N.N. Mathur, J.-The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has under Section 25 6(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. Theassessee-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, improveme