Income Tax Appellate Tribunal - Jodhpur
Lake Palace Hotels And Motels (P) Ltd. vs Deputy Commissioner Of Income Tax on 21 March, 2001
Equivalent citations: (2003)81TTJ(JODH)657
ORDER
P.M. Jagtap, A.M.
1. Both these appeals are directed against the common order of the learned CIT(A), Ajmer, dt. 11th Jan., 1993, involving asst. yr. 1990-91 and 1991-92 and as certain common issues are involved in both these appeals, the same are disposed of by a common order for the sake of convenience.
2.Ground No. 1 of ITA No. 421/Jp/1993 and ground No. 2 of ITA No. 484/Jp/1993 relate to a common issue of treatment of expenditure incurred on repairs and maintenance to furniture, fixture as capital expenditure.
3. In this case, the assessee-company claimed an expenditure of Rs. 10,31,157 for asst. yr. 1990-91 and Rs. 8,72,262 for asst. yr. 1991-92 on account of repairs and maintenance to furniture and fixture. While examining this claim of the assessee during the assessment proceedings, the AO noticed that certain expenditure was incurred on the wood work involving substantial amount. Therefore, considering the details of such expenditure furnished before him, he treated the part of the expenditure incurred on repairs and maintenance to furniture and fixture as capital expenditure to the extent of Rs. 5 lakhs and Rs. 3 lakhs for asst. yrs. 1990-91 and 1991-92, respectively, observing that no evidence was produced before him to show that the entire expenditure was incurred by the assessee exclusively on the repairs and maintenance. The matter was carried before the learned CIT(A) who upheld the action of the AO observing that a perusal of the details of such expenditure clearly shows that some of the expenditure is capital in nature. Aggrieved by the same, the assessee is in appeal before us.
4. The learned counsel for the assessee submitted before us that the assessee-company is running a renowned and reputed hotel which is managed by the famous Ta] group. He further submitted that the interior decoration of the hotel is required to be maintained as per the international norms for which substantial expenditure has to be incurred on repairs and replacement. He also submitted that the assessee-company is a private limited company, which is managed by the independent management and the books of account of the same are duly audited by a chartered accountant. It is also submitted by him that the auditors of the company found the entire expenses on repairs and maintenance as of revenue nature. In this regard he drew our attention towards a copy of audit report placed at page Nos. 1 to 4 of the paper book. He also carried us through the details of expenditure on repairs and maintenance to the furniture placed at pp. 12-44 of the paper book and contended that in spite of furnishing the entire relevant details, before the AO he treated a sum of Rs. 5 lakhs for asst. yr. 1990-91 and a sum of Rs. 3 lakhs for asst. yr. 1991-92 as capital expenditure on ad hoc basis, without pointing out any specific instance of such capital expenditure. He further submitted that the Tribunal has already considered a similar issue in assessee's own case for asst. yrs. 1984-85 and 1985-86 and the same has been decided in favour of the assessee vide its order dt. 13th Nov., 1991, a copy of which is placed at page No. 131 of the paper book.
5. The learned Departmental Representative, on the other hand, strongly supported the orders of the authorities below on this issue and further submitted that the relevant details of such expenditure on repairs and maintenance to furniture and fixture were not furnished by the assessee before the AO. In this regard, he pointed out the specific observations recorded by the AO on page No. 2 of his order and contended that this issue needs to be restored back to the AO, as the entire expenditure is required to be verified in depth for arriving at the exact conclusion.
