Section 37(1) of the Income-tax Act, 1961—Business expenditure— Expenditure was made in order to secure a long lease of new and more suitable business premises at a lower rent, thus, assessee did not get any capital asset by spending the said amounts, therefore, expenditure was revenue in nature.

Facts: Whether Tribunal has erred in deleting the addition of Rs. 1,65,02,262/- by Assessing Officer on account of renovation expenses treating the same as capital expenditure as the assessee is in the business of hotels ?

Held, that in order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view. The assessee got a long lease of a newly constructed building suitable to its own business at a very concessional rent. The expenditure, therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts. The saving in expenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. The appeal is thus dismissed. - CIT V/s NEW KENILWORTH HOTEL (P.) LTD. - [2018] 2 ITCD Online 116 (CAL)