DCIT, CHENNAI V. Savera Industries Ltd., CHENNAI

ITA 576/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4013 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Depreciation; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . . ! '# , $ %& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA NOS. 576 & 577/ MDS/2016 ASSESSMENT YEARS: 2006-07 & 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G.ROAD, 7 TH FLOOR, CHENNAI 600 034. V. M/S.SAVERA INDUSTRIES LTD., 146, RADHAKRISHNAN ROAD, CHENNAI 600 004. PAN: AAECS9541D ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , /APPELLANT BY : SHRI SUPRIYO PAL, JCIT )*'(+, /RESPONDENT BY : SHRI G.SEETHARAMAN, C.A. ! +-$ /DATE OF HEARING : 17.10.2016 ./0 +-$ /DATE OF PRONOUNCEMENT : 23.11.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE RESPECTIVE ORDERS OF THE CIT(A) DATED 14.12.2015 FO R THE ASSESSMENT YEARS 2006-07 & 2012-13. 2 I.T.A. NOS.576 & 577/MDS/2016 2. SHRI SUPRIYO PAL, THE LEARNED DEPARTMENT REPRESE NTATIVE SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF RUNNING A FOUR STAR HOTEL. IN THE COURSE OF ITS BUS INESS ACTIVITY FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE CLAIMED THAT A SUM OF RS.58,40,450/- TOWARDS RENOVATION EXPENDITURE. AC CORDING TO THE LEARNED REPRESENTATIVE, THE ASSESSEE HAS REPLACED E XISTING MOSAIC FLOORS INTO MARBLE FLOORS. 3. ACCORDING TO THE LEARNED REPRESENTATIVE, THE EXP ENDITURE INCURRED BY THE ASSESSEE WAS TO IMPROVE THE PROPERTY BEYOND ITS ORIGINAL CONDITION. THEREFORE, IT HAS TO BE TREATED AS CAPI TAL IN NATURE. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE EXPE NDITURE AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION AT THE RATE OF 10% . HOWEVER, THE CIT(A) FOUND THAT THE EXPENDITURE INCURRED BY THE A SSESSEE IS REVENUE IN NATURE. ACCORDING TO THE LEARNED REPRESENTATIVE, THE EXPENDITURE INCURRED FOR REPLACING THE MOSAIC FLOOR INTO A MARB LE FLOOR WOULD DEFINITELY IS IN THE CAPITAL FIELD. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY IS RUNNING A FOUR STAR HOTEL IN THE CITY. I N THE COURSE OF ITS 3 I.T.A. NOS.576 & 577/MDS/2016 BUSINESS ACTIVITY, ADMITTEDLY, THE ASSESSEE INCURRE D EXPENDITURE FOR REPLACING THE MOSAIC FLOORING INTO MARBLE FLOORING. BY REPLACING THE MOSAIC FLOORING, THE CAPACITY OF THE HOTEL BUILDING REMAINS THE SAME. THE PROFIT EARNING APPARATUS OF THE ASSESSEE CONTIN UES TO BE THE SAME. BEING A STAR HOTEL, THE ASSESSEE HAS TO IMPROVE ITS AMBIANCE TO ATTRACT MORE CUSTOMERS. THE ASSESSEE HAS TO NECESSARILY REP LACE THE EXISTING MOSAIC FLOOR INTO MARBLE FLOOR IN ORDER TO MAINTAIN THE BUSINESS ASSET. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE IN REPLACING THE MOSAIC FLOOR BY MARBLE FLOOR HAS TO BE TREATED AS R EVENUE IN NATURE. THEREFORE, THIS TRIBUNAL IS DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE SAME IS CO NFIRMED. 5. NOW COMING TO THE ASSESSMENT YEAR 2012-13, SHRI SUPRIYO PAL, THE LEARNED DEPARTMENT REPRESENTATIVE SUBMITTED THA T THE ASSESSEE HAS PURCHASED AIR CONDITIONER MACHINE, DISHWASH MACHINE , RESTO PUB AUDIO VIDEO FOR RS.59,50,665/- AND CLAIMED THE SAME AS R EVENUE EXPENDITURE. ACCORDING TO THE LEARNED REPRESENTATI VE, AIR CONDITIONER MACHINE, DISHWASH MACHINE, RESTO PUB AUDIO VIDEO AR E ALL CAPITAL IN NATURE. THEREFORE, IT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. ON A QUERY FROM THE BENCH, WHETHER THE ASSESSEE HAS REPL ACED THE EXISTING AIR CONDITIONER MACHINE, DISHWASH MACHINE AND RESTO PUB AUDIO VIDEO, 4 I.T.A. NOS.576 & 577/MDS/2016 THE LEARNED REPRESENTATIVE SUBMITTED THAT THE FACT IS NOT COMING OUT FROM THE ASSESSMENT ORDER. 6. ON THE CONTRARY, SHRI G.SEETHARAMAN, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A S TAR HOTEL AND IS HAVING AIR CONDITIONER MACHINE, DISHWASH MACHINE, R ESTO PUB AUDIO VIDEO. THE ASSESSEE HAS TO REPLACE THE EXISTING AIR CONDITIONER IN THE LOBBY AND RESTO PUB. THE ASSESSEE HAS ALSO NEEDS TO REPLACE THE AUDIO AND VIDEO IN THE RESTO PUB. IT IS NOT A CASE OF INS TALLATION OF AIR CONDITIONER FOR THE FIRST TIME. IT IS MAINTENANCE O F THE HOTEL IN THE COURSE OF ITS BUSINESS ACTIVITY. THEREFORE, THE CIT (A) HAS RIGHTLY FOUND THAT THE EXPENDITURE HAS TO BE ALLOWED AS REVENUE I N NATURE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF THE LOWER AUTHORITIES, IT APPEARS THAT THE HOTEL RUN BY THE ASSESSEE WAS CLASSIFIED AS FOUR STAR HOTEL SINCE 1971. THEREFORE , THE ASSESSEE HAS TO NECESSARILY HAVE AIR CONDITIONER MACHINE, DISHWASH MACHINE AND AUDIO VIDEO IN RESTO PUB. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT THE ASS ESSEE HAS PURCHASED ANY NEW MACHINERY, IT HAS TO BE CONSIDERED ONLY AS REPLACEMENT OF THE EXISTING MACHINERY. WHEN WE CONSIDER THE HOTEL AS A SINGLE UNIT, 5 I.T.A. NOS.576 & 577/MDS/2016 REPLACEMENT OF AIR CONDITIONER MACHINE, DISHWASH MA CHINE AND AUDIO VIDEO IN RESTO PUB HAS TO BE CONSIDERED AS MAINTENA NCE OF THE BUILDING FOR THE PURPOSE OF RUNNING THE BUSINESS OF HOTEL. T HEREFORE, THE CIT(A) HAS RIGHTLY FOUND THAT THE EXPENDITURE WAS REVENUE IN NATURE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE S AME IS CONFIRMED. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE IN ITA NOS.576 & 577/MDS/2016 STANDS DISMISSED. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( . . ! '# ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) $ /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 1 /DATED, THE 23 RD NOVEMBER, 2016. SP. + )-'2 320- /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. ! 4- ( )/CIT(A) 4. ! 4- /CIT, 5. 25 )- /DR 6. 6 7 /GF.