ACIT Vs Mfar Hotels & Resorts Limited (ITAT Cochin)
Assessee, engaged in running a five-star hotel under “Le Meridien,” incurred expenditure of Rs7,13,89,107 for renovating the International Convention Centre (ICC) constructed in 1998-99. ICC hosts various conventions, seminars & social functions. Due to extensive use over 12 years, the building required substantial refurbishment to maintain international standards. Assessee claimed the expenditure as revenue in nature noting that additions like increased floor area & additional fittings were capitalised separately.
AO disagreed, treating the expenditure as capital in nature citing the thorough revamp of the convention centre’s look & feel. AO also placed reliance upon the decision of the Hon’ble Bombay High Court in New Shorrock Spg. & Mfg. Co. Ltd. v/s CIT [1956] 30 ITR 338 (Bom.), & the decisions of the Hon’ble Supreme Court in Ballimal Naval Kishore v/s CIT, [1997] 224 ITR 414 (SC), & in CIT v/s Saravana Spg. Mills (P.) Ltd., [2007] 293 ITR 201 (SC).
CIT(A) allowed the expenditure as revenue in nature, holding that no new asset had come into existence. Revenue appealed against this decision.
Tribunal observed that the expenditure involved replacing worn-out tiles, granite flooring, panels, bathroom fittings & electrical cables without increasing floor space or capacity. AO did not dispute that no structural change occurred & that the works were confined to interiors, kitchens & toilets.
