The Delhi High Court recently ruled that the repair and maintenance expenditure incurred by a Hotel is revenue expenditure under the Income Tax Act.
A division bench acting Justice S. Ravindra Bhat and Justice A.K.Chawla were held so while handling a departmental appeal.
The revenue approached High Court in connection with an initial disallowance made in respect of expenses claimed towards repairs and maintenance.
Assessee in the instant appeal, manages a hotel in Jaipur argued that the maintenance of its rooms, in continuance are an intrinsic part of the expenditure incurred by it and expenditure fell entirely in the Revenue stream and essentially for the purposes of its commercial activity.
The AO on scrutiny concluded that expense and repair in the question are durable and sought to link in room rent or rates. In the meantime, CIT (A) quashed the additions holding that the expenditure fell entirely in the Revenue stream even by upholding part of the expenditure in respect of the Assessment Year 2006-2007.
However, the ITAT relied upon several judgments of various High Courts and quashed even the amounts that were brought to tax by the CIT (A).
Finally the court opinioned that the ITAT conducted a proper analysis of the case law including the facts in the case and arrived at the correct conclusion that the expenditure is essentially within and not capital in nature.
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