Peerless Hotels Limited, Kolkata V. DCIT, Circle - 8(2), Kolkata, Kolkata

ITA 2077/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4797 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 20-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C J SINGH JCITSRDR
• Assessee Lawyers: SOUMITRO CHOUDHURY
• Keywords: Capital asset; Revenue expenditure; Capital expenditure; TDS
• Section: 147; 148; 37

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 2077 / KOL / 2017 ASSESSMENT YEAR :2002-03 PEERLESS HOTELS LIMITED PEERLESS INN, 12,J.L.NEHRU ROAD, KOLKTA-700 013 [ PAN NO.AABCP 9484 D ] V/S . DCIT, CIRCLE-8(2) AAYAKAR BHAWAN, P-T CHORINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SOUMITRO CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI C.J. SINGH, JCIT, SR-DR /DATE OF HEARING 21-02-2019 /DATE OF PRONOUNCEMENT 17-05-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2002-03 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKATAS O RDER DATED 28.07.2017 PASSED IN CASE NO.1874/CIT(A)-3/CIR-8(2)/15-16/KOL, INVOLVING PROCEEDINGS U/S 254 R.W.S. 147 R.W.S.143(3) OF THE INCOME TAX A CT, 1961; IN SHORT THE ACT. 2. IT TRANSPIRES DURING THE COURSE OF HEARING THAT THE ASSESSEE HAS RAISED SIX SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL SEEKI NG TO REVERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS BUILDING REPAIR CLAIM TO COMBAT CORROSION, DISMANTLINH OF EXISTING WORN OUT HEATING VENTILATIO N AND AIR CONDITIONING SYSTEM, WORN OUT, DISMANTLING OF EXISTING OUT WATER SUPPLY FACILITIES, NEW TOILET FITTINGS PROVISION FIRE SAFETY DEVICES REPLACEMENT OF CIRCUIT-CUM-POINT WIRING ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 2 AND REPLACEMENT OF ELECTRIC CABLES EXPENDITURE INVO LVING SUMS OF 134.99, 2.28, 18.34, 28.71, 603 & 26.19 (IN LAC); RESPECTIVELY AS CAPITAL EXPENDITURE. 3. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUSE D. 4. THE CIT(A)S DETAILED DISCUSSION AFFIRMING THE A SSESSING OFFICERS ACTION TREATING THE ASSESSEES CLAIMS AS REVENUE EXPENDITU RE READING AS UNDER:- DECISION : IT HAS BEEN STAYED THAT THE HOTEL PEERLESS INN KO LKATA WAS HOUSED IN AN OLD BUILDING WHICH WAS EARLIER OCCUPIED RITZ CONTIN ENTAL HOTEL. THE ASSESSEE CAME TO OCCUPY THE SAID HOTEL PREMISES FROM THE GOVERNME NT OF WEST BENGAL ON LEASE BASIS IN 1993. IT WAS FOUND THAT THE BUILDING WAS S UFFERING FROM STRUCTURAL PROBLEM AND THEREFORE THE ASSESSEE APPOINTED A CONSULTANT T O EXAMINE THE DAMAGES AND DEFECT. IN THIS REGARD TESTS WERE CONDUCTED BY THE CONSTRUCTION & ENGINEERING DEPARTMENT, JADAVPUR UNIVERSITY WHICH IDENTIFIED MA JOR DAMAGES AND PROPOSED REMEDIAL MEASURE. SEVERAL SOPHISTICATED TESTS WERE CONDUCTED TO IDENTIFY THE DAMAGES. THE TESTS CONDUCTED WERE: (A) ULTRASONIC PULSE VELOCITY TEST USING PUNDIDT (B) HALF CELL POTENTIOMETER SURVEY USING CANIN. (C) NONE DESTRUCTIVE IN-SUIT TEST USING SCHMIDTS CONCR ETE TEST HAMMER. THE REPORT HIGHLIGHTED SEVERAL DEFECTS AND DAMAGES WHICH INCLUDED: ACCORDINGLY, THE CONTRACTOR HAD TO CARRY OUT EXTENS IVE REPAIRS, THE TOTAL OF WHICH CAME TO RS.134.99 LACS. REPAIRS WERE ALSO CARRIED O UT TO THE OTHER SYSTEMS AS FOLLOWS: (A) HEATING, VENTILATION & AIR CONDITIONING (B) WATE SUPPLY SYSTEM (C) TOILET UPGRADATION (D) FIRE PROTECTION SYSTEM-DETECTION (E) ELECTRIC INSTALLATION-CIRCUIT CUM POINT WIRING AND OTHER WORK IT IS OBSERVED THAT THE TOTAL PROJECT COST FOR HEAT ING, VENTILATION & AIR CONDITIONING SYSTEM WAS RS.184.45 LACS. OUT OF WHICH THE ASSESSE E HAS SUO MOTO CAPITALIZED THE AMOUNT OF RS.182.17 LACS. HOWEVER, THE EXPENSE OF R S.2.28 LACS WHICH PERTAINS TO DISMANTLING EXPENSES HAS BEEN CLAIMED AS REVENUE EX PENDITURE. AS REGARD WATER SUPPLY SYSTEM THE TOTAL EXPENDITURE WAS RS.88.49 LACS OUT OF WHICH RS.70.15 LACS WAS TREATED AS CAPITAL EXPENDITURE AN D RS.18.34 LAS WAS TREATED AS REVENUE EXPENDITURE. THE A/R OF THE ASSESSEE HAS CO NCEDED THE FACT THAT THE ENTIRE EXPENDITURE SHOULD HAVE BEEN CAPITALIZED AS THE ENT IRE SYSTEM HAS BEEN RE-LAID. SIMILARLY, FIRE PROTECTION SYSTEM HAS BEEN RE-LAID AT THE COST OF RS.13.87 LACS. THE COST OF SPRINKLERS OF RS.7.84 LACS WAS CAPITALIZED AND T HE BALANCE EXPENDITURE OF RS.6.03 LACS WAS TREATED AS REVENUE EXPENDITURE. THE A/R OF THE ASSESSEE HAS CONCEDED THE FACT THAT THE ENTIRE EXPENDITURE SHOULD HAVE BE EN CAPITALIZED AS THE ENTIRE SYSTEM HAS BEEN RE-LAID. TOILETS HAVE BEEN UPGRADED. ELECTRIC SYSTEM AND ELE CTRIC CIRCUIT BREAKERS HAVE BEEN UPGRADED. THE ENTIRE EXPENDITURE MADE HAS TO BE VIEWED IN TOT ALITY AND IT IS SEEN THAT IT IS TOWARDS STRUCTURAL REPAIRS AND RENOVATION WORK WHIC H HAS BEEN UNDERTAKEN WITH THE SOLE PURPOSE OF UP-GRADATION AND MODERNIZATION OF T HE HOTEL AND THE AMENITIES AND SERVICES PROVIDED THEREIN. THESE CHANGES HAVE BEEN MADE TO GIVE THE HOTEL A ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 3 MODERN AND SOPHISTICATED LOOK WITH UPGRADED AMENITI ES AND SERVICES. THESE STRUCTURAL CHANGES GIVE ENDURING AND LONG TERM BENE FIT TO THE ASSESSEE. ON THESE SET OF FACTS IT HAS TO BE EXAMINED WHETHER THE EXPENDIT URE IS REVENUE OR CAPITAL IN NATURE. A SIMILAR ISSUE REGARDING UPGRADATION OF STANDARD O F THE HOTEL WAS BEFORE THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF U.P. HOTELS LE ARNED. [391 ITR 203], WHEREIN IT HAS BEEN HELD TO BE CAPITAL EXPENSES. IN DECIDING T HE ISSUE RELIANCE WAS PLACED ON THE ORDER OF THE APEX COURT IN THE CASE OF SRI MAN GAYARKARASI MILLS PVT. LTD. [315 ITR 114 (SC)]. THE APEX COURT HAS OBSERVED AS FOLLOWS: `15. MOVING ON TO THE ISSUE OF CURRENT-REPAIRS UN DER SECTION 31 OF THE ACT, THE DECISION OF THIS COURT IN SARAVANA SPG. MILLS (P) L TDS CASE ((SUPRA) IS AGAIN RELEVANT. THIS COURT HAS LAID DOWN THAT IN ORDER TO DETERMINE WHETHER A PARTICULAR EXPENDITURE AMOUNTS TO CURRENT REPAIRS THE TEST IS WHETHER THE EXPENDITURE IS INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET AND NOT TO BRING A NEW ASSET INTO EXISTENCE OR TO O BTAIN A NEW ADVANTAGE. FOR CURRENT REPAIRS DETERMINATION, WHETHER EXPENDITUR E IS REVENUE OR CAPITAL IS NOT THE PROPER TEST.: IT IS OUR OPINION THAT THE EN TIRE TEXTILE MILL MACHINERY CANNOT BE REGARDED AS A SINGLE ASSET, REPLACEMENT O F PARTS OF WHICH CAN BE CONSIDERED TO BE FOR MERE PURPOSE OF PRESERVING OR MAINTAINING THIS ASSET. ALL MACHINES PUT TOGETHER CONSTITUTE THE PRODUCTION PROCESS AND EACH SEPARATE MACHINE IS AN INDEPENDENT ENTITY. REPLACEM ENT OF SUCH AN OLD MACHINE WITH A NEW ONE WOULD CONSTITUTE THE BRINGIN G INTO EXISTENCE OF A NEW ASSET IN PLACE OF THE OLD ONE AND NOT REPAIR OF THE OLD AND EXISTING MACHINE. ALSO, A NEW ASSET IN A TEXTILE MILL IS NOT ONLY FOR TEMPORARY USE. RATHER IT GIVES THE PURCHASER AN ENDURING BENEFIT OF BETTER A ND MORE EFFICIENT PRODUCTION OVER A PERIOD OF TIME. THUS, REPLACEMENT OF ASSETS AS IN THE INSTANT CASE CANNOT AMOUNT TO CURRENT REPAIRS. THE DECIS ION IN SARAVANA SPG. MILLS (P) LTD.S CASE (SUPRA) CLEARLY MENTIONS THAT REPLA CEMENT OF A DERELICT RING FRAME BY A NEW ONE DOES NOT AMOUNT TO CURRENT REPA IRS. FURTHER IN BALLIMAL NAVAL KISHORES CASE (SUPRA) THIS COURT HAS HELD TH AT A NEW ASSET OR NEW/DIFFERENT ADVANTAGE CANNOT AMOUNT TO CURRENT R EPAIRS, WHICH HAS BEEN SUBSEQUENTLY APPROVED IN THE SARAVANA SPG. MILLS (P ) LTDS CASE (SUPRA). FOR THESE REASONS, THE EXPENDITURE MADE BY THE ASSESSEE CANNOT BE ALLOWED AS A DEDUCTION UNDER SECTION 31 OF THE ACT. THE JUDGME NT OF THIS COURT IN THE SARAVANA SPG. MILLS (P) LTDS CASE (SUPRA) MAINTAIN S TWO EXCEPTIONS IN WHICH REPLACEMENT COULD AMOUNT TO CURRENT REPAIRS, NAMELY : WHERE OLD PARTS ARE NOT AVAILABLE IN THE MARKET ( AS SEEN IN RESPECT TO HE CAS OF CIT VS. MAHALAKSHMI TEXTILE MILLS LTD. (AIR 1968 SC 101), OR WHERE OLD PARTS HAVE WORKED FOR 50-60 YEARS. IN THE INSTANT CASE, THE ASSESSEE HAS NOT CLAIMED A NY OF THE ABOVE STATED EXCEPTIONS. THE SARVANA SPG. MILLS (P LTD.S CASE (SUPRA) ALSO RESTRICTS THE SCOPE OF CURRENT REPAIRS TO REPAIRS MADE TO MACHI NERY, PLAN TD AND/OR FURNITURE. IN THIS CASE, REPLACEMENT OF MACHIE CAN AT BEST AMOUNT TO A REPAIR MADE TO THE PROCESS OF MANUFACTURE OF YARN. FURTHER THIS COURT HAS ALSO OBSERVED IN SARAVANA SPPG. MILLS (P) LTDS CASE (SU PRA) THAT IF REPLACEMENT WAS HELD TO BE CURRENT REPAIR IN SUCH CASES, SECT ION 31(I) WILL BE COMPLETELY REDUNDANT AND ABSURDITY WILL CREEP IN BECAUSE REPAI R, IMPLIES EXISTENCE OF A PART OF THE MACHINE WHICH HAS MALFUNCTIONED, WHICH IS IMPOSSIBLE IN THE CASE OF SUCH REPLACEMENT. THUS, THIS REPLACEMENT EXPENDI TURE CANNOT BE SAID TO BE CURRENT REPAIRS AFTER THE DECISION IN THE SARAVAN A SPG. MILLS (P) LTDS CASE (SUPRA). 16. GIVEN THAT SECTION 31 OF THE ACT IS NOT APPLICA BLE TO THE SAID EXPENDITURE OF THE ASSESSEE, THE NEXT ISSUE IS WHETHER IT CAN B E CONSIDERED REVENUE EXPENDITURE OF THE NATURE ENVISAGED UNDER SECTION 37 OF THE ACT. THE SARAVANA SPG. MILLS (P) LTDS CASE (SUPRA) HOLDS TH AT EXPENDITURE IS DEDUCTIBLE UNDER SECTION 37 ONLY IF IT (A) IS NOT D EDUCTIBLE UNDER SECTIONS 30- ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 4 36, (B) IS OF A REVENUE NATURE, (C) IS INCURRED DUR ING THE CURRENT ACCOUNTING YEAR AND (D) IS INCURRED WOE FOR THE PURPOSE OF THE BUSINESS. WE ARE SATISFIED THAT THE ASSESSEES EXPENDITURE SATISFIES REQUIREME NTS (A), (C) AND (D) AS STATED ABOVE. THE DISPUTE IS WITH RESPECT TO THE NA TURE OF EXPENDITURE, THAT IS, WHETHER IT IS REVENUE OR CAPITAL IN NATURE. 17. WE ARE OF THE OPINION THAT THE EXPENDITURE OF T HE ASSESSEE IN THIS CASE IS CAPITAL IN NATURE AND THERE IS SUFFICIENT JUDICIAL PRECEDENT TO SUPPORT THIS VIEW IN THE CASE OF TRAVANCORE COCHIN CHEMICALS LTD. V. CIT [1977] 106 ITR 900 THIS COURT HELD THAT EXPENDITURE IS OF A CAPITAL NA TURE WHEN IT AMOUNTS TO AN ENDURING ADVANTAGE FOR THE BUSINESS AND REPAIR IS D IFFERENT FROM, BRINGING A NEW ASSET FOR THE BUSINESS. FURTHER, IN LAKSHMIJI S UGAR MILLS (P) CO. V. CIT AIR 1972 SC 159 IT HAS BEEN HELD BY THIS COURT THA T BRINGING IN RESPECT TO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR TH E ASSESSEE AMOUNTS TO CAPITAL EXPENDITURE. WE HAVE ALREADY EXPLAINED WHY REPLACEMENT, IN THIS CASE, AMOUNTS TO BRINGING INTO EXISTENCE AN NEW ASSET AND ALSO AN ENDURING BENEFIT FOR THE ASSESSEE. IT IS CLEAR THEN THAT EXPENDITURE OF THE ASSESSEE HERE IS NOT OF A REVENUE NATURE AND THUS, CANNOT BE CLAIMED AS A DEDUCTION UNDER SECTION 37 OF THE ACT. IN VIEW OF THE DECISION OF THE APEX COURT, THE HON 'BLE ALLAHABAD HIGH COURT HELD THAT REPAIRS MADE TO TWO FLOORS OF THE HOTEL W ERE CAPITAL IN NATURE. IN THIS CASE THE ENTIRE HOTEL BUILDING AND THE VARIOUS SYST EMS HAVE BEEN COMPLETELY CHANGED OR REFURBISHED WHICH HAS LEAD TO UP GRADATI ON OF THE HOTEL. THESE CHANGES HAVE BROUGHT INTO EFFECT A COMPLETELY MODER NIZED HOTEL. THE BENEFITS ARE LONG TEM AND ENDURING IN NATURE. RESPECTFULLY, FOLLOWING THE DECISIONS IN THE CASE OF UP HOTELS LTD. (SUPRA) AND SRI MANGAYA RKARASI MILLS PVT LTD. (SUPRA), THE EXPENDITURE OF RS.216.54 LACS ON ACCOU NT OF MODERNIZATION OF THE HOTEL IS TREATED AS CAPITAL EXPENDITURE. THE AC TION OF THE AO IS HEREBY CONFIRMED. THE APPEAL OF THE ASSESSEE ON THE ISSUE OF EXPENSES DISCUSSED IN THE SECOND LIMB (GROUND NO;. 2 TO GROUND NO.7) IS H ERBY DISMISSED. 5. CASE FILE COMPRISING OF ASSESSEES INVESTIGATION REPORT FROM ITS CONSULTANT TO INVESTIGATE THE COST OF MUSTY SMELL I N HOTEL ROOMS AND LOBBY AND KOLKATA TENANCY AGREEMENT BETWEEN THE ASSESSEE AND ITS SISTER CONCERN DATING BACK TO 20.07.1992 TAKING A PROPERTY ON LEAS E, TRIBUNALS ORDER IN ASSESSMENT YEAR 2010-11 DATED 14.05.2018, CIT(A)S ORDER DATED 09.02.2011 IN THE IMPUGNED ASSESSMENT YEAR, ASSESSMENT ORDER D ATED 20.03.2007, AUDITED ACCOUNTS AS ON 31.03.2002, SEC. 148 NOTICE REPLY, RETURN FILED IN FURTHERANCE TO SEC. 148 NOTICE RE-OPENING REASONS A ND FIRST ROUND TRIBUNALS ORDER DATED 27,.02.2015 IN REVENUES APPEAL ITA NO. 948/KOL/2011; RESPECTIVELY STANDS PERUSED. 6. BOTH THE LEARNED REPRESENTATIVES INFORM US DURI NG THE COURSE OF HEARING THAT THE TRIBUNALS FIRST ROUND ORDER HAD RESTORED THE REVENUES APPEAL ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 5 PREFERRED AGAINST THE CIT(A)S ORDER ACCEPTING THIS CLAIM; HAD RESTORED THE ISSUE(S) BACK TO THE ASSESSING OFFICER AS UNDER:- 7. WE HAVE HEARD BOTH THE LD. COUNSEL AND PERUSED THE RECORD. THE LD.DR SUBMITTED THAT THE ASSESSEE IS RUNNING A HOTEL. IN THE HOTEL BUILDING HUGE AMOUNT OF CAPITAL EXPENDITURE HAVE BEEN INCURRED, WHICH HAVE BEEN TER MED AS REPAIRS. THE LD.DR HAS SUBMITTED THAT THE ASSESSEE ITSELF ADMITTED THAT TH E ASSESSEE OBTAINED BENEFIT OF ENDURING NATURE FROM THE EXPENDITURE. HE FURTHER SU BMITTED THAT WHEN THERE IS NO DISPUTE THAT THE ASSESSEE OBTAINED BENEFIT OF ENDU RING IN NATURE, THE EXPENDITURE INVOLVED WAS CAPITAL IN NATURE AND IT CANNOT BE TRE ATED AS REPAIR EXPENDITURE. THE LD. DR FURTHER SUBMITTED THAT SECTION 30 AND 31 DO NOT PERMIT ALLOWANCE AS REVENUE EXPENDITURE, WHICH ARE IN THE NATURE OF CAPITAL EXP ENDITURE. HENCE, THE LD.DR SUBMITTED THAT SINCE EXPENDITURE INVOLVE INCREASED LIFE OF THE ASSET OF THE ASSESSEE, THE EXPENDITURE SHOULD BE CLASSIFIED AS CAPITAL EXPEND ITURE. 7.1 THE LD. COUNSEL OF THE ASSESSEE ON THE OTHER HA ND HAS RELIED ON THE DECISION OF THE LD.CIT(A). HE ALSO RELIED ON THE DECISIONS AS REFERRED TO BY THE LD.CIT(A). HE SUBMITTED THAT THE LD. CITA) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS RIGHTLY CONCLUDED THAT EXPENDITURE INVOLVED WAS RE VENUE IN NATURE. HE SUBMITTED THAT THE ASSESSEE COMPANY HAD ENGAGED CONSULTANTS AND U PON CONSULTANTS ADVICE IT HAS CARRIED OUT REPAIRS AND RENOVATION. THOUGH HE ACCEP TED THAT THIS EXPENDITURE ENHANCED THE LIFE OF THE BUILDING HE SUBMITTED THAT EXPENDIT URE WAS REVENUE IN NATURE. HENCE, THE SAME HAS TO BE ALLOWED AS REVENUE EXPENDITURE. 7.2. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE A SSESSEE ITSELF HAS ACCEPTED THAT THE RENOVATION AND REFURBISHMENT WORK DONE BY THE A SSESSEE WAS MEANT TO BRING AN ADVANTAGE OF ENDURING NATURE. WHEN THE RENOVATION A ND REFURBISHMENT WORK DONE BY THE ASSESSEE GIVES BENEFIT OF ENDURING NATURE TO T HE ASSESSEE, IT IS SETTLED LAW THAT THE SAME QUALIFIES AS CAPITAL EXPENDITURE. THE AO OBSE RVED THAT MAJOR STRUCTURAL WORK INCLUDING THAT OF BASEMENT, COLUMNS, BEAMS, ROOF CO VER, MAIN BUILDING (DIFFERENT FLOORS) WAS CARRIED OUT BY THE ASSESSEE. IN THESE C IRCUMSTANCES, THE AO HAS OPINED THAT EXPENDITURE INVOLVED WAS CAPITAL IN NATURE. 8. AS AGAINST THE ABOVE THE LD. CIT(A) ACCEPTED THE EXPENDITURE AS REVENUE IN NATURE. WE NOTE THAT THE LD.CIT(A) HIMSELF HAS ACCE PTED THAT WHEN THE EXPENDITURE RESULTS IN BRINGING INTO EXISTENCE A NEW ASSET OR A NEW ADVANTAGE TO THE ASSESSEE THE IT IS TO BE TREATED AS CAPITAL NATURE BUT WHERE TH E EXPENDITURE IS INCURRED TO REMEDY THE EFFECT OF SEVERAL YEARSOF WEAR AND TEAR OR NEG LECT OR TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET, IN THAT CASE IT IS TO BE AL LOWED AS REVENUE EXPENDITURE. STILL HE HAS IGNORED THE AOS FINDING THAT BENEFIT OF ENDURI NG OCCURRED TO THE ASSESSEE. LD.CIT(A) HAS NOT COGENTLY DISLODGED THIS FINDING. WE FIND THAT IN MAKING THE ABOVE DISCUSSION THE LD.CIT(A) HAS NOT EXAMINED THE NATUR E OF RENOVATION & REFURBISHMENT WORK DONE BY THE ASSESSEE IN DETAIL. THE LD.CIT(A) HAS ONLY CONSIDERED THE THEORETICAL ASPECT AND AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE CONCLUDED THAT EXPENDITURE INVOLVED WAS REVENUE IN NATURE. AS EXPO UNDED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILL S P.LTD REPORTED IN 293 ITR 201, THAT THE CURRENT REPAIR EXPENDITURE IS INCURRED TO PRESERVE & MAINTAIN AN ALREADY EXISTING ASSET. THE EXPENDITURE WHICH RESULTS TO BR ING A NEW ASSET INTO EXISTENCE OR ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 6 TO OBTAIN A NEW ADVANTAGE CAN NOT BE TERMED ON CURR ENT REPAIR. HENCE, IN OUR CONSIDERED VIEW SUCH AN ORDER OF THE LD.CIT(A) IS NOT SUSTAINABLE. HOWEVER, IT IS ALSO TO BE ACCEPTED THAT THE AO HAS ALSO NOT EXAMINED THE ISSUE IN DETAIL REGARDING THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. IN THIS REGARD, WE NOTE THAT THE HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHRIM AL VS. CIT REPORTED IN (1981) 131 ITR 451(SC) HAS HELD THAT IT IS THE JURISDICTI ON AS WELL AS THE DUTY OF THE APPELLATE AUTHORITY TO CORRECT THE LACUNAE IN THE PROCEEDINGS UNDER APPEAL AND REMIT THE CASE IF NEEDED. IN THIS VIEW OF THE MATTER, IN OUR CONSIDER ED OPINION THE ISSUE NEEDS TO BE REMITTED THE MATTER TO THE FILE OF THE AO. THE AO IS DIRECTED TO EXAMINE THE ISSUE IN DETAIL REGARDING THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE AND THEN DECIDE THE SAME AFRESH AS PER LAW. 8.1 AS REGARDS LD.CIT(A)S CONSIDERATION THAT EXPEN DITURE INCURRED WAS WITH RELATION TO TENANTED PROPERTY, WE FIND THAT THE ISS UE HAS BEEN DULY EXPLAINED AND CLARIFIED BY INSERTION OF EXPLANATION AFTER CLAUSE ( C) OF SECTION 30. HENCE, THIS PLANK OF GIVING RELIEF IS ALSO NOT SUSTAINABLE. IT IS IN FURTHERANCE TO LEARNED CO-ORDINATE BENCH INSTANT REMAND DIRECTION THAT THE ASSESSEES CLAIM STANDS TREATED AS CAPITAL EXPE NDITURE IN THE IMPUGNED CONSEQUENTIAL ROUND. 7. BOTH THE PARTIES REITERATE THEIR RESPECTIVE STAN DS AGAINST AND IN SUPPORT THE LOWER AUTHORITIES ACTION DECLINING THE ASSESSEE S EXPENDITURE HEADS AS CAPITAL IN NATURE. WE FIND FROM THE PAPER BOOK THAT THIS ASSESSEE IS ADMITTEDLY RUNNING ITS HOTEL HOSPIALITY BUSINESS FORM A TENANT ED PREMISES. THE VERY KIND OF ISSUES APPEARS TO HAVE ARISEN BETWEEN THE PARTIE S IN ASSESSMENT YEAR 2010-11 IN THIS TRIBUNAL. THE REVENUE HAD ITS APPEA L ITA 1896/KOL/2016. LEARNED CO-ORDINATE BENCHS ORDER DATED 14.05.2018 DISMISSED THE SAME VIDE ITS FOLLOWING DETAILED DISCUSSION:- 7. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 1,03,71,530/- ON ACCOUNT OF CAPITAL EXPENDITURE. 8. THE ASSESSEE DURING THE YEAR HAS CLAIMED AN EXPE NSE OF 1,03,71,530/- ON ACCOUNT OF REPAIR AND RENOVATION OF ROOM. THE A O DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT REPAIR AND REN OVATION OF ROOMS EXPENSE WERE INCURRED AT PORT BLAIR WERE INCLUSIVE ON THE F OLLOWING:- I) FLOORING OF MARBLE TILES II) POP WORK OF CEILING III) WOOD WORK ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 7 IV) FRESH FURNITURE PURCHASE ETC. ON QUESTION BY THE AO FOR TREATING THE AFORESAID EX PENSES AS CAPITAL IN NATURE, THE ASSESSEE FAILED TO PROVIDE ANY EVIDENCE TO SUBS TANTIATE ITS CLAIM. THE AO ALSO OBSERVED THAT ASSESSEE IN EARLIER YEAR HAS NOT INCURRED REPAIR AND RENOVATION EXPENSE MORE THAN 30% OF SUCH EXPENDITUR E. THEREFORE, AO TREATED THE SAME AS CAPITAL EXPENDITURE AND ALLOWED DEPRECI ATION @ 10% ON THE BUILDING AND ACCORDINGLY REMAINING AMOUNT WAS DISAL LOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT IT IS OCCUPYING OF THE BUILDING AS TENANT AND PAID THE RENT TO LANDLORD FOR 1,25,500/- PER MONTH AND 10% OF GROSS REVENUE. AS PER THE AGREEMENT, THE ASSESSEE WAS TO PAY ALL T HE TAX SUCH AS, MUNICIPAL TAX, BUILDING TAX, ELECTRICITY CHARGES, WATER TAX, AND A LL OTHER TAXES. THE ASSESSEE WAS ALSO UNDER THE OBLIGATION TO MAINTAIN THE EXTER IOR AND INTERIOR AT ITS OWN COST. THE HOTEL BUILDING IS LOCATED ON THE SEA FRON T AND THEREFORE, IT WAS WIDESPREAD DAMAGED DURING TSUNAMI OCCURRED IN 2004. THEREFORE, THE EXPENSES WERE INCURRED TO MAINTAIN THE HOTEL BUILDI NG IN WORKING CONDITION. 9.1 THE ASSESSEE ALSO FILED DETAILS OF THE EXPENSES INCURRED ON THE RENOVATION AND REPAIR OF BUILDING WHICH IS PLACED ON PAGES 11 AND 12 OF THE APPELLATE ORDER WHICH IS REPRODUCED BELOW:- 08. FOR PURPOSE OF REPAIR AND RENOVATION OF BUILDI NG, WORK WAS ENTRUSTED UPON: A KING TRADERS, P-2, AJAYNAGAR, SANTOSHPUR, KOLKATA 75 RUPEES (1) DISMANTLING OF RCC CONCRETES WITH REMOVAL OF RUBBISH AT SHIRTING AREA, PROVIDING AND MAKING PLAIN CEMENT CONCRETE 2 TO 3 TRICK MORTAR, 4 THICK WALL FOR LUGGAGE ROOM AND PASSAGE AREA 1:5 CEMENT MORTAR; SAND CEMENT PLATERI NG 1:5 CEMENT MORTAR LUGGAGE ROOM AND PASSAGE AREA 261 621 (2) REPAIR AND RENOVATION OF ROOMS 11301856 (3) REPAIR AND RENOVATION OF LOBBY AND RESTAURANT 2616 026 (4) REPAIR AND RENOVATION OF GROUND FLOOR CORRIDOR 548 45 (5) RENOVATION AND REPAIR OF KITCHEN, BAKERY CHEF OFFIC E, F &B OFFICE, SECURITY OFFICE, GARBAGE STORE, BUTCHE RY 668174 (6) REPAIR AND RENOVATION OF 1 ST FLOOR CORRIDOR 228407 (7) REPAIR AND RENOVATION OF 1 ST FLOOR LADIES & GENTS TOILET 226512 (8) REPAIR AND RENOVATION OF GROUND FLOOR LADIES & GENT S TOILET REPAIR AND RENOVATION OF LOBBY AND KITCHEN (9) REPAIR & RENOVATION OF HOUSEKEEPING AND GM OFFICE 7 8735 (10) REPAIR AND RENOVATION OF SMALL BANQUET HALL 212878 (11) REPAIR AND RENOVATION OF 1 ST FLOOR BANQUET HALL 131484 (12) NICHE WALL, CEILING, STORE CASE REPAIR AND RENOVATI ON 317193 ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 8 (13) FIXING OF ROOM MIRROR 676733 (14) REMOVING OF OLD DOOR AND RE-FIXING THE SAME WITH NECESSARY 213150 (15) FITTING, POLISHING & PAINTING REMOVING OLD SHAFT DOOR WITH MODIFICATION OF SHUTTER, OUTSIDE 78735 (16) VENEER PASTING AND INSIDE PAINTING 212606 17505477 B. M.L. ROY & CO SANITATIONS PVT. LTD. 188A RASHBEH ARI AVENUE, KOLKATA-29 SUPPLY OF SANITARY MATERIALS 94 9428 C. INDIAN MARBLE TRADERS: SUPPLY OF MARBLE TILES 1 544685 D 504 CHETLA ROAD, KOLKATA-27 D. M.NAGRAJAN POST BOX 632, SEASHORE ROAD, ANARKALI, HADDO POST OFFICE, PORT BLAIR 744102 SUPPLY CARRIAGE OF LOOSE EARTH INCLUDING LEVELING AND COMPACTING THE AREA USING ROLLER, BITUMEN WORK DOO R ON 1251600 THE PATHWAY FROM THE ENTRANCE TO THE COTTAGES E. OTHERS: VARIOUS OTHER WORKS IN CONNECTION WITH R EPAIR AND RENOVATION OF BUILDING 701775 21952965 EXPENSES INCLUDED UNDER THE HEAD OTHERS ARE COMPR ISED OF RUPEES ANDAMAN (1) DMP NIRMAN PVT. LTD. 58/63 PRINCE ANWAR SHAH ROAD, KOLKATA-45 A. ELECTRICAL WORK LOW TENSION FEEDER PILLAR BOX WITH HINGED DOOR SUPPLY AND FIXING 6304 TDDN FUSE SWITCH UNIT 630A HRC FUSE AND FEEDER PILLAR 440 VOLT L.T S UPPLY FOR LIGHT POINTS, CABLING WORKS, DISTRIBUTION ARRAN GEMENT AT PANEL FOR LIGHT LOAD AND POWER LOAD. DISTRIBUTION W IRING, TELEPHONE WIRING AND EARTHING 4722195 B. PLUMBING WORK, SANITARY WORK, WATER SUPPLY NET WORK LABOUR CHARGES FOR FIXING TILES AT TOILET 3116099 SAROODAYA SERVIES (2) OFFICE NO.34, A WING, TRILOK, DR. AMBEDKAR ROAD, BANDRA WEST, MUMBAII-400050 KITCHEN UTENSILS 10291 74 (3)SAENT INDIA 39 RIFLE RANGE ROAD, KOLKATA-19 CON SULTANCY SERVICES IN RESPECT OF ELECTRICAL W ORK 150000 (3) VARIOUS OTHER WORKS 879174 9896642 AMC CHARGES: KOLKATA 2780822 COST OF MATERIAL PURCHASED FOR MAINTENANCE BOTH CIVIL AND ELECTRICAL REPAIR WORK 4028223 ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 9 PEST CONTROL 295392 REPAIR OF OFFICE EQUIPMENTS 16071 17017150 THE ASSESSEE BEFORE THE LEARNED. CIT-A CLAIMED THAT THE ENTIRE EXPENSE INCURRED ON THE REPAIR AND RENOVATION OF HOTEL BUILDING WAS ELIGIBLE FOR DEDUCTION U/S. 30(A)(I) OF THE ACT. THE ASSESSEE IN SUPPORT OF ITS CLAIM ALSO RELIED ON THE FOLLOWING JUDGMENTS:- I) HON'BLE BOMBAY HIGH COURT IN THE CASE OF NEW SHORROCK SPINNING AND MANUFACTURING CO. LTD. VS. CIT (1956) 30 ITR 338 II) BOMBAY STEAM NAVIGATION CO. PVT. LTD. VS. CIT (1965 ) 56 ITR 52(SC) III) CIT VS. ICI (INDIA) PVT. LTD. (1983) 139 ITR 105, 106 (CAL) LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASS ESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE AO DISALLOWED AN AMOUNT OF RS.1,03,71,530/- INCURRE D FOR REPAIR AND RENOVATION OF ROOMS TREATING THEM AS CAPITAL EXPENDITURE. THE JUD GEMENTS RELIED UPON BY THE APPELLANT HAVE BEEN CAREFULLY PERUSED AND I FIND FO RCE IN THEIR CONTENTIONS BOMBAY HIGH COURT IN THE CASE OF NEW SHORROCK SPINNING AN D MANUFACTURING CO. LTD. VS. CIT (1956) 30 ITR 338 HELD THAT THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MIND, IS THAT, AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EXPENDITURE FOR REPAIRS, WHAT IS REALLY BEING DONE IS TO PRESERVE A ND MAINTAIN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITURE IS NOT TO BRING A NEW ASSET INTO EVIDENCE, NOR, IS SITS OBJECT THE OBTAINING OF A NEW OR FRESH ADVANTAGE. T HIS CAN BE THE ONLY DEFINITION OF REPAIRS BECAUSE IT IS ONLY BY DEFINITION OF REPAIRS , THAT THE EXPENDITURE IS REVENUE EXPENDITURE. THE ASSESSEE HAS ONLY RENOVATED THE ROOM AND OTHER FURNITURE IN ROOM WHICH WAS DAMAGED BY THE TSUNAMI. THE APPELLANT HAS POINTED OUT THAT DUE TO THE EXPENDITURE ON REPAIR AND RENOVATION OF THEIR HOTEL ROOMS, ROOM SALES WHICH WAS LANGUISHING AT RS.49.52 LACS IN AY 2009-10 WENT ON INCREASING IN EACH SUCCEEDING YEAR AND REACHED RS.600.79 LACS IN AY 2016-17. THIS IMPROVEMENT IN OPERATIONS EVIDENCES THAT REPAIR EXPENSES WERE INCURRED TO FAC ILITATE IMPROVEMENT IN TRADING OPERATIONS. CONSIDERING THE AFORESAID DECISIONS IN THE CASE OF EMPIRE JUTE CO. LTD. (SUPRA) AND OTHER CASES RELIED UPON BY THE APPELLANT, I AM OF T HE OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF REVENU E EXPENDITURE. HENCE THE AMOUNT OF R.1,03,71,530/-- DISALLOWED IS DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 10. BEFORE US LD. DR SUBMITTED THAT THE EXPENDITURE WAS INCURRED BY ASSESSEE TO RESTORE THE CONDITION OF THE DAMAGED BU ILDING AS EVIDENT FROM THE EXPENSES DISCUSSED IN THE ASSESSMENT ORDER. THEREFO RE, IT CANNOT BE SAID THAT IT WAS A ROUTINE REPAIR AND RENOVATION WORK INCURRED B Y ASSESSEE AND ASSESSEE. THE ASSESSEE INCURRED SUCH EXPENSES IN THE FINANCIA L YEAR 2009-10 WHEREAS THE TSUNAMI HAPPENED IN THE YEAR 2004. HE STATED THAT S UCH EXPENSES WERE INCURRED AFTER LAPS OF FIVE YEARS OF TSUNAMI. THEREFORE, THE PLEA TAKEN BY LD. AR THAT THE ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 10 EXPENSES WERE INCURRED AS A RESULT OF DAMAGED HAPPE NED IN TSUNAMI IN THE HOTEL BUILDING DOES NOT HOLD GOOD. ON THE OTHER HAND, LD. AR REITERATED THE SAME ARGUM ENTS THAT WERE MADE BEFORE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITE D BY LD. AR FOR THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IN THE YEAR UNDER CONSIDERATIO N HAS TREATED THE EXPENSES FOR THE REPAIRS AND RENOVATION OF ROOMS FOR RS.1,03 ,71,530/-AS REVENUE IN NATURE. HOWEVER THE ABOVE EXPENSES WERE TREATED BY THE AO AS CAPITAL IN NATURE. ACCORDINGLY THE AO DISALLOWED THE SAME. HOW EVER THE LEARNED CIT-A REVERSED THE ORDER OF THE AO BY TREATING THE SAME A S THE REVENUE IN NATURE. FROM THE ABOVE DISCUSSIONS WE NOTE THAT THE FOLLOWI NG FACTS HAVE NOT BEEN DISPUTED: 1. THE EXPENSES WERE INCURRED BY THE ASSESSEE ON THE M AINTENANCE OF THE HOTELS RUN BY IT IN KOLKATA AND PORT BLAIR. 2. THE HOTEL PROPERTY WAS TAKEN BY THE ASSESSEE ON REN TAL BASIS. AS PER THE AGREEMENT THE ASSESSEE WAS LIABLE TO BEAR THE COST OF THE REPAIR & MAINTENANCE ON THE EXTERIORS AND INTERIORS OF THE P ROPERTY THE COPY OF THE TENANCY AGREEMENTS IS PLACED ON PAGE 72-77 OF THE P APER BOOK. 3. THE ASSESSEE WAS INTO THE BUSINESS OF HOTELS INDUST RIES. 4. THERE WAS NO FIXED ASSET COMING INTO EXISTENCE OUT OF THE EXPENSES INCURRED BY THE ASSESSEE AS DISCUSSED ABOVE. 5. THE EXPENSES WERE INCURRED BY THE ASSESSEE FOR ITS EFFECTIVE RUNNING OF THE BUSINESS AND TO RESTORE THE BUILDING TO ITS ORIGINA L CONDITIONS AFTER DESTRUCTION OF TSUNAMI. 6. AS A RESULT OF THE EXPENSES THE REVENUE OF THE ASSE SSEE HAS INCREASED MANIFOLDS. THEREFORE THESE EXPENSES ARE DIRECTLY CO NNECTED WITH THE TRADING OPERATIONS OF THE ASSESSEE. 7. THE GENUINENESS AND REASONABLENESS OF THE EXPENSES HAVE NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. IN VIEW OF ABOVE WE NOTE THAT THE EXPENSES WERE INC URRED BY THE ASSESSEE ON THE RENTED PREMISES. THERE WAS LOT OF DAMAGE TO THE PROPERTIES AS A RESULT OF TSUNAMI. THERE WAS NO FIXED ASSET COMING INTO EXIST ENCES OUT OF SUCH EXPENDITURE. WE ALSO NOTE THAT IN THE SIMILAR CIRCUMSTANCES VARI OUS COURTS HAVE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE BOMBAY HIGH COURT IN THE CASE OF NEW ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 11 SHORROCK SPINNING & MANUFACTURING CO. LTD. REPORTED IN 30 ITR 338 HAS HELD AS UNDER: THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN MI ND IS THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EXPENDITURE FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AND MAINTAIN AN ALREADY E XISTING ASSET. THE OBJECT OF THE EXPENDITURE IS NOT TO BRING A NEW ASSET INTO EX ISTENCE, NOR IS ITS OBJECT THE OBTAINING OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION OF REPAIRS BECAUSE IT ONLY BY REASON OF THIS DEFINIT ION OF REPAIRS THAT THE EXPENDITURE IS A REVENUE EXPENDITURE. SIMILARLY WE ALSO RELY ON THE ORDER OF THIS TRIBUNA L IN THE CASE OF DCIT VS. KALYANAPUR CEMENT LTD. IN ITA NO.1396 & 1397/KOL/20 11 FOR A.Y 2006-07 & 2007-08 DATED 14.10.2014. THE RELEVANT EXTRACT OF T HE ORDER IS REPRODUCED BELOW:- 10.WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE HAS FILED C OMPLETE DETAILS OF REPAIR AND MAINTENANCE EXPENSES AND ALSO A CERTIFICATE FRO M CHARTERED ENGINEER DATED 15.12.2008, WHO HAS CERTIFIED THAT THE EXPENS ES UNDER THE HEAD REPAIR AND MAINTENANCE DURING THE YEAR ENDING 31.03.2007 H AS BEEN PROCUREMENT OF WORN OUT COMPONENTS AND CERTAIN CAPITAL ASSETS OR G ROUP OF ASSETS. ACCORDING TO HIM, THESE WORN OUT PARTS ARE IN THE CONTEXT OF CAPITAL ASSET WHERE THESE ARE USED AND ALSO FROM A SMALL FRACTION OF THE TOTAL VA LUE OF CORRESPONDING CAPITAL ASSET IN EACH CASE. HE CERTIFIED THE EXPENSES AND S UMMARIZED SECTION WISE AS UNDER:- 1. LINE STONE CAPTIVE QUARRY RS. 27.15 LACS 2. CRUSHING SECTION RS. 45.53 3. RAW MILL SECTION RS.224.90 4. KILN RS. 79.89 5. COAL MILL RS. 25.10 6. CLINKER GRINDING SECTION RS, 69,24 7. SLAG GRINDING SECTION RS. 53.39 8. PACKING PLANT RS. 4.63 9. MISCELLANEOUS RS. 5.64 TOTAL RS.526.46 LEARNED. COUNSEL FOR THE ASSESSEE BEFORE US CONTEND ED THAT DUE TO UNSATISFACTORY FINANCIAL POSITION OF THE COMPANY FOR FEW YEARS IN THE PAST, IT COULD NOT UNDERTAKE THE REPAIR AND MAINTENANCE OF PLANT AND MACHINERY AND I TS CAPACITY UTILISATION WAS IN THE RANGE OF 37.46% AGAINST THE INDUSTRY AVERAGE OF 90. ACCORDING TO HIM TO MAKE THE SITUATION IMPROVE, THE ASSESSEE COMPANY IN FY 2006- 07 RELEVANT TO AY 2007-08 UNDERTOOK THE OVERDUE REPAIRS AND MAINTENANCE FOR P LANT AND MACHINERY AND REPAIR AND REPLACEMENT OF INTERNAL CONTROL PURPOSE WAS STA RTED. THE ASSESSEE COMPANY HAS NOT INCREASED IN THE RATED CAPACITY OF ANY OF THE P LANT/EQUIPMENT BY VIRTUE OF THIS REPAIR AND MAINTENANCE. FACTUALLY, THE ASSESSEE HAS CARRIED OUT REPAIR AND MAINTENANCE, AS IS EVIDENT FROM THE ABOVE DISCUSSIO N. IN SIMILAR CIRCUMSTANCES, HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. H OWGULE & CO. PVT. LTD. (1995) 214 ITR 523 (BOM) HAS CONSIDERED THE EXPRESSION CURRENT PRECEDING REPAIRS AS UNDER: I) THE AMOUNT SHOULD BE PAID ON ACCOUNT OF REPAI RS. ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 12 (II) CURRENT REPAIRS MEANS REPAIRS UNDERTAKEN IN TOE NORMAL COURSE OF USER FOR THE PURPOSE OF PRESERVATION MAINTENANCE OR PROP ER UTILISATION OR FOR RESTORING IT TO ITS ORIGINAL CONDITION (III) CURRENT REPAIRS DO NOT MEAN ONLY PETTY REPAIRS OR REPAIRS NECESSI TATED BY WEAR AND TEAR DURING THE PARTICULAR YEAR. (IV) SUCH REPAIRS SHOULD NOT BRING INTO EXISTENCE N OR OBTAIN A NEW OR DIFFERENT ADVANTAGE. (V) THE QUANTUM OF EXPENDITURE NOR THE FACT THAT IN THE PROCESS OF REPAIRS, THERE WAS SUBSTANTIAL REPLACEMENT OF THE PARTS OF M ACHINE OR SHIP IS DECISIVE OF THE TRUE NATURE OF THE EXPENDITURE. (VI) THE ORIGINAL COST OF THE ASSET IS NOT AT ALL R ELEVANT OF OR ASCERTAINMENT OF THE TRUE NATURE OF THE EXPENDITURE ON REPAIRS. (VII) THE REPLACEMENT COST OF THE ASSET MAY HOWEVER , AT TIMES MAY BE USED AS INDICATOR OF THE TRUE CHARACTER OF THE EXPENDITURE. IF THE EXPENDITURE ON REPAIRS ADDED TO THE WRITTEN DOWN VALUE OR DISPOSAL VALUE E XCEEDS THE REPLACEMENT COST OF THE ASSET, A PRESUMPTION IS POSSIBLE THAT I T IS NOT A REVENUE EXPENDITURE BUT EXPENDITURE OF CAPITAL NATURE. SUCH PRESUMPTION , OF COURSE, WOULD BE REBUTTABLE. (VIII). THE EXPRESSION CURRENT PRECEDING REPAIRS APPEARS TO HAVE BEEN USED BY THE LEGISLATURE WITH A VIEW TO RESTRICTING THE A LLOWANCE TO EXPENDITURE INCURRED FOR PRESERVATION AND MAINTENANCE THEREOF I N ITS CURRENT STATE IN CONTRADICTION TO THAT INCURRED ON ANY IMPROVEMENT O R AN ADDITION THERETO [CIT V. CHOWGULE & CO. PVT. LTD (1995) 125 CGTR (BOM) 44 2, 448 = (1995) 214 ITR 523 (BOM). IN THE FACTS OF THAT CASE, THE TRIBU NAL, ON INVESTIGATION OF THE NATURE OF THE REPAIRS UNDERTAKEN BY THE ASSESSEE, R ECORDED A CATEGORICAL FINDING OF FACT THAT IT DID NOT RESULT IN EMERGENCE OF A NEW SHIP BUT AMOUNTED, IN SUBSTANCE, TO CURRENT REPAIRS TO THE EXISTING SH IP. THE ACT THAT OLD PARTS OF THE SHIP WERE REPLACED BY NEW PATS WAS NOT RELEVANT FOR DETERMINING WHETHER THE EXPENDITURE WAS ON CURRENT REPAIRS OR NOT. THEREFORE, THE EXPENDITURE CLAIMED BY THE ASSESSEE AMOUNTED TO C URRENT REPAIRS , ALLOWABLE AS A DEDUCTION UNDER SECTION 31. HON'BLE SUPREME COURT IN THE CASE OF CIT V. SARAVA NA SPINNING MILLS (P) LTD. (2007) 7 SC 298 HAS HELD UNAMBIGUOUSLY THAT EACH M ACHINE IN A SEGMENT OF A TEXTILE MILL HAS AN INDEPENDENT ROLE TO PLAY IN THE MILL AND THE OUTPUT OF EACH DIVISION IS DIFFERENT FROM THE OTHER. WE ALSO NOTE THAT THE ASSESSEE WAS TO BEAR THE COST ON RENOVATION FOR THE MAINTENANCE OF INTERIOR AND EXTERIOR OF THE HOTEL B UILDING. THE RELEVANT EXTRACTS OF THE TENANCY AGREEMENT IS PLACED ON PAGE 73 OF THE PAPER BOOK. IN VIEW OF ABOVE WE HOLD THAT THE EXPENSES IN CURRED BY THE ASSESSEE ON THE LEASEHOLD PREMISES ARE REVENUE IN N ATURE AND THE SAME CANNOT BE TREATED AS CAPITAL IN NATURE. THUS WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDERED OF LD. CIT-A. HENCE THE GR OUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. IT IS THEREFORE CLEAR THAT THE LEARNED CO-ORDINA TE BENCH CONCLUDED THAT THE ASSESSEES EXPENSES INCURRED ON LEASEHOLD PREMI SES ARE REVENUE AND ITA NO.2077/KOL/2017 A.Y. 20 02-03 PEERLESS HOTELS LTD. VS. DCIT, CIR-8(2), KOL. PAGE 13 SAME CANNOT BE TREATED AS CAPITAL IN NATURE IN VIEW OF HON'BLE DELHI HIGH COURTS DECISION AS WELL AS THIS TRIBUNALS ORDER I N (SUPRA). LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT N ONE OF THE ASSESSEES IMPUGNED CLAIM HAS GIVEN RISE TO ANY CAPACITY EXPAN SION OR CREATED NEW ASSET. WE THEREFORE ADOPT THE ABOVE DETAILED REASON ING MUTATIS MUTANDIS TO DELETE THE IMPUGNED CAPITAL EXPENDITURE. THE ASSESS ING OFFICER IS DIRECTED TO FRAME CONSEQUENTIAL ASSESSMENT TREATING THE ASSESSE ES SIX IMPUGNED CLAIMS AS REVENUE EXPENDITURE IN NATURE AS PER LAW. THE IN STANT APPEAL SUCCEEDS ON MERITS 9. COMING TO ASSESSEES PETITION DATED 15.02.2019 S EEKING TO RAISE ITS ADDITIONAL GROUND CHALLENGING VALIDITY OF THE IMPUG NED RE-OPENING, LEARNED COUNSEL FAIRLY STATES THAT HE IS NO MORE WISHES TO PRESS FOR THE SAME IN VIEW OF OUR FAVOURABLE ADJUDICATION ON MERITS. THE SAME IS ACCORDINGLY, DISMISSED AS NOT PRESSED. 10. THIS ASSESSEES APPEAL IS PARTLY ALLOWED ON MER ITS IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT 17 /05/2018 SD/- SD/- ( %) (' %) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP (- 17/05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-PEERLESS INN, 12, J.L. NEHRU ROAD, KOLK ATA-13 2. /RESPONDENT-DCIT, AAYAKAR BHAWAN, P-T CHOWRINGHEE S Q. KOLKATA-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,