N.N. Mathur, J.
1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has under Section 256(1) of the Income-tax Act, 1961, referred the following question of Jaw for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the sum of Rs. 5,30,503 incurred on old wing of the hotel building owned by the assessee was not a capital expenditure ?'
2. The assessee-company, namely, The Lake Palace Hotels and Motels P. Ltd., Udaipur, is running two hotels, namely, Lake Palace Hotel and Garden Hotel. The hotels of the company are being operated by the Indian Hotels Co. Ltd. (Taj Group). As per the agreement 50 per cent. of the net operative profit is being paid to the assessee by the said group. The assessee filed the returns for the assessment year 1984-85 declaring a loss of Rs. 10,03,560. The company was given a notice under Section 143(2). In response to the notice a detailed reply was submitted. The company also claimed Rs. 20,00,000 as revenue expenditure, the amount spent during the year ending on June 30, 1983, for carrying out the most essential repairs, replacement, improvements in interiors, purchase of household and operating supplies. This was to be carried out in a phased manner as a uplift programme. Considering the facts and circumstances, written submissions made by the assessee and keeping in view the benefit of enduring nature to be derived by the assessee-company, the Assessing Officer disallowed a sum of Rs. 6,00,000 considering the same as of capital nature. In appeal before the Commissioner of Income-tax (Appeals), he reduced the said amount to Rs. 5,30,503. In the opinion of the Commissioner of Income-tax (Appeals), the following expenditure was of capital nature :
Rs.
(a) Four hand madewoollen carpets
2,24,280
(b) 50 Banquet tables(folding)
57,500
(c) 8 room mattresses
5,366
(d) 2 hand-knittedwoollen carpets
50,670
(e) 15 items offurniture
35,600
(f) Miscellaneousfurniture
30,778
(g) Lamp shades
11,950
(h) Partition panels
14,616
(i) Partition articles
41,343
(j) 12 decorative brasslamps
37,400
(k) 20 Galichas
11,000
Total5,30,503
3. Before the Income-tax Appellate Tribunal it was submitted on behalf of the assessee that the carpets, folding tables, etc., were items, which were not even durable. They were not durable articles as such there was no addition or embellishment of capital assets. The Tribunal relying on various decisions of the apex court and High Courts held that the provision of carpets, room mattresses, lamp shades, decorative lamps, galichas, etc., could not be treated as a capital expenditure. The Income-tax Appellate Tribunal also accepted the position that no major repairs and renovations had been carried out since its inception and the repairs and renovations were necessitated as the Commonwealth Foreign Ministers' Conference at one time was proposed to be held in the Lake Palace Hotel. As such in the opinion of the Income-tax Appellate Tribunal the disallowance of Rs. 5,30,503 was not sustainable.
4. The Revenue made an application under Section 256(1) of the Income-tax Act for referring four questions as formulated in the application for the opinion of this court. In para. 10, the Income-tax Appellate Tribunal declined to refer the proposed question No. 1. In para. No. 11, the Income-tax Appellate Tribunal declined to refer questions Nos. 2 and 3. Similarly question No. 4 was not referred in view of the discussion in para. No. 12. Thus, in fact there was no occasion for the Income-tax Appellate Tribunal to make the instant reference.
5. Be that as it may, from the question referred, it is clear that what has to be determined in the instant case is as to whether, on the facts and circumstances disclosed and the findings of the Tribunal, the expenditure incurred by the assessee-company for the purpose of modernisation falls in the category of 'revenue expenditure' or 'capital expenditure'.
6. It is submitted by Mr. Bhandawat, learned counsel for the Revenue, that the expenditure which is made once for all for procuring an enduring benefit to the business clearly falls in the category of capital expenditure. It is further submitted that the benefit which enured to the assessee was of enduring nature and as such the Income-tax Appellate Tribunal ought to have treated the subject expenditure as capital expenditure, Learned counsel has placed reliance on the decisions of the apex court in CIT v. Coal Shipments P. Ltd. : [1971]82ITR902(SC) ; Arvind Mills Ltd. v. CIT : [1992]197ITR422(SC) ; Ashoka Hotels Ltd. v. CIT : [1969]72ITR306(Delhi) and Hylam ltd. v. CIT : [1973]87ITR310(AP) . On the other hand, it is submitted by Mr. Rajendra Mehta, learned counsel for the respondent-assessee, that at the first instance securing the benefit for the business would prima facie fall in the category of capital expenditure. It is also submitted that if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite time. Learned counsel has placed reliance on a large number of cases, viz,, Empire Jute Co. Ltd. v. CIT : [1980]124ITR1(SC) ; CIT v. Dasa-prakash : [1978]114ITR210(Mad) ; CIT v. Indian Woollen Textile Mills P. Ltd. [1978] 112 ITR 441; Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. CIT : [1965]56ITR52(SC) ; CIT v. Polyolefins Industries Ltd. : [1988]169ITR538(Bom) ; Cultural Enterprises Corporation v. CIT : [1992]196ITR488(Cal) and Vanaja Textiles Ltd. v. CIT [1994] 208 ITR 161.