6. We have considered the rival submissions and also perused the relevant material on record, to which our attention was drawn during the course of the hearing. It is observed that the assessee-company is engaged in the business of running a hotel of international repute which is maintained by a professional Taj group. In order to maintain and upkeep the interior decoration, including all furniture and fixture to conform with the international standard, the assessee-company has to spend substantial amount on repairs and renovations every year including the years under consideration. It is also observed that the affairs of the company are managed by an independent professional group which looks after the day-to-day activities of the hotel, owned by the assessee-company. All the regular books of account of the assessee-company are maintained in which expenses incurred on repairs and maintenance to furniture and fixture have been duly recorded. The said books of account are audited by a chartered accountant and a perusal of the auditors' report shows no adverse comments on the nature of such expenditure claimed by the assessee as revenue expenditure. It is also observed that details in respect of each and every entry appearing in the repairs and maintenance account were furnished by the assessee-company before the AO and no specific instance of any capital expenditure has been painted out by the AO in his order. It is also observed that the assessee-company has accounted for the capital expenditure incurred on furniture and fixture separately in its books of account and accordingly additions to the extent of Rs. 6,80,437 to the furniture and fixture has been duly reflected in the relevant balance sheet, for asst. yr. 1990-91. Although such details for asst. yr. 1991-92 are not available on record before us, the reflection in the balance sheet relevant to asst. yr. 1990-91 makes it abundantly clear that the assessee-company has given separate treatment to the expenses incurred on account of repairs to furniture and fixture considering the respective nature of such expenditure. The learned counsel for the assessee has placed on record before us a copy of Tribunal's decision in assessee's own cases for asst. yr. 1984-85 and 1985-86 and a perusal of the said order dt. 13th Nov., 1991 reveals that a similar issue involving identical facts has been decided by the Tribunal in favour of the assessee relying on various judicial pronouncements elaborately discussed therein. As such, considering all the facts of the case as also the aforesaid decision of the Jaipur Bench of the Tribunal in assessee's own case, we hold that the learned CIT(A) was not justified in upholding the action of the AO treating the expenditure on repairs and maintenance to furniture and fixture to the extent of Rs. 5 lakhs in asst. yr. 1990-91 and Rs. 3 lakhs in asst. yr. 1991-92 as capital expenditure. We, therefore, direct the AO to allow the same as revenue expenditure in full.
7. Ground No. 2 of ITA No. 421/Jp/1993 and Ground No. 1 of ITA No. 484/Jp/1993 relates to the expenditure incurred by the assessee on replacement of cables which has been treated by the Revenue authorities as capital expenditure as against the assessee's claim of revenue expenditure.
8. After considering the rival submissions and perusing the relevant material on record, it is observed that the assessee-company purchased substantial quantity of electric cable worth Rs. 80,764 and Rs. 67,450 during the previous year relevant to asst. yr. 1990-91 and 1991-92, respectively. Although the assessee has claimed that this cable was used to replace the old cable, there is nothing on record to support this statement. It has also been submitted on behalf of the assessee that such expenditure was allowed in assessee's own case for earlier years. In this respect also nothing has been brought on record before us to substantiate this plea. It is observed that the learned CIT(A) has disallowed assessee's claim of replacement, by observing that there is no entry regarding disposal of old cables. The learned counsel for the assessee has contended before us that the old cables, being of no utility or value, were scrapped by the assessee-company. However, considering that substantial quantity of electric cables containing major element of costly metal/alloy is involved in this case, we find it difficult to agree with the learned counsel for the assessee. As such considering all the facts of the case, we are of the view that no cogent evidence has been brought on record before us to establish that the expenditure was incurred on the replacement of cable in the present case. In that view of the matter, we do not find any mistake in the impugned order of the learned CIT(A) treating the cost of cable as capital expenditure.
9. Ground No. 4 of ITA No. 421/Jp/1993 and Ground No. 6 of ITA No. 484/Jp/1993 relate to a common issue of disallowance of Rs. 30,000 each out of miscellaneous expenses.
10. Rival contentions on this issue are heard and relevant material on record is also perused. It is observed that disallowance out of miscellaneous expenses has been made by the AO on ad hoc basis on account of non-availability of complete details, unverifiable nature and element of non-business purpose involved in the said expenses. It is, further observed that the AO has not given any finding in support of this disallowance, nor he has pointed out any specific instance to justify the said disallowance. The learned CIT(A) has also given a very general observation that some of these expenses are not incidental to the business of the company while confirming the disallowance made by the AO. In our opinion, the disallowance made on this count without recording any adverse finding, cannot be sustained. We, therefore, direct the AO to delete the same in both the years involved in these appeals.
11. Ground No. 5 of ITA No. 421/Jp/1993 and Ground No. 6 of ITA No. 484/Jp/1993 relate to a common issue of disallowance of depreciation on imported cars.
