JCIT (OSD), CHENNAI V. M/s. SAS Hotels & Enterprises Ltd., CHENNAI

ITA 439/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61100 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS A DDL
• Assessee Lawyers: RAMACHANDRA RAO
• Keywords: Revenue expenditure; Capital expenditure
• Section: 153A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.439 & 440(MDS)/2012 ASSESSMENT YEARS : 2006-07 & 2007-08 THE JOINT COMMISSIONER OF INCOME-TAX(OSD), CENTRAL CIRCLE IV(2), CHENNAI. VS. M/S. SAS HOTELS & ENTERPRISES LTD., 3-MANGESH STREET, T.NAGAR, CHENNAI-17 PAN AAECS1194C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P JACOB, IRS, AD DL.CIT RESPONDENT BY : SHRI RAMACHANDRA RAO, FCA. DATE OF HEARING : 8 TH MAY, 2012 DATE OF PRONOUNCEMENT : 16 TH MAY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE TWO APPEALS ARE FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEARS ARE 2006-07 AND 2007-08. THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER OF TH E COMMISSIONER OF INCOME-TAX(APPEALS)-I AT CHENNAI, D ATED 8-9-2011 AND ARISE OUT OF THE ASSESSMENTS COMPLETED UNDER - - ITA 439 & 440 OF 2012 2 SECTION 143(3), READ WITH SECTION 153A OF THE INCOM E-TAX ACT, 1961. 2. THE COMMON GROUNDS RAISED BY THE REVENUE IN BOTH THESE APPEALS IS THAT THE COMMISSIONER OF INCO ME- TAX(APPEALS) HAS FAILED TO NOTE THAT HAVING REGARD TO THE NATURE OF BUSINESS OF THE ASSESSEE, THE ENTIRE EXPENDITURE CANNOT BE TERMED AS REVENUE EXPENDITURE AND THE ESTIMATE OF 2 5% TOWARDS CAPITAL EXPENDITURE MADE BY THE ASSESSING AUTHORITY IS REASONABLE. THE EXPENSES RELATED TO INTERIOR DECOR ATION, GRANITE, GRILLS, HARDWARE, MARBLE, FRAMES AND PICTURES, SHOW ER CUBICLE, BATH TUB, PLUMBING ITEMS, ETC. AND AS SUCH THOSE IT EMS SHOULD HAVE BEEN TREATED AS CAPITAL EXPENDITURE, AS THEY P ROVIDED ENDURING BENEFIT AND, THEREFORE, THE 25% DISALLOWAN CE MADE BY THE ASSESSING OFFICER SHOULD HAVE BEEN UPHELD BY TH E COMMISSIONER OF INCOME-TAX(APPEALS). 3. THE ASSESSEE HAD INCURRED SUBSTANTIAL EXPENDITU RE DURING THE PREVIOUS YEARS RELEVANT TO THE IMPUGNED ASSESSMENT YEARS IN REPAIRING, RENOVATING AND UPDATING ITS HOT EL PROPERTY AT CHENNAI. ON THE DETAILS COLLECTED IN THE COURSE OF SURVEY AND OTHER ENQUIRIES, THE ASSESSING OFFICER EXAMINED THE DETAILS OF - - ITA 439 & 440 OF 2012 3 THE EXPENDITURE INCURRED BY THE ASSESSEE IN THIS RE GARD AND HELD THAT 25% OF THE TOTAL EXPENDITURE NEEDS TO BE TREAT ED AS CAPITAL IN NATURE. ACCORDINGLY HE ALLOWED ONLY 75% OF THE TOTAL CLAIM AS DEDUCTIBLE REVENUE EXPENDITURE. 4. IN FIRST APPEAL, THE COMMISSIONER OF INCOME- TAX(APPEALS) CONSIDERED ALL THE RELEVANT FACTS OF T HE CASE AND ARRIVED AT THE FOLLOWING FINDINGS:- 1. NO NEW ASSET HAS COME INTO EXISTENCE 2. THE CLASSIFICATION OF THE HOTEL REMAINS THE SA ME, AS A THREE STAR FACILITY. 3. THE BUILT UP AREA OF THE HOTEL REMAINS UNCHANG ED. 5. IN THE LIGHT OF THE ABOVE FINDINGS, HE RELIED O N THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F EMPIRE JUTE CO. LTD., 17 CTR 113 AND FOLLOWED THE PRINCIPL ES LAID DOWN BY THE APEX COURT IN THE SAID DECISION THAT EVEN IF THE EXPENDITURE WAS INCURRED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, NONETHELESS, THE SAME COULD BE ON REVENUE ACCOUNT I F THE ADVANTAGES CONSISTED MERELY IN FACILITATING THE BUS INESS OF THE ASSESSEE IN A MORE EFFICIENT AND MORE PROFITABLE MA NNER. THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT THES E CASES - - ITA 439 & 440 OF 2012 4 FELL UNDER THE ABOVE CATEGORY. ACCORDINGLY HE DIRE CTED THE ASSESSING OFFICER TO ALLOW THE BALANCE OF 25% OF TH E EXPENDITURE ALSO. THE DISALLOWANCE MADE BY THE ASSESSING AUTHO RITY WAS ACCORDINGLY DELETED. 6. AFTER GOING THROUGH THE DETAILS OF THE CASE AND PARTICULARS OF THE EXPENDITURE AVAILABLE ON RECORD, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS COME TO A REASONABLE CONCLUSION. THE ASSESSEE IS RUNNING A T HREE-STAR HOTEL AND, THEREFORE, IT IS NECESSARY THAT THE ASSE SSEE SHOULD MAINTAIN THE MINIMUM LEVEL OF OPERATIONAL FACILITIE S SO AS TO REMAIN IN BUSINESS. THEREFORE, PERIODICAL RENOVATI ON, REPAIR AND REPLACEMENTS ARE ESSENTIAL, EVEN THOUGH THOSE ITEMS MAY COST VERY HIGH AND THE EXPENDITURE MIGHT BE SUBSTANTIAL IN NATURE. BUT, AS THE PRINCIPLE LAID DOWN BY THE HONBLE SUPR EME COURT IN THE CASE OF EMPIRE JUTE CO. LTD., 17 CTR 113, ALL S UCH EXPENSES, SOMETIMES RESULTING IN ENDURING BENEFIT, NEED NOT NECESSARILY BE TREATED AS CAPITAL EXPENDITURE IF TH OSE EXPENSES ARE NECESSARILY INCURRED FOR CARRYING ON THE BUSINE SS OF THE ASSESSEE IN A MORE EFFICIENT AND PROFITABLE MANNER. THEREFORE, WE DO NOT FIND ANY HARD REASON TO INTERFERE WITH TH E ORDERS - - ITA 439 & 440 OF 2012 5 PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). WE UPHOLD HIS ORDERS. 7. IN RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 16 TH OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MAY, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.