ACIT CIR 6(3), MUMBAI V. HOTEL AIRPORT KOHINOOR P. LTD, MUMBAI

ITA 4882/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8901 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHATURBHUJ DAS
• Keywords: Business income; Depreciation; Capital expenditure
• Section: 143(3); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI , . . BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 4882/MUM/2011 / ASSESSMENT YEAR 2006-07 ACIT CIR.6(3), R.NO. 522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. HOTEL AIRPORT KOHINOOR PVT. LTD., A-KOHINOOR BHAVAN, SENAPATI BAPAT MARG, DADAR (EAST), MUMBAI-400 028. PAN: AAACH 1577 Q ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI CHATURBHUJ DAS ASSESSEE BY : SHRI JAYESH DADIA ' #$% / DATE OF HEARING : 30 -08-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 12 -09-2012 () / O R D E R PER RAJENDRA, A.M. THE FOLLOWING ARE THE GROUNDS OF APPEAL FILED BY TH E APPELLANT AGAINST THE ORDER DATED 23-01-2011 OF THE CIT(A)-12, MUMBAI : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE OF RS. 18,29,961/- CLAIMED ON REPAIRS & MAINTE NANCE OF FURNITURES AND FIXTURES, HOLDING THE SAME TO BE REVENUE EXPEND ITURE IN NATURE, WITHOUT APPRECIATING THE FACT THAT THE SAID EXPENDITURE ON REPAIRS INVOLVED ARE NOT CURRENT REPAIRS, BUT PROVIDES ENDURING BENEFIT TO THE ASSESSEE COMPANY AND ACCORDINGLY IS CAPITAL IN NATURE ITA NO. 4882/MUM/2011 M/S. HOTEL AIRPORT KOHINOOR PVT. LTD. 2 THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 26-10-2006 DECLARING NIL INCOME. ASSESSMENT WAS FINALIZED U/S. 143(3) OF TH E INCOME TAX ACT, 1961 (ACT) BY THE ASSESSING OFFICER (AO) ON 03-12-2008 AT TOTAL B USINESS INCOME OF RS. 69.89 LAKHS. AGAINST THE SAID BUSINESS INCOME, UN-ABSORB ED DEPRECIATION HAS BEEN SET-OFF. AS A RESULT TOTAL INCOME NIL WAS ARRIVED FOR TAXATI ON. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAD DEBITED EXPENDITURE AMOUNTING TO RS. 25.62 LAKHS UNDER THE HEAD FURNITURE AND FIXTURES . AFTER SCRUTINIZING THE DETAILS FILED BY THE ASSESSEE-COMPANY, AO HELD THAT FURNITU RE MADE BY THE CARPENTER IN THE HOTAL WAS CAPITAL EXPENDITURE, THAT ASSESSEE HAD PURCHASED PLY-WOOD WORTH RS. 10.44 LAKHS, THAT THE ONUS WAS ON THE ASSESSEE TO P ROVE THAT THE EXPENSES WERE RELATED TO AN ASSET ALREADY IN EXISTENCE, THAT BENEFITS AVA ILED BY THE ASSESSEE BY INCURRING THE SAID EXPENDITURE WAS OF ENDURING NATURE. HE HELD T HAT EXPENDITURE ON CARPENTRY, LABOUR CHARGES OF RS. 8.82 LAKHS ALONG WITH PLY-WOO D PURCHASE OF RS. 10.44 LAKHS WAS TO BE TREATED AS CAPITAL IN NATURE. AFTER EARN ING THE TOTAL AMOUNT OF RS. 19.22 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE HE ALLOWE D THE DEPRECIATION TO THE ASSESSEE ON THE SAID ASSETS. ASSESSEE PREFERRED AN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND ASSESSMENT ORDER, HE OBSERVED THAT THE ASSESSEE HAD INCURRED EXPENDITURE AMOUNTING TO RS. 25.62 LAKHS ON REPAIRS AND MAINTENANCE/RENOVATION OF 42 ROOMS OF B WING OF THE HOTEL, THAT THE INTERIORS OF THE ROOM HAD BEEN RENOVATED AND THE EX PENSES INCURRED WERE MAINLY IN THE NATURE OF REPAIRS OF ALREADY EXISTING ASSETS BY THE APPELLANT. HE WAS OF THE OPINION THAT REPLACEMENT OF EXISTING ASSETS WAS ALWAYS A RE VENUE EXPENDITURE. HE HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE-COMPANY WA S REVENUE IN NATURE AND DELETED THE ADDITION MADE BY THE AO. RELYING UPON THE CASE S OF LAKE PALACE HOTELS AND MOTORS (P) LTD., (258 ITR 5627, LAXMI TALKIES (275 ITR 125) AND JANAKIRAM MILLS LTD (275 ITR 403), HE ALLOWED THE APPEAL FILED BY T HE ASSESSEE. 3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIE D UPON THE ORDER OF THE AO AND SUBMITTED THAT EXPENDITURE INCURRED BY THE ASSE SSEE-COMPANY ON PURCHASING PLY- WOOD WAS CAPITAL EXPENDITURE, THAT AO HAD RIGHTLY A LLOWED DEPRECIATION ON IT. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT NO NE W ASSETS CAME INTO EXISTENCE AS A RESULT OF INCURRING OF THE EXPENDITURE, THAT REVENU E GENERATING CAPACITY OF THE ASSESSEE HAS INCREASED, THAT EXPENDITURE WAS ALLOWABLE U/S. 37 OF THE ACT, THAT ASSESSMENT WAS NOT CLAIMED U/S. 31 UNDER THE HEAD CURRENT REPAIRS , THAT ENTIRE REPAIRS AND RENOVATION EXPENSES WERE INCURRED BY THE ASSESSEE-COMPANY MAIN LY TO FACILITATE THE ASSESSEES TRADING OPERATION IN A MORE EFFICIENT MANNER. HE R EFERRED TO PAGE NOS. 8 AND 16 OF THE PAPER BOOK. HE RELIED UPON THE CASES OF INDO-CONTI NENTAL HOTEL AND RESORTS LTD (321 ITR 601) AND LAKE PALACE HOTELS (SUPRA). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATTER FROM THE DETAILS AVAILABLE, IT IS FOUND THAT OUT OF RS. 19.2 6 LAKHS, RS. 4.44 LAKHS (RS. 3.18 LAKHS + 1.26 LAKHS ) WERE PAID TO NEW SHAKTI DCOR FOR REPAIRING THE FURNITURE. IN ITA NO. 4882/MUM/2011 M/S. HOTEL AIRPORT KOHINOOR PVT. LTD. 3 OUR OPINION, FURNITURE REPAIR IS A REVENUE EXPENDIT URE AND HENCE ALLOWABLE AS PER THE PROVISIONS OF THE ACT. IT IS A FACT THAT ASSESSEE HAD PURCHASED PLY-WOOD OF RS. 5.99 LAKHS, BUT THIS IN ITSELF CANNOT BE A BASIS FOR TRE ATING THE EXPENDITURE AS CAPITAL EXPENDITURE. PLY-WOOD CAN BE USED FOR REPAIRING AS WELL AS MAKING NEW PIECES OF FURNITURE. AO HAS NOT DISCUSSED ANYTHING ABOUT THE USE OF PLY-WOOD. AS THERE IS NO FINDING THAT THE PLY-WOOD WAS USED FOR MAKING NEW F URNITURE CANNOT BE PRESUMED THAT USE OF PLY-WOOD RESULTED IN BRINGING INTO EXISTENCE NEW ASSETS. SIMILARLY, LABOUR CHARGES PAID TO UTTAM FURTURE AMOUNTING TO RS. 8.82 LAKHS ALSO CANNOT BE HELD CAPITAL EXPENDITURE IN ABSENCE OF FURTHER DETAILS. AS PER THE AO, RS. 21,000/- WERE PAID AS CARPENTRY LABOUR CHARGE FOR EACH OF THE REN OVATED ROOM. IN OUR OPINION, LABOUR CHARGES PAID ARE REVENUE IN NATURE. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE AR AND THE FAA. PRINCIPLES ENUMERATED BY THE SAID CASE LAWS SUPPORT THE VIEW TAKEN BY THE FAA. UPHOLDING THE ORDER OF THE FAA, WE DISMISS GROUND NOS. 1 TO 3 FILED BY THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2012. SD/- SD/- ( / VIJAY PAL RAO ) ( / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 12 TH SEPTEMBER, 2012 TNMM () () () () ' '' ' # # # # ,# ,# ,# ,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE !# # //TRUE COPY// () () () () / BY ORDER, - -- - / . . . . DY./ASSTT. REGISTRAR , / ITAT, MUMBAI