Assistant Commissioner of Income tax, V. The Duke Retreat Ltd, Pune

ITA 2918/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0039 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Question of law; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2918/PUN/2016 / ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE-10, PUNE . /APPELLANT VS. THE DUKE RETREAT LTD., MUMBAI PUNE ROAD, KHANDALA, PUNE PAN : AAACT4158K . / RESPONDENT / APPELLANT BY : SHRI SUDHENDU DAS / RESPONDENT BY : SHRI C.H. NANIWADEKAR / DATE OF HEARING : 10.09.2018 / DATE OF PRONOUNCEMENT: 19.09.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CI T(A)-6, PUNE, DATED 02-09-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER : (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT THE EXPENDI TURE OF RS.61,99,546/- ON ACCOUNT OF REPAIRS AND RENOVATIONS DONE IN CURRENT YEAR AND EARLIER YEAR AS REVENUE IN NATURE WHEN IT IS A FACT THAT THE ASS ESSEE HAS CARRIED OUT EXTENSIVE RENOVATION WITH THE PRIME MOT IVE OF ENHANCING ITS BUSINESS PROSPECTS AND ATTRACT NEW CUSTOMERS, RESUL TING IN ENDURING BENEFIT TO THE ASSESSEE. (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THE EXPENDITURE OF RS.22,06,998/- ON ACCOUNT OF REPAIRS AND RENOVATIONS OF LEASED PREMISES AS REVENUE IN NATURE WHEN IT IS A FACT THAT THE ASSESSEE HAS CARR IED OUT EXTENSIVE RENOVATION WITH THE PRIME MOTIVE OF ENHANCING ITS B USINESS PROSPECTS AND ATTRACT NEW CUSTOMERS, RESULTING IN ENDURING BENEFI T TO THE ASSESSEE. ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 2 (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN FOLLOWING THE DECISION O F HONBLE ITAT FOR A.Y. 2010-11 IN ASSESSEES OWN CASE WHEREIN THE HONBLE ITAT HAS RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF COMFORT LIVING HOTELS PVT. LTD. (SUPRA) WHEN THE HONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT (1997) (90 TAXMANN 4 01)(SC) HAS LAID DOWN THAT WHAT THE ASSESSEE DID WAS NOT MERE REPAI RS BUT A TOTAL RENOVATION OF THE THEATRE. NEW MACHINERY, NEW FURN ITURE, NEW SANITARY FITTINGS AND NEW ELECTRICAL WIRING WERE INSTALLED B ESIDES EXTENSIVELY REPAIRING THE STRUCTURE OF THE BUILDING. BY NO STR ETCH OF IMAGINATION, COULD IT BE SAID THAT THE SAID REPAIRS QUALIFIED A CURRE NT REPAIRS WITHIN THE MEANING OF SECTION 10(2)(V). IT WAS A CASE OF TOT AL RENOVATION AND HAD RIGHTLY BEEN HELD BY THE HIGH COURT TO BE CAPITAL I N NATURE. (IV) WITHOUT PREJUDICE THE CIT(A) ERRED IN NOT APPR ECIATING THE FACT THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPG. MILLS LTD. (163 TAXMANN 201) HAS CLEARLY HELD THAT TO DECIDE THE APPLICABLE OF SECTION 31(1) THE TEST IS NOT WHETHER THE EXPENDITU RE IS REVENUE OR CAPITAL IN NATURE, WHICH TEST HAS BEEN WRONGLY APPLIED BY THE HIGH COURT, BUT WHETHER THE EXPENDITURE IS CURRENT REPAIRS. THE BASIC TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIRS IS THAT THE E XPENDITURE MUST HAVE BEEN INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. (V) THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE ABOVE GROUNDS OF APPEAL. FROM THE ABOVE, IT IS EVIDENT THAT THE DISPUTE FOR ADJUDIC ATION RELATES TO THE ISSUE OF CAPITAL/REVENUE NATURE OF THE EXPENDITURE INC URRED BY THE ASSESSEE ON REPAIRS AND RENOVATIONS OF THE HOTEL GUEST ROOMS/ENTRANCE LOBBY, COFFEE SHOP, TOILETS ETC. REVENUE HOLDS THAT SUCH EX PENDITURE CONSTITUTES OF CAPITAL NATURE WHEREAS THE ASSESSEE CON TENDS THAT THE SAME CONSTITUTES REVENUE IN NATURE AS IN EARLIER YEARS. 