Expenditure incurred on renovation so as to generate more profit by attracting more customers is revenue expenditure:

AO disallowed expenditure incurred by the assessee on renovation of her hospital by treating the same to be capital in nature. The Hon’ble ITAT observed that the assessee was a doctor by profession and was having a hospital in rented premises. Certain expenditure was incurred on renovation of the hospital for attracting more customers and to remain in competition in the field of medical profession. Such expenditure included colour, painting, repairs to terrace, splitting the existing rooms, making attached bathrooms, replacement of aluminium doors/windows for proper ventilation, etc. No new asset was created by incurring such expenditure. Rather, it was a necessity for assessee’s business to generate more profit by attracting more customers. Further, such expenditure was also recurring in nature. It was held that any expenditure which facilitated the assessee’s trading operations or enabling him to manage and conduct his business more efficiently and profitably must be considered as revenue expenditure. Accordingly, the impugned addition was deleted.

[DR. PARUL ASHWIN SHAH Vs. ACIT – ITA 2072/Ahd/2012]