Rs. 1,01,718 and he capitalised the balance of Rs. 5,31,000 as capital expenditure. Being aggrieved, the assessee carried the matter in appeal to the CIT(A), Dehradun, who took the view that the entire amount of Rs. 6,32,718 was revenue expenditure. Being aggrieved, the Department carried the matter in appeal to the Tribunal which has confirmed the order of the CIT (A). Being aggrieved, the Department has come by way of appeal to this Court under s. 260A of the IT Act. This appeal pertains to the asst. yr. 1988-89. Arguments : Mr. Maulkhi, learned counsel appearing on behalf of the Department, contended that in this case there was conversion of manual latrine to flush latrine; there was replacement of cement roof by a tiled roof; that there was a construction of water tank; further there was replacement of cement concrete floor by Kota stones; tiles were also put in the kitchen and furniture was repaired. It was argued by learned counsel for the Department that expenditure was incurred for the above items. That the said expenditure provided additional value to the property. That the expenditure gave a benefit of enduring nature to the assessee. Hence, the said expenditure was not a revenue expenditure. It was a capital expenditure. He relied upon judgments of the Supreme Court and the High Courts. Question : “Whether the Tribunal was right in holding that the above expenditure was revenue expenditure ?” Answer : For the reasons given hereinafter we answer the above question in the affirmative, i.e., in favour of the assessee and against the Department. Reasons :
The nature of expenditure, whether capital or revenue, depends on the facts of each case. The assessee is a company. It runs a hotel by the name Hotel Savoy at Mussoorie which is a hilly area. It has been found by the CIT(A) that the hotel is spread over 12 acres of land having 100 suites. That the structure was very old. That the hotel was located on a hill. That the climatic conditions of Mussoorie were very severe. That generally Mussoorie gets heavy rainfall and, therefore, the assessee was required to incur expenditure at regular intervals in order to maintain and upkeep the hotel. This finding of facts recorded by the CIT(A) has been confirmed by the Tribunal. It is a concurrent finding, hence, we do not see any reason to interfere with this finding. On the facts the assessee has shown that it is required to incur expenditure at regular intervals due to weather conditions prevailing in Mussoorie. Hence, the expenditure was in the nature of “current expenditure”. Hence, we answer the above question in the affirmative, i.e., in favour of the assessee and against the Department. Accordingly, the appeal is disposed of. No order as to costs.
[Citation : 265 ITR 109]
