The DCIT, Circle-1(2), Baroda V. Express Hotels Pvt. Ltd., Baroda

ITA 1454/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0506 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: NIKITA BRAHMBHATT
• Keywords: Depreciation; Capital expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , .!.'#$%, !& ! ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.1454/AHD/2010 ( ( ) *) / ASSESSMENT YEAR : 2007-08 ) THE DCIT CIRCLE-1(2) BARODA ( / VS. M/S.EXPRESS HOTELS PVT.LTD. EXPRESS HOTEL BUILDING R C DUTT ROAD ALKAPURI BARODA ./ ./ PAN/GIR NO. : AAACE 4316 L ( / APPELLANT ) .. ( / RESPONDENT ) AND CO NO.178/AHD/2010 A.Y. 2007-08 (IN ITA NO.1454/AHD/2010) M/S.EXPRESS HOTELS PVT.LTD. VS. DCIT,CIRCLE-4 BARODA BARODA (CROSS OBJECTOR) .. (RESPOND ENT) REVENUE BY : SHRI D.K.SINGH, SR.D.R. ASSESSEE BY : MS.NIKITA BRAHMBHATT / DATE OF HEARING : 21/02/2013 !' / DATE OF PRONOUNCEMENT : 22.2.13 #$ / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THE REVENUE IS IN APPEAL AND THE RESPONDENT-ASSESS EE IS IN CROSS- OBJECTION AGAINST THE ORDER OF LD.CIT(A)-I, BARODA DATED 21.1.2010. GROUND RAISED BY THE REVENUE IS AS UNDER:- ITA NO.1454/AHD/2002 (BY REVENUE) AND CO NO.178/AHD/2010 (BY ASSESSEE) DCIT VS. M/S.EXPRESS HOTELS PVT.LTD. ASST.YEAR - 2007-08 - 2 - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF REPAIRS TO BUILDING OF RS.42,41,633/- AND REPAIRS T O PLANT AND MACHINERY OF RS.69,00,897/- MADE ON ACCOUNT OF CAPI TAL EXPENDITURE IRRESPECTIVE OF THE FACT HUGE EXPENDITURE TOWARDS B UILDING, MACHINERY AND PLANT MADE, WHICH EXTENDED THE LIFE TIME, RELYI NG ON THE DECISION OF THE HON.SUPREME COURT IN THE CASE OF CIT VS. SARAVA NA SPINNING MILLS PVT.LTD. (2007) 293 ITR 201 (SC). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT DATED 16.11.2009 WE RE THAT THE ASSESSEE IS IN HOTEL BUSINESS. FOLLOWING THE PAST HISTORY OF THE CASE, THE AO HAS HELD THAT THE EXPENDITURE ON REPAIRS AND RENOVATION ON BUILDING W AS CAPITAL EXPENDITURE, HENCE DISALLOWED THE SAME. HOWEVER, HE HAS ALLOWED THE DEPRECIATION ON THE IMPUGNED AMOUNT OF THE DISALLOWANCE. THE FACTS WHI CH WERE NOTICED BY THE AO IN RESPECT OF THE REPAIR ACTIVITY OF THE ASSESSE E IS CONCERNED, THE SAME IS NARRATED AS UNDER:- 8. REPAIRS TO BUILDING THE ASSESSEE HAS CLAIMED EXPENSES FOR REPAIRS TO BU ILDING AT RS.42,41,633/-. THE ASSESSEE WAS REQUESTED TO FURN ISH THE DETAILS OF SUCH REPAIRS CARRIED OUT BY THE ASSESSEE ALONG WITH RELEVANT BILLS FOR PERUSAL, UPON WHICH IT WAS OBSERVED THAT THE EXPEND ITURE OF RS.42,41,633/- WAS INCURRED FOR PURCHASE OF VARIOUS ITEMS LIKE MARBLES, TILES, GLASS, POP WORK, INTERIOR DESIGNING , CEMENT, SAND, GRIT, BATH TUB, SHOWER, PAINTS, PIPES, VALVES, ETC. REQUIRED FOR STRUCTURAL RENOVATION OF A BUILDING. THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN THIS REGARD WAS OVERBEA RINGLY CAPITAL AND SIMILAR ISSUE WAS ALSO DEALT IN THE CASE OF THE ASS ESSEE FOR A.Y. 2005-06 AND 2006-07, IT WAS PROPOSED TO DISALLOW THE SAME O N ACCOUNT OF ITS INADMISSIBILITY AS REVENUE EXPENSE. THE ASSESSEE H AS CONTENDED ON THE SAME LINE AS CONTENDED IN THE AYS 2005-06 & 2006-07 WHEREIN SIMILAR ISSUE WAS INVOLVED. ITA NO.1454/AHD/2002 (BY REVENUE) AND CO NO.178/AHD/2010 (BY ASSESSEE) DCIT VS. M/S.EXPRESS HOTELS PVT.LTD. ASST.YEAR - 2007-08 - 3 - 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS REVERSED THE ACTION OF THE AO FOLLOW ING THE EARLIER YEAR, I.E. AY 2005-06. 