1976 (11) TMI 80 - AT - Income Tax

Summary

Issues:
1. Whether the expenditure claimed by the assessee for repairs on a 30-year-old building qualifies as current repairs or capital expenditure.

Analysis:
The assessee had claimed Rs. 13,247 for current repairs on a building with a written down value of just over a lakh of rupees. The Income-tax Officer contended that the work done was in the nature of capital work for reconstruction or remodelling, allowing only a portion as current repairs. The Appellate Assistant Commissioner agreed, considering it accumulated repairs. However, the Appellate Tribunal found no material indicating anything other than current repairs based on the details furnished by the assessee. The Tribunal noted the nominal cost incurred for repairs in comparison to the building's value, indicating it was not reconstruction or remodelling but current repairs. The expenditure lacked the character of investment or capital expenditure, clearly described as only current repairs.

2. Whether the claimed expenditure represents accumulated repairs or current repairs.

The Income-tax Officer and the Appellate Assistant Commissioner suggested that the lack of repairs in the past years implied accumulated repairs. However, the Tribunal disagreed, stating that the absence of repairs in previous years does not automatically mean all work in the current year is accumulated repairs. Without additional material on the building's condition in earlier years and whether repairs were needed but postponed, inferring accumulated repairs is unwarranted. The Tribunal concluded that based on the available details of expenditure, the expenditure was for current repairs only, not accumulated repairs.

Conclusion:
The Appellate Tribunal allowed the appeal, determining that the amount spent by the assessee, Rs. 13,247, was solely for the current repairs of the building. The expenditure was held to be fully allowable as a deduction under Section 30 of the Income-tax Act, 1961 for computing business income.