12. The learned counsel for the assessee submitted before us that the vehicles were imported by the assessee-company under special quota as "taxi" with the approval of the RBI. He further submitted that all the required details of hire charges have been maintained by the assessee and the same were furnished before the AO during the assessment proceedings. He further submitted that the assessee-company is duly authorised as per its memorandum of association to carry on the business of running vehicles of all kinds and as per this authorisation, the business of running the imported vehicles on hire was carried out by the assessee-company. In this regard he drew our attention towards the copy of memorandum of association of assessee-company placed in his paper book and specifically pointed out the relevant portion contained in Clause No. 14 on paper book, page No. 49. He further submitted that all the imported vehicles were used by the assessee-company during the period under consideration exclusively for running the same on hire for the tourists staying in the hotel of the assessee-company. In this regard he drew our attention towards Circular No. 609, dt. 29th July, 1991, issued by the CBDT placed at p. Nos. 71 and 72 of his paper book and contended that in order to promote tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists which entitles the assessee to claim full depreciation on such cars. He further contended that as per the said circular, even if the transportation services are provided as a part of package tour for tourists including boarding and lodging, service of guide, etc., the depreciation should be allowed on such cars. He also referred to the statements placed at pp. 51-70 of the paper book giving details of hire charges received by the assessee-company. He also submitted that depreciation on the imported cars was allowed in the case of the assessee-company in earlier years and there being no change in the year under consideration as compared to the earlier years such depreciation should be allowed. He also submitted that the use of imported cars for the purpose of running the same on hire for tourists has been established by the assessee-company and contended that the assessee is fully entitled for depreciation on such cars as per the aforesaid circular of the CBDT. For this contention he also relied on the decisions of Hon'ble Kerala High Court reported in CIT v. Dr. K.R. Jayachandran (1995) 212 ITR 637 (Ker) and CIT v. Balakushna Transports (1998) 233 ITR 133 (Ker) and also that of Delhi Bench of the Tribunal in Site World Travel (India) (P) Ltd. v. IAC (1993) 45 ITD 623 (Del).
13. The learned Departmental Representative, on the other hand, contended that if the depreciation on imported cars has been allowed in the assessee's case, in earlier years, on the basis of wrong connotation, such a mistaken act cannot be the basis for allowing depreciation in the subsequent years. He further referred to the details of vehicle hire charges furnished by the assessee-company in the paper book and submitted that a fixed amount of Rs. 500 has been charged in the cases of all customers irrespective of the total bill amount. According to him, charging of fixed amount of Rs. 500 to the customers towards taxi charges clearly shows that the assessee-company was providing the vehicles as an additional facility just to pick up its customers from the airport and dropping them back at the airport again after the completion of stay in the assessee's hotel. He, therefore, contended that these services were given by the assessee-company to its customers as an incidental service to its main business of running a 5-star hotel and the vehicles were never engaged in the business of running the same on hire. In this regard, he referred to Clause (ii) of Section 32(1) and contended that the emphasis has been laid down on the business of running the vehicles on hire in order to claim full depreciation on such vehicles. It is also submitted by him that the main business of the assessee-company is to run-5 star hotel and certainly not the tourist business. He further submitted that the CBDT's Circular No. 609, dt. 29th July, 1991, covers only the tour-operators and travel agents with no reference of hotel business and hence the same does not support the assessee's case. According to him the intention of the legislature in allowing the depreciation on imported cars in exceptional cases was to encourage tourism activities by using such cars for transportation of the tourists from one centre to another centre in the country. He also submitted that the restricted use of the imported cars by the assessee-company as an additional facility to its customers is very much evident from the record of the case and contended that the assessee-company is, therefore, not entitled for allowance of depreciation on the imported cars.