7. We have scanned through the cases referred to by learned counsel for the Department as well as for the assessee. Section 37 of the Income-tax Act provides for deduction of any expenditure not being in the nature of capital expenditure laid out or expended wholly and exclusively for the purposes of the business or profession. But the expression 'capital expenditure' is not defined in the Act and the words employed under Section 37(1) 'in the nature of capital expenditure', make the meaning of the expression more elastic in application to the facts of each case. The word 'capital' connotes permanency and 'capital expenditure' is, therefore, closely akin to the concept of securing something, tangible or intangible property, or corporeal or incorporeal right, so that they could be of a lasting or enduring benefit to the enterprise in issue. Revenue expenditure, on the other hand, is operational in its perspective and solely intended for the furtherance of the enterprise. To put it differently, ordinarily, 'capital' means as an asset which has an element of permanency about it and which is capable of being a source of income and 'capital expenditure' must, therefore, generally mean an acquisition of an asset and the asset must be intended to be of lasting nature ; while income or revenue expenses are generally running expenses incurred in earning profit or expenses incurred with the primary object of an immediate return or acquisition of assets which are not of lasting value and are likely to get exhausted or consumed in the process of the return.
8. At this stage, it may be apposite to refer some of the judicial decisions, wherein broad tests have been laid down to distinguish capital expenditure from revenue expenditure. In Empire Jute Co. Ltd. v. CIT : [1980]124ITR1(SC) , the apex court has laid down that every advantage of enduring nature acquired by an assessee, it would not be treated as a capital expenditure, that it was material to consider the nature of the advantage in the commercial sense and that it was only where the advantage was in the capital field that the expenditure would be disallowable on the ground that it was capital but if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future.
9. The Supreme Court in Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. CIT : [1965]56ITR52(SC) , has held that an expenditure made under a transaction which is so closely related to the business that it could be viewed as an integral part of the conduct of the business, may be regarded as revenue expenditure laid out wholly and exclusively for the purposes of the business. It is contended by Mr. Bhandawat that the decision of the Delhi High Court in Ashoka Hotels Ltd. v. CJT : [1969]72ITR306(Delhi) , is more close to the facts of the instant case. We have carefully read the judgment in Ashoka Hotels Ltd.'s case : [1969]72ITR306(Delhi) . In that case, the assessee who owned a luxury hotel, purchased linen and blankets for use in the rooms of the hotel and the uniforms for its employees for She first time at or before the commencement of the hotel business. The court found that the expenditure was incurred by the assessee on linen and blanket and uniforms for its employees as a part of the initial equipment of the hotel and that a five star modern hotel cannot be said to be fully equipped without the linen, blankets and uniforms which form an integral part of the income earning apparatus. The case is clearly distinguishable on facts. In the instant case because of the order placed to accommodate the guests in the Foreign Ministers' Conference of international level purchasing was made of carpets, mattresses, folding tables, lamp shades, etc., by no stretch of imagination can such items be said to be durable. Such expenses cannot be treated as capital expenditure. In fact the decision of the Madras High Court in CIT v. Dasaprakash : [1978]114ITR210(Mad) is more close to the facts of the instant case. In the said case the assessee was carrying on the business of running a hotel. The assessee made an expenditure in a sum of Rs. 37,390 on various items like fixing carpets in the reception hall, replacement of old and worn-out hinges, putting frosted glass in the pink hall, putting decorated mirrors and pictures of religious personages in the dinning-cum-lecture hall/ etc. The court held that the expenditure was incurred with a view to beautify the premises to attract guests. Thus, the expenses cannot said to be of enduring nature.
10. The question whether the expenditure was capital or revenue in the particular facts of the case is laid down in a large number of judicial decisions by the apex court and different High Courts. However, we are of the view that ordinarily it is essentially a question of fact. The law which the apex court laid down in Assam Bengal Cement Co. Ltd. v. CIT : [1955]27ITR34(SC) still holds good, which is extracted as follows :
'The aim and object of the expenditure would determine its character, namely, whether it was capital expenditure or revenue expenditure. If the expenditure was made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it was properly attributable to capital and was of the nature of capital expenditure. If, on the other hand, it was made for running the business or working it with a view to produce profits, it was revenue expenditure.'
11. In our view no referable question of law has arisen from the order of the Tribunal. The finding of the Income-tax Appellate Tribunal is purely a finding of fact which does not call for interference by this court. As already stated even according to the Tribunal no question of law arises from its order.
12. Consequently, the instant reference is returned without answering thequestion referred.