4. WITH THIS BACKGROUND, WE HAVE HEARD BOTH THE SID ES. THE ISSUE AS RAISED BY THE REVENUE DEPARTMENT HAS ALREADY BEEN DEALT WI TH BY ITAT C BENCH AHMEDABAD IN ASSESSEES OWN CASE FOR AYS 2005-06 & 2006-07 VIDE AN ORDER DATED 12.8.2011 TITLED AS DCIT VS. EXPRESS HOTELS P.LTD. BEARING ITA NOS.3297 & 3298/AHD/2009 (BY REVENUE) AND CO NOS.4 AND 5/AHD/2010 (BY ASSESSEE). THE RELEVANT PORTION OF THE FINDING IS REPRODUCED BELOW:- 7. IN THIS REGARD, OUR ATTENTION WAS DRAWN ON THE NATURE OF EXPENDITURE; IT WAS IN CONNECTION OF WATER PROOFING OF TILES, PURCHASE OF MARBLES, PAINTS, ETC. OF MISCELLANEOUS NATURE. FRO M THESE DETAILS, LEARNED AUTHORISED REPRESENTATIVE HAS DEMONSTRATED THAT NO NEW ASSET CAME INTO EXISTENCE AND THERE WAS NO ASSET CREATED FOR GETTING BENEFIT OF ENDURING NATURE. THE LEARNED AUTHORISED REPRESEN TATIVE HAS INFORMED THAT THE EXPENDITURE ON REPAIRS IS AN ANNU AL FEATURE ONLY TO PROPERLY MAINTAIN THE HOTEL. IT WAS A BUSINESS REQ UIREMENT TO MAINTAIN THE BUILDING PROPERLY. CASE LAWS CITED IN SUPPORT ARE, (I) HOTEL KINGSWAY VS. ITO REPORTED AT 38 TTJ 274 (AHD.) AND OF CIT VS. DASAPRAKASH REPORTED AT 114 ITR 210 (MAD.). CONSID ERING THE DETAILS OF THE EXPENDITURE, WE ARE OF THE VIEW THAT THIS IS SUE IS COVERED BY THESE PRECEDENTS, HENCE LEARNED CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM. WE, THEREFORE, AFFIRM THE FININGS OF LEARNED CIT(AP PEALS) AND DISMISS THIS GROUND. AS FAR AS THE REPAIRS TOWARDS MAINTEN ANCE FOR PLANT AND MACHINERY IS CONCERNED, THE SAME WAS TOWARDS WEAR & TEAR OF ELECTRIC EQUIPMENTS AND REPLACEMENT OF WORN-OUT PARTS. AS PER THE DETAILS PLACED BEFORE US, ALL THESE EXPENDITURE ARE MINER R EPAIRS, ETC. AND SOME OF THEM ARE REPLACEMENT OF THE EXISTING ELECTRIC GA DGETS. WE HAVE TO KEEP IN MIND THAT THE ASSESSEE IS IN HOTEL INDUSTRY , THEREFORE THE CLAIMED EXPENDITURE CAN BE SAID TO BE THE BUSINESS NECESSIT Y OF THE ASSESSEE. AS A RESULT, REVENUES THIS GROUND FOR THE BOTH THE YE ARS IS DISMISSED. 4.1. THE ISSUE THUS STOOD SQUARELY COVERED BY THE A FORESAID DECISION OF THE RESPECTED CO-ORDINATE BENCH, THEREFORE FOLLOWING T HE VIEW,FOR THE YEAR UNDER ITA NO.1454/AHD/2002 (BY REVENUE) AND CO NO.178/AHD/2010 (BY ASSESSEE) DCIT VS. M/S.EXPRESS HOTELS PVT.LTD. ASST.YEAR - 2007-08 - 4 - CONSIDERATION, SPECIALLY WHEN NO CONTRARY MATERIAL IS PLACED FROM THE SIDE OF THE REVENUE, THE GROUND IS HEREBY DISMISSED. REVEN UES APPEAL IS DISMISSED. ASSESSEES CROSS OBJECTION NO.178/AHD/2010 5. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN ITS CROSS-OBJECTION:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSIN G OFFICER IN MAKING A DISALLOWANCE INVOKING SECTION 14A OF THE INCOME TAX ACT, 1961 OF RS.50,646/-. 5.1. HOWEVER, DURING THE COURSE OF HEARING, LD.AR M S.NIKITA BRAHMBHATT HAS EXPRESSED NOT TO PRESS THIS GROUND OF THE CROSS OBJECTION. ACCORDINGLY, THE CROSS-OBJECTION IS DISMISSED BEING WITHDRAWN. 6. IN THE RESULT, REVENUES APPEAL AS WELL AS C ROSS-OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. SD/- SD/- ( %..& '( ) ( ) ) * ) # +, # ( A. K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22 / 02 /2013 -.., .,../ T.C. NAIR, SR. PS !, - ./0 1!0* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / 01 2 / CONCERNED CIT 4. 2 () / THE CIT(A)-I, BARODA 5. 56& ,,01, 01', 7)#/# / DR, ITAT, AHMEDABAD 6. &(8 9 / GUARD FILE. !,( / BY ORDER, 5 , //TRUE COPY// 2/ 3 ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD