The Dules Retreat Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 2085/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1743 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Question of law; Commercial expediency
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 2085/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2011-12 THE DUKES RETREAT LTD., MUMBAI PUNE ROAD, KHANDALA, PUNE PAN : AAACT4158K ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE / RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 31-05-2016 / DATE OF PRONOUNCEMENT : 31-05-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 25-09 -2014 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RE CORDS ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LOCOMOTIVE AND HO TEL. THE 2 ITA NO. 2085/PN/2014, A.Y. 2011-12 LOCOMOTIVE BUSINESS OF THE ASSESSEE IS BASED IN HYDERABAD , WHILE THE HOTEL OF THE ASSESSEE IS LOCATED IN KHANDALA. DURING THE P ERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAD CARRIED OUT EXTENSIVE REPAIRS AND RENOVATION OF HIS HOTEL. THE ASSESSEE HAD CLAIM ED AN EXPENDITURE OF ` 2,51,12,647/- UNDER THE HEAD REPAIRS AND MAINTENANCE. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE WIT H RESPECT TO REPAIRS AND MAINTENANCE OF HOTEL AS REVENUE EXPENDITU RE. THE ASSESSING OFFICER HELD THE EXPENDITURE ON RENOVATION OF HOT EL AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION ON THE SAME. AGGRIEVED BY THE ASSESSMENT ORDER DATED 17-12-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUG NED ORDER UPHELD THE FINDINGS OF ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT AN IDENTICAL ISSUE WITH RESPECT TO REPAIRS AND RENOVATION OF HOTEL HAS BEEN ADJUDICATED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1726/PN/2013 FOR THE ASSESSMENT YEAR 2010-11 DECIDED ON 10-04-2015. IN THE PERIOD RELE VANT TO THE ASSESSMENT YEAR 2010-11 THE ASSESSEE HAD CLAIMED THE EXPENDITURE ON RENOVATION OF 33 ROOMS OF HOTEL TO THE TUNE OF ` 1,44,03,077/- UNDER THE HEAD REPAIRS AND MAINTENANCE. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER. IN SEC OND APPEAL, THE TRIBUNAL REVERSED THE FINDINGS OF LOWER AUTHORIT IES AND HELD THE EXPENDITURE AS REVENUE IN NATURE, ALLOWABLE U/S. 37(1) OF THE ACT. 3 ITA NO. 2085/PN/2014, A.Y. 2011-12 THE LD. AR PLACED ON RECORD A COPY OF THE ORDER OF TRIBU NAL IN ITA NO. 1726/PN/2013 (SUPRA). 4. SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEH EMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS). THE LD. DR CONTENDED THAT THE ASSESSEE HAD INCURRED SUBSTA NTIAL EXPENDITURE ON THE RENOVATION OF HOTEL. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE DETAILED ORDER, AFTER PLACING RELIANCE ON V ARIOUS DECISIONS HAS UPHELD THE FINDINGS OF ASSESSING OFFICER IN HOLD ING THE EXPENDITURE AS CAPITAL IN NATURE. HOWEVER, THE LD. DR FAIRLY ADMITTED THAT IDENTICAL ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN THE EXPENDITURE ON REPAIRS AND RENOVATION OF HOTEL WAS HELD TO BE REVENUE IN NATURE ALLOWABLE U/S. 37(1) OF THE ACT. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. A PERUSAL OF THE DOCUMENTS ON RECORD SHOW THAT DURING TH E PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSE SSEE HAD CARRIED OUT EXTENSIVE REPAIRS AND RENOVATION OF 18 DELUXE ROOMS AND 8 COTTAGES OF HOTEL SITUATED AT KHANDALA. THE DETAILS AND DESCRIPTION OF THE RENOVATION WORKS CARRIED OUT BY THE ASSESSEE DURING TH E YEAR IS AS UNDER: PARTICULARS AMOUNT EXPENDITURE ON 18 DELUXE ROOMS WORK DONE IN ROOMS, SIT - OUT AREA AND CORRIDOR IN FRONT OF ROOMS : CIVIL AND INTERIOR WORKS COMPRISING OF DEMOLITION OF FLOO R, REMOVAL OF FALSE CEILING, OTHER DEMOLITION WORK, ANTI-TERMITE TREATM ENT, CONCRETE FILLING OF FLOOR, PLASTERING, LAYING OF CERAMIC FLOORING (INCL UDING MATERIALS), DADDOING, WATER PROOFING, PROVIDING AND FIXING SING LE LEAF FLUSH DOOR, SLIDING DOOR FOR TOILETS, GLASS FOR BATHROOM WINDOW S, FRAME FOR DUCT, FALSE CEILING WORK, PUNNING WORK, REPLACING FURNITURE ITE MS IN THE ROOM LIKE LUGGAGE RACK, STUDY TABLE, WORK FOR WALL PANELING, GLAZED PANEL AND WALL RUNNERS, TRAP DOOR AND MIRRORS FOR TOILETS. 92,01,212 4 ITA NO. 2085/PN/2014, A.Y. 2011-12 PAINTING WORK 2,27,894 GRANITE SLAB AND ENIGMA FLOORING 4,45,524 BATHROOM FITTINGS INCLUDING CONCEALED CISTERN FLUSH , SHOWERS, HEALTH FAUCETS, STOP COCKS, BASIN MIXER, ANGLE VALVES, BOT TLE TRAP, WC TOILET SEAT WITH COVERS, WASH BASINS 6,85,600 UPVC WINDOWS, GUTTER AND GUTTER SPACER 8,45,547 SHEER AND BLACKOUT CURTAINS, FITTINGS, ROLLER BLIND S AND SUN CONTROL FILMS ON WINDOWS 3,93,104 ELECTRICAL ITEMS 5,09,009 ROOF TILES AND LABOUR CHARGES FOR FIXING OF ROOF TILES 9,26,921 OTHER MISCELLANEOUS ITEMS 2,12,309 TOTAL FOR DELUXE ROOM 1,34,47,120 EXPENDITURE ON 8 COTTAGES CIVIL AND INTERIOR WORKS COMPRISING OF DISMANTLING OF FLOOR, ANTI TERMITE TREATMENT, CONCRETE FILLING OF FLOOR, MASONRY WORK (ENCLOSURE FOR OPEN TO AIR OUTSIDE SHOWER AREA), PLASTERING, FLOORING AND DADDOING, WATER PROOFING, PROVIDING AND FIXING SINGLE LEAF FLUSH DO OR, SLIDING DOOR FOR TOILETS, FALSE CEILING WORK, PAINTING AND PUNNING A ND WALL PANELING. 28,09,190 FLOORING AND TILES 3,77,846 WATERPROOFING OF ROOF, ONDULINE ROOFING AND FABRICA TION WORK FOR ROOF 9,03,969 BATHROOM FITTINGS AND PLUMBING WORK 9,24,568 PAINTING WORK AND EXTERNAL PLASTERING 2,85,729 TOUGHENED GLASSES 1,10,300 SHEER AND BLACKOUT CURTAINS, FITTINGS AND PLYWOOD 4,41,607 UPVC WINDOWS AND DOOR LOCKS 5,00,378 ELECTRICAL ITEMS 9,92,736 LABOUR CHARGES FOR DISMANTLING OF BATHROOMS 1,21,593 OTHER MISCELLANEOUS ITEMS 2,93,938 TOTAL FOR COTTAGES 77,61,854 APART FROM THE ABOVE THE ASSESSEE HAS INCURRED EXPEN DITURES OF ` 15,03,821/- IN SETTLING THE BILLS OF CIVIL CONTRACTOR FOR THE RE PAIRS OF EXECUTIVE ROOMS AND ` 23,99,852/- TOWARDS PAYMENT OF PROFESSIONAL FEE TO ANAND & ASSOCIATES & SN JOSHI CONSULTERS PVT. LTD. THE RENOVATION WORK CARRIED OUT BY THE ASSESSEE INCLUDES: TILES ARE REMOVED - REMOVING TILES & HACKING OF FLOOR CHIPPING OF WALL FOR REMOVAL OF EXISTING DOOR FRAME S CHIPPING & REMOVAL OF EXISTING PLASTER FROM WALLS INJECTING CHEMICAL EMULSIONS FOR POST CONSTRUCTION ANTI-TERMITE TREATMENT BOTH INTERNALLY AND EXTERNALLY BY DRILLIN G HOLES CEMENT CONCRETE FLOORING WATERPROOFING - THIS IS ESSENTIAL FOR PROTECTION OF WALL & INTERIOR FINISH TO PREVENT DAMAGES DUE TO MOISTURE ABSORPTIO N. REMOVING & FITTING OF CERAMIC TILES INSIDE THE TOILET WALL, OL D TILES DAMAGES. REMOVAL OF CINDER (LIGHT WEIGHT FILLING MATERIAL I. E. COAL ETC) TO FILLING SUNKEN SLAB IN THE TOILET WHERE WC IS FIXED . 5 ITA NO. 2085/PN/2014, A.Y. 2011-12 REMOVE OLD WOODEN & WINDOWS FRAME & FIXING GRANITE THRESHOLDS & GRANITE SLAB FRAMES. FIXED SINGLE LEAF FLUSH DOOR WITH DOOR FRAME FOR RO OMS, OLD DOOR FRAME DAMAGE DUE TO AGING. CHANGES OF FRAME & DOOR FOR THE DUCT I.E. MAINTAINED ACCESS AREA IN CONTAIN PIPE, AC CONDITIONS. REMOVE OLD DAMAGE & CRACKED FALSE CEILING & MAKING NEW FALSE CEILING. USE POP PUNNING TO GIVE FINISH TO THE INTERNAL WALL FOR CLIMATIC CONDITION IN KHANDALA TO PREVENT FUNGU S WE USED PLASTIC EMULSION PAINT. FIXING OF THE HEADBOARD FIXING WALL RUNNING AND WALL PANELING OF MDF / PLYW OOD & LAMINATE. FIXING PELMETS ON THE WINDOWS & WALL FOR CONCEALED LIGHT FITTING & FOR CURTAINS GLASS PARTITION BETWEEN TOILET & BEDROOM AFTER REMOVING THE EXISTING WALL - IN DELUXE ROOMS FITTING OF BATHROOM FITTINGS WHERE DAMAGE TAKE PLAC E I.E. WASH BASIN, CP FITTINGS, SHOWERS FALSE-CEILING WORK - REMOVAL OF EXISTING FALSE CEIL ING AND FRESH POP WORK WATER-PROOFING AND PAINTING WORK THERE IS NO INCREASE IN THE AREA OF THE EXISTING RO OMS 6. WE OBSERVE THAT IN THE ASSESSMENT YEAR 2010-11 SIM ILAR EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RENOVATION OF 33 EXECUTIVE ROOMS. THE CO-ORDINATE BENCH AFTER CONSIDERING THE FACTS OF THE CASE AND VARIOUS JUDGMENTS RELIED UPON BY THE RIVAL SIDES HELD AS UNDER: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. ITS A TRITE LAW THAT THE QUESTION AS TO WHETHER A PARTICULAR EXPEND ITURE IS CAPITAL OR REVENUE IN NATURE IS A MIXED QUESTION OF LAW AND FA CTS AND NO UNIVERSAL PRINCIPLE IS APPLICABLE IN ALL SITUATIONS. IN-FACT, THERE ARE A PLETHORA OF JUDICIAL RULINGS ON THE SUBJECT BUT A SINGULAR REFR AIN IS THAT EACH CASE HAS TO BE DECIDED ON THE BASIS OF ITS OWN PECULIAR FACT S. IN THE PRESENT CASE, ASSESSEE IS RUNNING A HOTEL AT KHANDALA AND DURING THE YEAR UNDER CONSIDERATION, THE IMPUGNED EXPENDITURE OF RS.1,44, 03,077/- HAS BEEN INCURRED BY WAY OF RENOVATION OF THE EXISTING ROOMS . THE DETAILS OF SUCH EXPENDITURE HAVE BEEN ENUMERATED IN THE EARLIER PAR T OF THIS ORDER AND EVEN A CURSORY GLANCE SHOWS THAT NO NEW ASSET HAS B EEN CREATED. IN- 6 ITA NO. 2085/PN/2014, A.Y. 2011-12 FACT, ASSESSING OFFICER ALSO AGREES TO THE AFORESAI D PROPOSITION IN PARA 6 OF THE ASSESSMENT ORDER AS THE FOLLOWING DISCUSSION WOULD SHOW :- IT IS AGREED THAT THE ASSESSEE HAS NOT BROUGHT INT O EXISTENCE ANY NEW ASSET BUT THE ASSESSEE HAS ITSELF ADMITTED TO O BTAIN A NEW ADVANTAGE BY RENOVATING THE HOTEL IN TERMS OF COMPE TITIVE EDGE IN THE HOTEL INDUSTRY IN KHANDALA. 8. THE AFORESAID DISCUSSION BY THE ASSESSING OFFICE R SHOWS THAT THE CASE SETUP AGAINST THE ASSESSEE IS THAT IT HAS OBTAINED A NEW ADVANTAGE BY RENOVATING THE HOTEL IN TERMS OF COMPETITIVE EDGE I N THE HOTEL INDUSTRY IN KHANDALA. THE MOOT QUESTION IS AS TO WHETHER SUCH A N ADVANTAGE OBTAINED BY THE ASSESSEE AS A CONSEQUENCE OF THE AF ORESAID EXPENDITURE IS IN CAPITAL FIELD OR IN REVENUE FIELD. IN ORDER T O ANSWER THE AFORESAID CONTROVERSY, IT WOULD ALSO BE RELEVANT TO UNDERSTAN D THE COMMERCIAL REASONS WHICH WEIGHED WITH THE ASSESSEE TO INCUR TH E IMPUGNED EXPENDITURE. BEFORE THE LOWER AUTHORITIES, ASSESSEE MADE WRITTEN SUBMISSIONS WHEREBY THE COMMERCIAL EXPEDIENCY WAS S OUGHT TO BE DEMONSTRATED IN THE FOLLOWS WORDS :- THE COMMERCIAL EXPEDIENCY FOR INCURRING THE RENOVA TION EXPENSES HAVE BEEN STATED EARLIER. BRIEFLY, IT IS SUBMITTED THAT: A. THE HOTEL IS A THREE STAR HOTEL, LOCATED IN HILL Y AREA AND FACES VERY HIGH RAINFALL AND HENCE THE HOTEL BUILDING REQ UIRES VERY HIGH MAINTENANCE AND ALSO REQUIRES RENOVATION PERIODICAL LY DUE TO WEATHER AND HEAVY RAINFALL. B. IN ORDER TO RETAIN REGULAR CUSTOMERS IT IS NECES SARY THAT THE MONOTONY OF THE SAME AMBIENCE AND FACILITY IS BROKE N THE HOTEL NECESSARILY HAS TO BE CARRY OUT REGULAR UPDATION AN D RENOVATION, INCLUDING ROOMS, CONFERENCE HALLS AND OTHER FACILIT IES LIKE SWIMMING POOL, RESTAURANT ETC. C. WITH THE PASSAGE OF TIME, NEW TRENDS EMERGE IN T HE HOTEL INDUSTRY AND IT BECOMES ESSENTIAL TO INCORPORATE TH E NEW TRENDS TO ATTRACT NEW CUSTOMERS AND ALSO TO RETAIN OLD CUSTOM ERS. D. AS PER THE GENERAL PRACTICE IN THE HOTEL INDUSTR Y, PERIODIC UPGRADATION OF FACILITIES AND CHANGE OF AMBIENCE, A S WELL AS RENOVATION OF THE INFRASTRUCTURE, INCLUDING ROOMS, RESTAURANTS ETC. IS A REGULAR FEATURE. E. KHANDALA BEING A TOURIST PLACE, THERE IS A LOT O F COMPETITION IN THIS BUSINESS. IN ORDER TO COMPETE WITH THE NEW HOT ELS WHICH HAVE 7 ITA NO. 2085/PN/2014, A.Y. 2011-12 FRESH LOOK AND HAVE THE NEW AND MODERN FACILITIES, THE EXISTING HOTELS ALSO REQUIRED TO CHANGE ON A CONTINUOUS BASI S. F. THE LAST MAJOR RENOVATION OF THE HOTEL WAS UNDER TAKING IN THE YEAR 2000/2001 WHICH IS A VERY LONG PERIOD BY THE G ENERAL INDUSTRY STANDARDS AND CONSIDERING THE FACT THAT TH E HOTEL IS A THREE STAR HOTEL. FURTHER, AS STATED ABOVE, THERE W AS A SIGNIFICANT AMOUNT OF WEAR AND TEAR DUE TO PASSAGE OF TIME, USA GE AND WEATHER (RAINY CONDITIONS) G. IN VIEW OF ABOVE FACTORS, THE MANAGEMENT REALIZE D THAT IT WAS HIGH TIME TO CREATE A NEW AMBIENCE IN ORDER TO RETA IN THE FAITHFUL CUSTOMERS AND TO ATTRACT NEW CUSTOMERS. 9. ALL THE AFORESAID ASPECTS OF COMMERCIAL EXPEDIEN CY BROUGHT OUT BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES HAVE NOT BEEN DISPUTED. THE ASSERTIONS MADE BY THE ASSESSEE CLEARLY POINT OUT T HAT WHAT THE ASSESSEE SOUGHT TO ACHIEVE BY INCURRING THE EXPENDI TURE WAS TO RETAIN ITS BUSINESS BY OFFERING AND UPGRADING ITS FACILITIES F OR EXISTING AS WELL AS NEW CUSTOMERS. IN-FACT, THE DETAIL OF THE EXPENDITU RE ALSO REVEAL THAT IT HAS BEEN INCURRED ON UPGRADING THE FACILITIES, CHAN GE OF AMBIENCE AND RENOVATION OF THE INFRASTRUCTURE INCLUDING ROOMS, R ESTAURANT, ETC. IN OUR CONSIDERED OPINION, IN SUCH LIKE SITUATION WHERE TH E QUESTION IS WHETHER EXPENDITURE INCURRED BY AN ASSESSEE IS CAPITAL OR R EVENUE EXPENDITURE, IT WOULD BE QUITE APPROPRIATE TO BEAR IN MIND THE FOLL OWING OBSERVATIONS IN THE CASE OF HALLSTORMS PROPERTY LTD. VS. FEDERAL C OMMISSIONER OF TAXATION, 72 CLR 634, WHICH ARE AS UNDER :- WHAT IS AN OUTGOING OF CAPITAL AND WHAT IS AN OUTG OING ON ACCOUNT OF REVENUE DEPENDS ON WHAT THE EXPENDITURE IS CALCULATED TO EFFECT FROM A PRACTICAL AND BUSINESS POINT OF VI EW RATHER THAN UPON THE JURISTIC CLASSIFICATION OF THE LEGAL RIGHT S, IF ANY SECURED, EMPLOYED OR EXHAUSTED IN THE PROCESS. 10. THE IMPORT OF THE AFORESAID OBSERVATIONS IS THA T THE CONTROVERSY OUGHT TO BE ADDRESSED IN THE CONTEXT OF THE BUSINESS NECE SSITY OR EXPEDIENCY. IF THE OUT-GOING EXPENDITURE IS TARGETED TO RETAIN THE REGULAR CUSTOMERS AND ALSO ATTRACTED NEW CUSTOMERS WITH UPGRADATION OF FA CILITIES AND CHANGE OF AMBIENCE, IT WOULD CERTAINLY QUALIFY TO BE AN OB JECTIVE OF BUSINESS NECESSITY OR EXPEDIENCY. THUS, IN SUCH AS SITUATION THE EXPENDITURE CAN BE SAID TO BE INCURRED IN THE REVENUE FIELD ESPECIA LLY IN THE PRESENT CASE WHEN THERE IS NO DISPUTE THAT NO NEW ASSET HAS BEEN CREATED WITH THE INCURRENCE OF THE IMPUGNED EXPENDITURE. AT THE PRES ENT STAGE, WE MAY ALSO REFER TO AN ARGUMENT TAKEN BY THE REVENUE TO S AY THAT BY INCURRENCE 8 ITA NO. 2085/PN/2014, A.Y. 2011-12 OF THE IMPUGNED EXPENDITURE A PORTION OF THE BALCON Y OUTSIDE THE ROOMS HAVE BEEN BROUGHT INTO THE ROOM SPACE ITSELF THEREB Y INCREASING THE CAPACITY OF THE ROOM. ON THIS BASIS, IT IS SOUGHT T O BE MADE OUT THAT THIS HAS RESULTED IN ENHANCED PROFIT YIELDING CAPACITY A ND THEREFORE A PORTION OF THE IMPUGNED EXPENDITURE IS CAPITAL IN NATURE. I N OUR CONSIDERED OPINION, A MERE INCREASE IN THE ROOM SPACE ON ACCOU NT OF ENCLOSING OF THE BALCONY AREA WOULD NOT SHOW ANY INCREASE IN CAPACIT Y OR CREATION OF ANY NEW ASSET SO AS TO RENDER SUCH EXPENDITURE AS A CAP ITAL EXPENDITURE. IN- FACT, IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR T HE ASSESSEE REFERRED TO THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN TH E CASE OF COMFORT LIVING HOTELS P. LTD. VS. CIT, (2014) 363 ITR 182 ( DELHI) WHEREIN ASSESSEE WAS RUNNING A HOTEL AND IT HAD INCURRED EX TENSIVE REPAIRS WHICH RESULTED IN INCREASED SEATING CAPACITY OF THE EXISTING BAR IN THE HOTEL. THE REVENUE HAD SETUP A CASE THAT SUCH INCRE ASED SEATING RESULTED IN ENHANCEMENT OF PROFIT YIELDING CAPACITY SO AS TO RENDER THE EXPENDITURE CAPITAL IN NATURE. THE HONBLE HIGH COU RT DISAGREED WITH THE REVENUE BY NOTICING THAT IT WAS ONLY AN INCREASE IN SEATING CAPACITY OF THE EXISTING BAR WHICH DID NOT RESULT IN CREATION O F ANY NEW ASSET. BY FOLLOWING THE AFORESAID PROPOSITION, THE HONBLE HI GH COURT IN THE CASE OF COMFORT LIVING HOTELS PVT. LTD. (SUPRA), HELD THE E XPENDITURE TO BE REVENUE IN NATURE. IN OUR CONSIDERED OPINION, THE R ATIO OF THE AFORESAID DECISION IS SQUARELY APPLICABLE IN THE PRESENT CONT EXT AND THEREFORE A MERE INCREASE IN THE ROOM SIZE DUE TO INCLUSION OF BALCONY AREA WOULD NOT RESULT IN CREATION OF ANY NEW ASSET OR INCREASED PR OFIT YIELDING CAPACITY SO AS TO RENDER THE EXPENDITURE CAPITAL IN NATURE. 11. IN-FACT, THE BENEFIT TO THE ASSESSEE ACCRUING A S A RESULT OF THE IMPUGNED EXPENDITURE, THOUGH SPREAD OVER A NUMBER O F YEARS, IS CERTAINLY IN THE REVENUE FIELD AND THEREFORE SUCH A N EXPENDITURE PROVIDES THE ASSESSEE WITH AN ADVANTAGE IN A COMMERCIAL SENS E AND THEREFORE THE EXPENDITURE HAS TO BE HELD TO BE REVENUE IN NATURE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF EMPIRE JUTE CO. (SUPRA). AS A CONSEQUENCE, WE THEREFORE SE T-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELE TE THE DISALLOWANCE AND TREAT THE EXPENDITURE OF RS.1,44,03,077/- AS RE VENUE IN NATURE IN TERMS OF SECTION 37(1) OF THE ACT. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 7. IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSE E HAS MADE IDENTICAL SUBMISSIONS BEFORE THE AUTHORITIES BELOW AND IN PAR A 6 OF THE 9 ITA NO. 2085/PN/2014, A.Y. 2011-12 ASSESSMENT ORDER THE ASSESSING OFFICER HAD ADMITTED THE FACT THAT THE ASSESSEE HAS NOT BROUGHT INTO EXISTENCE ANY NEW ASSET. THE FAC TS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS DECIDED BY THE C O-ORDINATE BENCH IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR AND THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF CO-OR DINATE BENCH. IN SUCH CIRCUMSTANCES, WE FIND NO REASON TO TAKE A CONT RARY VIEW. ACCORDINGLY, WE HOLD THAT THE EXPENDITURE AMOUNTING TO ` 2,51,12,647/- INCURRED ON REPAIRS AND RENOVATION ON THE PART OF HOTEL BUILDING IS REVENUE IN NATURE, ALLOWABLE U/S. 37(1) OF THE ACT. 8. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 31 ST DAY OF MAY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 31 ST MAY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE