The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently in an appeal filed before it, held that replacement of old tube light with LED lights, is revenue expenditure in hotel business.
The aforesaid observation was made by the Delhi ITAT, when an appeal was filed before it by the assessee, as against the order dated 20.12.2022, passed by National Faceless Appeal Centre (NFAC), New Delhi, pertaining to assessment year 2018-19.
The disputes in the appeal being with regard to the expenditure on repair and maintenance of electrical equipment as well as installation amounting to Rs.12,80,215, and disallowance under Section 40(a)(i) of the Income Tax Act, on account of payment made to overseas entities towards advertisement expenses, amounting to Rs.3,62,220, at the time of hearing, as Adv Shri J.P. Jain, the counsel appearing for the assessee, on instructions, did not contest the disallowance of Rs.3,62,220 made under Section 40(a)(i) of the Act. And accordingly, the Tribunal treated the assessee’s ground on the issue as not pressed, hence, dismissed.
As regards the disallowance of Rs.12,80,215, the brief facts of the case were that, in the course of assessment proceedings, the Assessing Officer, while verifying the financial statement noticed that the assessee had debited an amount of Rs.12,80,215 towards expenses on electrical instruments.
After verifying the details, he found that the major part of the expenditure was towards purchase and installation of LED lights in the assessee’s hotel named, ‘Airport Motel’. And, being of the view that, by incurring the said expenditure, the assessee has acquired capital assets with enduring benefits, the Assessing Officer treated the same as capital expenditure and disallowed the it.
Being aggrieved, the assessee contested the disallowance before the Commissioner (Appeals). However, he was unsuccessful in gaining a decision in his favour. And, it is being aggrieved by the same, that the assessee has preferred the instant appeal before the Delhi ITAT.
Hearing the opposing contentions of both sides as presented by Shri J.P. Jain, the Advocate on behalf of the assessee, and by Shri Om Prakash, the Sr. DR on behalf of the Revenue, as well as perusing the materials available on record, the Delhi ITAT observed:
“I have considered rival submissions and perused the material available on record. As could be seen from the facts on record, out of the total expenditure of Rs.12,80,215 claimed by the assessee, an amount of Rs.8,15,000 was for installation of LED lights and rest of the amount was for other routine expenses. From the facts and material placed before me, it is observed that the assessee has replaced old bulbs/tube lights with new LED lights. Some other expenditure was incurred for regular repair and replacement.”
“Thus, from the nature of expenditure incurred, it is evident that they are in the nature of consumables and not for acquiring any assets of enduring nature. I am of the view, replacement of old tube light with LED lights cannot be treated as capital expenditure. Therefore, I do not find any reason to sustain the disallowance made by the Assessing Officer”, Saktijit Ray, the Judicial member concluded.
Finally, the Delhi ITAT held:
“Accordingly, I delete the disallowance of Rs.12,80,215. The ground is partly allowed. In the result, the appeal is partly allowed.”
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