3. BRIEFLY STATED RELEVANT FACTS OF THE ASSESSEE ARE THA T THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF HOTEL AS WELL AS LOCOMOTIV E. THE HOTEL BUSINESS IS LOCATED AT KHANDALA AND THE LOCOM OTIVE BUSINESS IS LOCATED AT HYDERABAD. ASSESSEE FILED THE RETURN OF INCO ME ON 26-09-2012 DECLARING TOTAL INCOME OF RS.3,70,21,960/-. IN T HE ASSESSMENT, THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF REPAIRS TO BUILDING WAS THE SUBJECT MATTER FOR SCRUTINY O F THE AO. AT THE END OF ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, AO MADE ADDITION ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 3 OF RS.84,06,544/- ON ACCOUNT OF (I) EXPENDITURE ON RENOVATION OF HOTEL; (II) EXPENDITURE ON RENOVATION DONE IN EARLIER YEAR; AND (III) EXPE NDITURE ON LEASED PREMISES. EVENTUALLY, THE AO ASSESSED THE INCOM E OF THE ASSESSEE AT RS.4,14,63,350/- AS AGAINST RS.3,70,21,960/- RET URNED BY THE ASSESSEE. IN THE FIRST APPELLATE PROCEEDINGS, THE C IT(A) RELYING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1726/PUN/2013, DATED 10-04-2015 DELETED THE ADDITIONS MADE BY THE AO. CONTENTS OF PARA NOS. 4.1 TO 4.3.1 OF THE ORDER O F CIT(A) ARE RELEVANT. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE FILED THE PRESENT APPEAL BEFORE US WITH THE GROUNDS REFERRED ABOVE. 4. LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AND CONTENDED THAT THE ASSESSEE CARRIED OUT EXTENSIVE REP AIRS AND RENOVATION WITH THE PRIME MOTIVE OF ENHANCING ITS BUSINESS PROSPECTS AND TO ATTRACT THE NEW CUSTOMERS. THE SAME RESULTED IN CREATION OF A N ASSET OF ENDURING BENEFIT TO THE ASSESSEE. REFERRING TO THE DECIS ION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMEN T YEAR, LD. DR SUBMITTED THAT THE DEPARTMENT PREFERRED APPEAL BEFORE T HE HONBLE HIGH COURT AND THEREFORE, PRAYED FOR ALLOWING THE APPEAL OF THE REVENUE. 5. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE AO MADE COUPLE OF DISALLOWANCES (I) DISALLOWANCE OF EXPENDITURE OF RS.61,99,546/- ON ACCOUNT OF REPAIRS AND RENOVATION DONE TO THE ENTRANCE LOBBY, COFFEE SHOP, TOILETS ETC. AND (II) DISALLOWANCE OF EXPENDITURE OF RS.22,06,998/- ON ACCOUNT OF REPAIRS AND RE NOVATION OF THE LEASED PREMISES. ON THIS ISSUE, LD. COUNSEL BROUGHT OU R ATTENTION TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1726/PUN/2013, DATED 10-04-2015 FOR THE A.Y. 2010-11 AND SUBMITTED THAT SIMILAR ISSUE ALLOWABILITY OF EXPENDITURE ON AC COUNT OF ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 4 REPAIRS AND RENOVATION CAME UP FOR ADJUDICATION BEFORE TH E TRIBUNAL. THE TRIBUNAL HELD THAT THE SAME CONSTITUTES REVENUE EXP ENDITURE. IN THAT YEAR, THE EXPENDITURE WAS INCURRED IN CONNECTION WIT H SOME OF THE LEASED PREMISES. ASSESSEE UNDERTOOK THESE REPAIRS AND RENOVATION WORK IN A PHASED MANNER OVER THE YEARS. GIVING OUR ATTENTION TO PARA NOS. 7 TO 11 OF THE ORDER OF TRIBUNAL (SUPRA), LD. COUNSEL DEMONST RATED THAT THE EXPENDITURE WAS HELD AS REVENUE BY THE TRIBUNAL. FURTH ER, LD. COUNSEL ALSO MENTIONED THAT THE REVENUE FILED AN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE SAID DECISION OF THE TRIBUNAL AND THE DE CISION OF THE TRIBUNAL WAS CONFIRMED DISMISSING THE APPEAL OF THE REVENUE (ITA NO.1196 OF 2015, DATED 27-11-2017). LD. COUNSEL FURTHER SUBMITTED THA T THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.2085/P UN/2014, DATED 31-05-2016 FOR THE A.Y. 2011-12 GAVE RELIEF TO THE ASSESSEE ON THE SAME ISSUE. THEREFORE, LD. COUNSEL SUBMITTED THAT, FOLLOWING T HE RULE OF CONSISTENCY, THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. 6. WE HEARD BOTH THE PARTIES ON BOTH THE ISSUES OF REV ENUE/CAPITAL NATURE OF THE REPAIRS AND RENOVATION WORK. WE HAVE PER USED THE ORDERS OF THE REVENUE AND THE DECISION OF THE TRIBUNAL IN THE EAR LIER ASSESSMENT YEARS. WE FIND THAT THE ASSESSEE RUNS A 3 STAR HOTEL A T KHANDALA AND UNDERTOOK REPAIRS AND RENOVATION WORK. THE SAID HOTEL S TARTED FUNCTIONING SINCE 1990 COMPRISING OF 62 ROOMS. DUE TO WEAT HER CONDITIONS AND HUGE RAINFALL IN THE REGION, WHERE THE HOTEL IS LOCATED, THERE IS A REQUIREMENT OF PERIODIC REPAIRS AND RENOVATION OF THE HOTEL BUILDING. SIMILAR REPAIRS WERE DONE BY THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS 2010-11 AND 2011-12 AND THE TRIBUNA L ALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE AS REVENUE IN NATUR E. WE FIND THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010-11, IN PARA NO.11 OF THE ORDER, CATEGORICALLY HELD THAT THE SAID EXPENDITURE SINCE SPREAD ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 5 OVER MANY YEARS FALLS IN REVENUE FIELD AND RELIED ON THE JU DGMENT OF SUPREME COURT IN THE CASE OF EMPIRE JUTE COMPANY LTD. VS . CIT 124 ITR 1. WE ALSO FIND THE SAID DECISION OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT DISMISSING THE APPEAL FILED BY THE DEPARTMENT. FURTHER, WE FIND THE TRIBUNAL IN THE ASSESSEE S OWN CASE IN ITA NO.2085/PUN/2014, DATED 31-05-2016 FOR THE A.Y. 2011 -12 GAVE RELIEF TO THE ASSESSEE FOLLOWING THE ORDER OF TRIBUNAL FOR THE A.Y. 2010-11. FOR THE SAKE OF COMPLETENESS, WE PROCEED TO REPRODUCE THE SAME HERE AS UNDER : 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRE SENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. A PERUSAL OF THE DOCUMENTS ON RECORD SHOW THAT DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAD CARRI ED OUT EXTENSIVE REPAIRS AND RENOVATION OF 18 DELUXE ROOMS AND 8 COT TAGES OF HOTEL SITUATED AT KHANDALA. THE DETAILS AND DESCRIPTION OF THE REN OVATION WORKS CARRIED OUT BY THE ASSESSEE DURING THE YEAR IS AS UNDER: ............. .............. APART FROM THE ABOVE THE ASSESSEE HAS INCURRED EXPE NDITURES OF RS. 15,03,821/- IN SETTLING THE BILLS OF CIVIL CONTRACT OR FOR THE REPAIRS OF EXECUTIVE ROOMS AND RS.23,99,852/- TOWARDS PAYMENT OF PROFESSIONAL FEE TO ANAND & ASSOCIATES & SN JOSHI CONSULTERS PVT. LT D. THE RENOVATION WORK CARRIED OUT BY THE ASSESSEE INC LUDES: TILES ARE REMOVED - REMOVING TILES & HACKING OF F LOOR CHIPPING OF WALL FOR REMOVAL OF EXISTING DOOR FRAMES CHIPPING & REMOVAL OF EXISTING PLASTER FROM WALLS INJECTING CHEMICAL EMULSIONS FOR POST CONSTRUCTIO N 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 TO ILET WALL, OLD TILES DAMAGES. REMOVAL OF CINDER (LIGHT WEIGHT FILLING MATERIAL I.E. COAL ETC) TO FILLING SUNKEN SLAB IN THE TOILET WHERE WC IS FIXED. REMOVE OLD WOODEN & WINDOWS FRAME & FIXING GRANIT E THRESHOLDS & GRANITE SLAB FRAMES. FIXED SINGLE LEAF FLUSH DOOR WITH DOOR FRAME FOR ROOMS, OLD DOOR FRAME DAMAGE DUE TO AGING. CHANGES OF FRAME & DOOR FOR THE DUCT I.E. MAINTAI NED ACCESS AREA IN CONTAIN PIPE, AC CONDITIONS. REMOVE OLD DAMAGE & CRACKED FALSE CEILING & MAKIN G NEW FALSE CEILING. USE POP PUNNING TO GIVE FINISH TO THE INTERNAL WA LL FOR CLIMATIC CONDITION IN KHANDALA TO PREVENT FUNGUS WE USED PLA STIC EMULSION PAINT. ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 6 FIXING OF THE HEADBOARD FIXING WALL RUNNING AND WALL PANELING OF MDF / PLYWOOD & LAMINATE. FIXING PELMETS ON THE WINDOWS & WALL FOR CONCEALE D LIGHT FITTING & FOR CURTAINS GLASS PARTITION BETWEEN TOILET & BEDROOM AFTER R EMOVING THE EXISTING WALL - IN DELUXE ROOMS FITTING OF BATHROOM FITTINGS WHERE DAMAGE TAKE PL ACE I.E. WASH BASIN, CP FITTINGS, SHOWERS FALSE-CEILING WORK - REMOVAL OF EXISTING FALSE CE ILING AND FRESH POP WORK WATER-PROOFING AND PAINTING WORK THERE IS NO INCREASE IN THE AREA OF THE EXISTING ROOMS 6. WE OBSERVE THAT IN THE ASSESSMENT YEAR 2010-11 S IMILAR EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RENOVAT ION OF 33 EXECUTIVE ROOMS. THE CO-ORDINATE BENCH AFTER CONSID ERING THE FACTS OF THE CASE AND VARIOUS JUDGMENTS RELIED UPON BY TH E RIVAL SIDES HELD AS UNDER: '7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IT'S A TRITE LAW THAT THE QUESTION AS TO WHETHER A PARTICULAR EX PENDITURE IS CAPITAL OR REVENUE IN NATURE IS A MIXED QUESTION OF LAW AND FACTS AND NO UNIVERSAL PRINCIPLE IS APPLICABLE IN ALL SIT UATIONS. IN-FACT, THERE ARE A PLETHORA OF JUDICIAL RULINGS ON THE SUB JECT BUT A SINGULAR REFRAIN IS THAT EACH CASE HAS TO BE DECIDED ON THE BASIS OF ITS OWN PECULIAR FACTS. IN THE PRESENT CASE, ASSESSEE IS RU NNING A HOTEL AT KHANDALA AND DURING THE YEAR UNDER CONSIDERATION, T HE IMPUGNED EXPENDITURE OF RS.1,44,03,077/- HAS BEEN INCURRED B Y WAY OF RENOVATION OF THE EXISTING ROOMS. THE DETAILS OF SU CH EXPENDITURE HAVE BEEN ENUMERATED IN THE EARLIER PART OF THIS OR DER AND EVEN A CURSORY GLANCE SHOWS THAT NO NEW ASSET HAS BEEN CRE ATED. IN-FACT, ASSESSING OFFICER ALSO AGREES TO THE AFORESAID PROP OSITION 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 OBTA INED A NEW ADVANTAGE BY RENOVATING THE HOTEL IN TERMS OF COMPE TITIVE EDGE IN THE HOTEL INDUSTRY IN KHANDALA. THE MOOT QUESTION I S AS TO WHETHER SUCH AN ADVANTAGE OBTAINED BY THE ASSESSEE AS A CON SEQUENCE OF THE AFORESAID EXPENDITURE IS IN CAPITAL FIELD OR IN REVENUE FIELD. IN ORDER TO ANSWER THE AFORESAID CONTROVERSY, IT WOULD ALSO BE RELEVANT TO UNDERSTAND THE COMMERCIAL REASONS WHICH WEIGHED WITH THE ASSESSEE TO INCUR THE IMPUGNED EXPENDITURE. BEFORE THE LOWER AUTHORITIES, ASSESSEE MADE WRITTEN SUBMISSIONS WHER EBY THE COMMERCIAL EXPEDIENCY WAS SOUGHT 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 REQUIRES VERY HIGH MAINTENANCE AND ALSO REQUIRES RENOVATION PERIODICAL LY DUE TO WEATHER AND HEAVY RAINFALL. ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 7 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 THE NEW TRE NDS TO ATTRACT NEW CUSTOMERS AND ALSO TO RETAIN OLD CUSTOMERS. 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 HOTELS W HICH HAVE FRESH LOOK AND HAVE THE NEW AND MODERN FACILITIES, THE EX ISTING HOTELS ALSO REQUIRED TO CHANGE ON A CONTINUOUS BASIS. F. THE LAST MAJOR RENOVATION OF THE HOTEL WAS UNDER TAKING IN THE YEAR 2000/2001 WHICH IS A VERY LONG PERIOD BY THE GENERA L INDUSTRY STANDARDS AND CONSIDERING THE FACT THAT THE HOTEL I S A THREE STAR HOTEL. FURTHER, AS STATED ABOVE, THERE WAS A SIGNIF ICANT AMOUNT OF WEAR AND TEAR DUE TO PASSAGE OF TIME, USAGE AND WEA THER (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 N OT BEEN DISPUTED. THE ASSERTIONS MADE BY THE ASSESSEE CLEAR LY POINT OUT THAT WHAT THE ASSESSEE SOUGHT TO ACHIEVE BY INCURRI NG THE EXPENDITURE WAS TO RETAIN ITS BUSINESS BY OFFERING AND UPGRADING ITS FACILITIES FOR EXISTING AS WELL AS NEW CUSTOMERS. I N-FACT, THE DETAIL OF THE EXPENDITURE ALSO REVEAL THAT IT HAS BEEN INCURR ED ON UPGRADING THE FACILITIES, CHANGE OF AMBIENCE AND RENOVATION O F THE INFRASTRUCTURE INCLUDING ROOMS, RESTAURANT, ETC. IN OUR CONSIDERED OPINION, IN SUCH LIKE SITUATION WHERE THE QUESTION IS WHETHER EXPENDITURE INCURRED BY AN ASSESSEE IS CAPITAL OR R EVENUE EXPENDITURE, IT WOULD BE QUITE APPROPRIATE TO BEAR IN MIND THE FOLLOWING OBSERVATIONS IN THE CASE OF HALLSTORM'S P ROPERTY LTD. VS. FEDERAL COMMISSIONER 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 CALCU LATED TO EFFECT FROM A PRACTICAL AND BUSINESS POINT OF VIEW RATHER THAN UPON THE JURISTIC CLASSIFICATION OF THE LEGAL RIGHTS, 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 BUSINES S NECESSITY OR EXPEDIENCY. IF THE OUT-GOING EXPENDITURE IS TARGETE D TO RETAIN THE REGULAR CUSTOMERS AND ALSO ATTRACTED NEW CUSTOMERS WITH UPGRADATION OF FACILITIES AND CHANGE OF AMBIENCE, I T WOULD CERTAINLY QUALIFY TO BE AN OBJECTIVE OF BUSINESS NECESSITY OR EXPEDIENCY. THUS, IN SUCH AS SITUATION THE EXPENDITURE CAN BE SAID TO BE INCURRED IN THE REVENUE FIELD ESPECIALLY IN THE PRESENT CASE WH EN THERE IS NO ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 8 DISPUTE THAT NO NEW ASSET HAS BEEN CREATED WITH THE INCURRENCE OF THE IMPUGNED EXPENDITURE. AT THE PRESENT STAGE, WE MAY ALSO REFER TO AN ARGUMENT TAKEN BY THE REVENUE TO SAY THAT BY INCURRENCE OF THE IMPUGNED EXPENDITURE A PORTION OF THE BALCONY O UTSIDE THE ROOMS HAVE BEEN BROUGHT INTO THE ROOM SPACE ITSELF THEREBY INCREASING THE CAPACITY OF THE ROOM. ON THIS BASIS, IT IS SOUGHT TO BE MADE OUT THAT THIS HAS RESULTED IN ENHANCED PROFIT YIELDING CAPACITY AND THEREFORE A PORTION OF THE IMPUGNED EXPENDITURE IS CAPITAL IN NATURE. IN OUR CONSIDERED OPINION, A MERE INCREASE IN THE ROOM SPACE ON ACCOUNT OF ENCLOSING OF THE BALCONY AREA W OULD NOT SHOW ANY INCREASE IN CAPACITY OR CREATION OF ANY NEW ASS ET SO AS TO RENDER SUCH EXPENDITURE AS A CAPITAL EXPENDITURE. I N- FACT, IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE RE FERRED TO THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CA SE 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 I NCREASED SEATING RESULTED IN ENHANCEMENT OF PROFIT YIELDING CAPACITY SO AS TO RENDER THE EXPENDITURE CAPITAL IN NATURE. THE HON'B LE HIGH COURT DISAGREED WITH THE REVENUE BY NOTICING THAT IT WAS ONLY AN INCREASE IN SEATING CAPACITY OF THE EXISTING BAR WHICH DID N OT RESULT IN CREATION OF ANY NEW ASSET. BY FOLLOWING THE AFORESA ID PROPOSITION, THE HON'BLE HIGH COURT IN THE CASE OF COMFORT LIVIN G HOTELS PVT. LTD. (SUPRA), HELD THE EXPENDITURE TO BE REVENUE IN NATU RE. IN OUR CONSIDERED OPINION, THE RATIO OF THE AFORESAID DECI SION IS SQUARELY APPLICABLE IN THE PRESENT CONTEXT AND THEREFORE A M ERE INCREASE IN THE ROOM SIZE DUE TO INCLUSION OF BALCONY AREA WOUL D NOT RESULT IN CREATION OF ANY NEW ASSET OR INCREASED PROFIT YIELD ING 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 COMMER CIAL SENSE AND THEREFORE THE EXPENDITURE HAS TO BE HELD TO BE REVENUE IN NATURE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE H ON'BLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. (SUPRA). AS A CONSEQUENCE, WE THEREFORE SET-ASIDE THE ORDER OF THE CIT(A) AND DIR ECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE AND TREAT THE EX PENDITURE OF RS.1,44,03,077/- AS REVENUE IN NATURE IN TERMS OF S ECTION 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 PARA 6 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAD ADM ITTED THE FACT THAT THE ASSESSEE HAS NOT BROUGHT INTO EXISTENCE AN Y NEW ASSET. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS DECIDED BY THE CO-ORDINATE BENCH IN ASSESSEE'S OWN CASE IN THE IMMEDIATELY PRECEDING YEAR AND THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF CO-ORDINATE BENCH. IN SUCH CIRCUMSTANCE S, WE FIND NO REASON TO TAKE A CONTRARY VIEW. ACCORDINGLY, WE HOL D THAT THE EXPENDITURE AMOUNTING TO RS.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. ITA NO.2918/PUN/2016 THE DUKE RETREAT LTD., 9 7. FROM THE ABOVE, IT IS EVIDENT THAT THE FACTS OF THE REP AIR/RENOVATION ARE IDENTICAL TO THE ONES INCURRED IN THE PAST. THE TRIBU NAL DECIDED THE ISSUES IN FAVOUR OF ASSESSEE FOR A.YRS. 2010-11 & 2011-12 . HONBLE HIGH COURT ALSO CONFIRMED THE ORDER OF THE TRIBUNAL. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE EXPENDITURE OF RS.84,06,544/ - (RS.61,99,564 + RS.22,06,998/-) INCURRED BY THE ASSESSEE ON ACCOUNT OF REPAIRS AND RENOVATION WORK IS AN ALLOWABLE EXPENDITURE AS REVENUE EXPENDITURE. WE THEREFORE UPHOLD THE ORDER OF CIT(A) BEING FAIR AND REASONABLE. ACCORDINGLY, THE GROUND NOS. 1 AND 2 RAISED BY THE REVENUE ARE DISMISSED. FURTHER, THE GROUND NOS. 3 AND 4 ARE ALS O DISMISSED AS ARGUMENTATIVE ONES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (VIKAS AWASTHY) (D.KARU NAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 19 TH SEPTEMBER, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-6, PUNE. 4. / THE PR. CIT-5, PUNE. 5. , , / DR B, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.