TMI Blog1961 (10) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... him. His petition before the House Rent Controller failed. While the matter was pending appeal in the sub-court, the parties came to a compromise as a result of which the assessee paid a sum of ₹ 17,000 to the lessee and obtained possession of the premises together with certain items of machinery and furniture. Such possession was taken by him on 1st July, 1953. Thereafter, the assessee carried out extensive repairs to the cinema house. A total sum of ₹ 36,318 was spent by him, After reconditioning the theatre, the assessee started exhibition of films in this cinema house on and from 5th November, 1953. For the assessment year 1954-55, for which the account year ended on 31st March, 1954, the assessee claimed entitled to deduct a sum of ₹ 24,889 as expenses towards current repairs. This sum forms part of the amount of ₹ 36,318 spent by him. Apparently, his own auditors excluded a sum of ₹ 13,500 as having been spent of items of a capital nature such as the construction of a cabin room, booking offices and compound wall. The sum claimed includes also ₹ 2,229 spent for whitewashing the premises. The Income-tax Officer disallowed the claim ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nema house is of a revenue nature and that no item thereof can be regarded as a capital expenditure. Nor having regard to the wording of clause (xv) can it be his contention that if the expenditure is to be brought within clause (xv) it was also on account of current repairs. But, apparently, the claim was put forward partly on the basis of clause (v) and partly on the basis of clause (xv). Though the question that has been referred for our determination specifically refers to clause (xv), the circumstances of the case clearly call for an examination of the scope of both the clauses in relation to the expenditure in question. Even without reference to any authority, it seems to us that the expression current repairs indicates an expenditure that is incurred by an assessee in relation to the building, machinery, etc., giving rise to the income under assessment which expenditure was necessitated during the time the business was conducted and by reason of the business itself such as on account of wear and tear and the like. It does not appear reasonable to hold that there could be any expenditure incurred on account of current repairs either before the business was started or aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of current repairs. They refer to a decision of this court in Commissioner of Income-tax v. Sri Rama Sugar Mills Ltd. [1952] 21 I.T.R. 191 where replacement of a boiler by a new one was held to be within section 10(2)(v). The reason adopted by the learned judges of the Punjab High Court was that compared to the value of the lorries themselves, the expenditure incurred on the construction of new bodies therein was negligible and that, having regard to the circumstances of the case, it could not be said that the company was acquiring a new asset or adding to the number of its vehicles. If the replacement of a tyre or a wheel or such minor parts as the carburettor could be deemed to be current repairs, the learned judges had no reason to hold otherwise with regard to the replacement or a worn out body. It seems to us that while these cases no doubt furnish some guidance with regard to the interpretation of clause (v) of section 10(2), they are hardly applicable to the facts and the circumstances of the present case. Though the question has been framed in a general manner, it is important for us to note that the various items of expenditure which go to make up this total of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is required in the running of the business and has been necessitated by the running of the business, and the other expenditure laid out or expended wholly and exclusively for the purpose of such business, obviously a business which was already in existence and not one that is to come into existence in the future. No direct authority dealing with the point had been cited before us. But certain illustrations would serve to show that where repairs are effected to buildings, such repairs, being found necessary at the time of the purchase for the purpose of commencing a business therein, those expenses cannot but be regarded as expenditure on capital account. If, for instance, the assessee purchases certain dilapidated buildings and puts them into serviceable condition for the purpose of commencing his business, it can hardly be claimed that such expenditure can be brought in either under section 10(2)(v) or section 10(2)(xv). As we have pointed out, the position might perhaps be different if the assessee had taken over the business as a going concern and in relation to that business found it necessary to carry out the repairs to the buildings. But what was only an item of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were spent by the assessee up to that date were only for the purpose of bringing a serviceable asset into existence. That the repairs to those buildings arose out of neglect of the prior lessee is of no consequence. Up to that date, the property was not an asset of any business which the assessee was carrying on. It was only property, the income wherefrom was being assessed under the head income from property . It is only expenditure incurred on and after the commencement of the business that can possibly qualify for allowance either by way of current repairs under section 10(2)(v) or as other expenditure falling within the scope of section 10(2)(xv). As we have said, there is no indication as to the nature of the various items of expenditure incurred and also as to those items which were incurred before and after November 5, 1953. We accordingly answer the question in this manner. Expenditure incurred prior to the commencement of the business will not fall for deduction under any of the clauses of section 10(2). The expenditure incurred after that date would have to be independently examined for the purpose of granting relief under either of the two clauses. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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