14. We have considered the rival submissions and also perused the relevant material on record, to which our attention was drawn during the course of hearing. The undisputed facts of the case are that the assessee company is engaged in the business of running a 5-star hotel of international fame and repute, which is housed in a lake palace and ancestral property of great heritage. This hotel is very popular among the foreign tourists visiting India, especially the State of Rajasthan and the assessee-company has provided the facility to such tourists staying in its hotel of transportation from airport to hotel and back for which the cars of foreign mark are mainly used. It is observed that the said car have been imported by the assessee-company under the taxi quota with the approval of the RBI. It is also observed that a fixed amount has been charged to all the customers availing this facility towards the hire charges and details in respect of the same have been separately maintained by the assessee. From the perusal of such details, it is evident that the imported cars were used for transportation of the tourists throughout the year under consideration and hire charges for the same have also been collected during this period. Although the use of such imported cars on hire was restricted only for the customers of the assessee-company, we are of the view that such restricted use does not change the nature and character of the activities of the assessee-company which essentially involved the running of imported cars on hire on regular basis. The concept of business involves some kind of regularity in the activity involved in the business and the existence of such regularity in the present case establishes that the assessee-company was carrying on the business of running the imported cars on hire. Moreover, the assessee-company was also authorised to carry on such business of running the vehicles on hire in pursuance of its memorandum of association. It is worthwhile to mention here that the foreign cars were imported by the assessee-company with the approval of the RBI under taxi quota with the intention or to say with the pre-condition to use the same for running on hire. It is observed that the authorities below have rejected the assessee's claim for depreciation on the imported cars merely because the dominant purpose of these cars was the transportation of the assessee's customers in connection with its hotel activities. The lower authorities were, therefore, of the opinion that the activity of running the vehicles for its own customers, is only incidental to its main activity of running a 5-star hotel. In the case of CIT v. Dr. K.R. Jayachandran (supra), the assessee was engaged in the business of running a hospital and an ambulance van was also kept by the assessee for the purpose of being used on hire for its patients on which depreciation at higher rate was claimed by the assessee. In such facts and circumstances, which are identical to the facts of the present case, the Hon'ble Kerala High Court has held that plying of ambulance van on hire itself constitutes the business of the assessee, though it may be incidental to the running of the hospital. Their Lordships, therefore, allowed depreciation at higher rate on the ambulance van observing that in such cases, one business can advantageously be combined with another business.
15. The learned counsel for the assessee has relied on Circular No. 609, dt. 29th July, 1991, issued by the CBDT in support of his contentions. A perusal of the said circular reveals that special concession for allowance of depreciation on imported cars has been provided to the tour operators and the travel agents using their foreign motor cars for providing transportation services to tourists even as a part of package tour. Although, the present case of the assessee-company is not specifically covered by the said circular, in our opinion, the said circular is quite indicative of the legislative intention behind providing special concession for the allowance of depreciation on imported motor cars and accordingly an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists with the objective of promoting tourism industry. Obvious as it is, the facts of the present case clearly fall within the purview of the legislative spirit spelt out in the said circular inasmuch as the imported vehicles were used by the assessee-company for providing transportation service to the tourists which ultimately resulted in the promotion of tourism industry. As such, considering all the facts and circumstances of the case and in view of the reasons given hereinbefore, we are of the considered opinion that the imported cars were used by the assessee-company in a business of running them on hire for tourists and accordingly the assessee was entitled for depreciation on such imported cars at full rate. We order accordingly.
16. Ground No. 6 of ITA No. 421/Jp/1993 and ground No, 8 of ITA No. 484/Jp/ 1993 relate to a common issue of disallowance of depreciation on Indian cars.
16A. In this case the assessee-company claimed a depreciation at higher rate on the Indian cars on the basis that the same were used in the business of running them on hire. The AO, however, considered this activity as only incidental to the main business of the assessee of running a hotel and accordingly allowed the depreciation on the said cars at normal rate. As all the facts relevant to this issue are similar to the facts involved in the issue raised in ground No. 5 of ITA No. 421/Jp/1993 and ground No. 8 of ITA No. 484/Jp/1993, the learned representatives of both the sides have reiterated the same arguments. As such considering that all the facts as well as the arguments of both the sides being the same, we also follow our conclusion drawn in para No. 14 of this order and accordingly direct the AO to allow the depreciation on Indian cars at higher rate.
17. Ground No. 70 of ITA No. 421/Jp/1993 and ground No. 9 of ITA No. 484/Jp/1993 relate to a common issue of depreciation on motor boats.
18. The learned counsel for the assessee submitted before us that depreciation on boats has been claimed at higher rate treating the same as plant. He further submitted that the 5-star hotel owned by the assessee-company is situated in the middle of Lake Pichola and the only mode of conveyance to the hotel is by boats. He, therefore, contended that the business of the assessee-company cannot function without the boats and as such applying the functional test, the boats are to be considered as plant in the peculiar circumstances of the present case. He further submitted that the boats are used for transportation of persons as well as goods from outside world to the hotel and without using boats, the assessee-company cannot run its hotel business.
19. The learned Departmental Representative, on the other hand, submitted that the rate of depreciation for all types of ships and vessels are specifically prescribed in Part IV of Appendix I of IT Rules and accordingly there was no mistake in applying correct rates given in the depreciation. He further submitted that the functional as well as the actual use of the boats in assessee's case is one and the same and there is no justification in treating the boats as plant for the purpose of allowing depreciation.
20. We have considered the rival submissions and also perused the relevant material on record. It is observed that the boats are used by the assessee-company for transportation of persons and goods from outside to hotel premises. Although this is the only mode of accessability to the hotel building, in our view this fact does not change the nature and character of the relevant assets inasmuch as the functional and actual use of the boats remain one and the same. It is observed that under the rules governing allowance of depreciation, boats like inland vessels, speed boats and other vessels are all classified under broad head of "ships" and these rules framed under Section 32 are relevant for the interpretation of the word "ship" appearing in that section. The learned counsel for the assessee has contended that these boats should be considered as plant, but this contention of the learned counsel for the assessee, in our opinion, is far fetched keeping in view the use for which these boats were put to. As such, considering all the facts and circumstances of the case, we uphold the impugned order of the learned CIT(A) on this issue allowing depreciation on boats considering the same as ships and not plant.
21. Ground No. 8 of ITA No. 421/Jp/1993 and ground No. 10 of ITA No. 484/Jp/1993 relate to a common issue of depreciation on woollen rugs and carpets.
22. The learned counsel for the assessee submitted that the expenditure on woollen rugs and carpets is in fact revenue in nature and the same has been allowed as such in assessee's own case for the earlier years. He further submitted that these expenses have not been claimed by the assessee as revenue expenditure at any stage and instead depreciation at the rate applicable to plant was claimed by the assessee-company. He contended that the authorities below have allowed the depreciation at lower rate considering the woollen rugs and carpets as furniture and fixture. According to him, such treatment given by the authorities below is totally wrong and instead the assessee's claim of higher depreciation, considering these assets as plant, should have been allowed. He also raised the alternative plea that the assessee in fact is entitled to claim full deduction in respect of this expenditure being revenue is nature and even if there is no such specific claim made by the assessee before the authorities below, the Tribunal is empowered to grant such relief to the assessee as held by the Hon'ble Supreme Court, in CIT v. Mahalakshmi Textiles Mills Ltd. (1967) 66 ITR 710 (SC). The learned Departmental Representative, on the other hand, strongly supported the orders of the authorities below on this issue and further contended that the assessee itself has claimed this expenditure as capital expenditure on which depreciation at appropriate rate has been allowed as per the rules, treating the same as furniture and fixture.
23. We have considered the rival submissions and also perused the relevant material on record. It is observed that the assessee has raised the issue of rate of depreciation on woollen rugs and carpets by taking the following grounds :
"Ground No. 8 (ITA 421) "On the facts and in the circumstances of the case the learned appellate authority was also wrong in disallowing depreciation on woollen rugs and carpets of Rs. 20,662 by restricting the same to the extent of 15 per cent against 33.33 per cent claimed by the assessee more particularly when expenses on these items have been paid as revenue expenditure by the Hon'ble Tribunal in appellant's own case in asst. yr. 1984-85 & 1985-86".
"Ground No. 10 (ITA No. 484) "On the facts and in the circumstances of the case the learned appellate authority was also wrong in disallowing depreciation on woollen rugs and carpets of Rs. 7,952 by restricting the same to the extent of 11.25 per cent against 25 per cent claimed by the assessee more particularly when expenses on these items have been held as. revenue expenditure by the Hon'ble Tribunal in appellant's own case in the asst. yrs. 1984-85 and 1985-86."
From the perusal of the aforesaid grounds, it is apparent that the assessee has disputed the rate of depreciation allowed by the AO on woollen rugs and carpets. However, the learned counsel for the assessee has raised a new alternative plea before us that the expenditure on purchase of woollen rugs and carpets is of revenue nature and as the same has already been allowed as such by the Tribunal in assessee's own case for asst. yrs. 1984-85 and 1985-86, the assessee is entitled to full deduction of such expenditure and even if no specific claim has been made by the assessee before the authorities below to this effect, the Tribunal is empowered to grant such relief admissible to the assessee, as the same is relevant to the assessment as well as to the computation of taxable income of the assessee. In support of this contention, he has relied on the decision of Hon'ble Supreme Court in the case of CIT v. Mahalaxmi Textiles (supra) wherein it has been held by the Hon'ble apex Court that the Tribunal is competent to pass such orders on the appeal "as it thinks fit" and there is nothing in the IT Act which restricts the Tribunal to the determination of questions raised before the Departmental authorities. Explaining further, the Hon'ble apex Court has observed that all the questions, whether on law or on fact which relate to the assessment of the assessee may be raised before the Tribunal and if the assessee is entitled for grant of relief on another ground, it would be open to the Tribunal and indeed it would be under a duty to grant such relief.
24. We are also consciously aware that the Tribunal is a final fact-finding authority and in order to render justice or for that matter to render real and substantive justice, the law has vested ample jurisdiction in the Tribunal under Section 254(1) having wide embracement for the purpose, and this legislative spirit has been emphasised in the decision of the Hon'ble Supreme Court in the case of CIT v. Mahalaxmi Textile Mills (supra). However, in the present case, we are precluded from entertaining the alternative plea raised by the learned counsel for the assessee for allowing this expenditure as revenue expenditure because it appears from the record that the expenditure on purchase of woollen rugs and carpets has been incurred by the assessee in the period prior to the years under consideration and the same has also been capitalised in the corresponding period. It also appears that the written down value of the relevant assets after allowance of depreciation in the earlier year(s) has been brought forward in the years under consideration. Thus, it makes clear that no expenditure on purchase of the woollen rugs and carpets has been incurred by the assessee-company during the years under consideration. This being the position, question of allowing the same as revenue expenditure in the years under consideration does not arise at all and hence a limited issue of rate of depreciation alone survives for our consideration.
25. As regards the rate of depreciation, it is observed that the assessee-company has claimed the depreciation on woollen rugs and carpets at higher rate considering that the same are plants. However, considering the entire facts and situation of the case, we do not find any justification in this claim of the assessee. We, therefore, uphold the impugned order of the learned CIT(A) on this issue allowing the depreciation at the lower rate treating the woollen rugs and carpets as items of furniture and fixture.
26. Ground No. 4 of ITA No.484/Jp/1993 relates to the disaUowance of Rs, 1,40,000 paid to M/s Abhikram towards professional charges holding the same as expenditure of capital nature.
27. The learned counsel for the assessee submitted before us that a sum of Rs, 1,40,000 was paid by the assessee-company to M/s Abhikram, a renowned architect firm for renovation and design services rendered by it. He further submitted that the expansion and extension of the hotel building was proposed and planned by the assessee-company and for this purpose, the job of design work was assigned to the said firm of architect. He, therefore, contended that this expenditure having been incurred for the expansion of the existing business ought to have been allowed in full as revenue expenditure. For this contention, he relied on the various decisions in CIT v. Shah Theatres (P) Ltd. (1988) 169 ITR 499 (Raj), Challapalli Sugars Ltd. v. CIT (1975) 98 ITR 167 (SC), CIT v. Western Bengal Coal Fields Ltd. (1998) 233 ITR 139 (Cal) and CIT v. Kasthuri & Sons (2000) 241 ITR 412 (Mad).
28. The learned Departmental Representative, on the other hand, relied on the orders of the authorities below and further submitted that the assessee had proposed to convert the existing old building into hotel building for which the initial expenses towards drawing and designing work were incurred by the assessee before the commencement of the new project and, therefore, the AO has rightly disallowed the same as capital expenditure. He further submitted that the cases cited by the learned counsel for the assessee involved different facts and thus the same are not relevant in the present case.
29. We have considered the rival submissions and also perused the relevant material on record. It is observed that all the cases cited by the learned counsel for the assessee relate to the issue of interest on capital borrowed for the purpose of expansion of the existing business of the assessee wherein such interest expenditure was considered as revenue expenditure mainly because the funds were borrowed with reference to an existing business of the assessee. In the case of India Cements Ltd. v. CIT (1966) 60 ITR 52 (SC), relied upon in the cases cited by the learned counsel for the assessee, the Hon'ble Supreme Court has held that the loan obtained was not an asset or an advantage of enduring nature and as the same is obtained only for securing the use of money for a certain period; it is irrelevant to consider the object with which the loan was obtained. In the present case before us, the issue of arthictectural fees for drawing and designing charges is involved and in our opinion nature of such expenditure is to be ascertained from the facts and circumstances of the case in order to give the appropriate treatment either as revenue expenditure or capital expenditure. The learned counsel for the assessee has furnished the copies of bills raised by the architect firm M/s Abhikram and from the perusal of the same, it appears that the fees has been charged therein on the basis of actual cost of the work i.e., some fixed percentage of actual cost incurred by the assessee on expansion/extension work. It is also observed that certain reference has also been made to the amount of revised estimate in the said bills while charging the fees. In our opinion, these specific references indicate that the fees has been charged on the basis of actual cost incurred by the assessee-company. However, as the material available on record before us is not sufficient to draw any final conclusion in the matter, we find it appropriate to restore back this issue to the file of the AO for reconsideration on the basis of actual verification of the relevant record and also as per the directions given below :
1. If the professional charges paid to the architect are not linked to the actual cost incurred by the assessee on account of building expansion and extension work, the entire expenses be allowed as revenue expenditure;
2. If the professional charges are directly related to the actual cost incurred by the assessee-company and such cost has been allowed as repairs and maintenance expenditure, the professional fees attributable thereto be allowed as revenue expenditure, and the balance amount of fees attributable to capital expenditure, if any, be disallowed treating the same as capital expenditure.
30. Ground No. 5 of the ITA No. 484/Jp/1993 relates to the disallowance of Rs. 1,03,000 incurred on sponsoring a cricket match.
31. After considering the rival submissions and perusing the relevant material on record, it is observed that the AO has disallowed this expenditure observing that the assessee could not establish the business expediency of such expenditure. The learned CIT(A) confirmed this disallowance, as the assessee could not produce any evidence to substantiate that this expenditure was incurred for the purpose of business. The learned counsel for the assessee has submitted before us that this expenditure has been incurred by the assessee-company for sponsoring a benefit match for one renowned cricketer which resulted into lot of publicity. He, therefore, contented that this expenditure has been clearly incurred on advertisement. It is, however, observed that no evidence has been brought on record before us to establish such expenditure being advertisement in nature, It is also observed that the decision of Hon'ble Gujarat High Court in CIT v. Emtich Engineering Ltd., cited by the learned counsel for the assessee is distinguishable on facts and thus cannot be applied in the present case. It is also observed that the name of the assessee-company does not appear in the brochure published on the eve of the benefit match, a copy of which is placed on record. As such, considering all the facts and circumstances of the case, we are of the view that there is no mistake in the impugned order of the learned CIT(A) confirming the disallowance made by the AO on this count. We, therefore, decline to interfere.
32. Ground No. 9 of ITA No. 421/Jp/1993 is not pressed by the learned counsel for the assessee before us. Accordingly, the same is dismissed as not pressed.
32. Ground Nos. 10 and 11 of ITA No. 421/Jp/1993 as well as ground Nos. 11 and 12 of ITA No. 484/Jp/1993 are general and require no specific decision from us.
34. In the result, both these appeals preferred by the assessee are partly allowed as indicated above.