TMI Blog2001 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... of the air-conditioning plant was a revenue expenditure being in the nature of current repairs? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the deduction of Rs.6,000 paid to counsel as retainership fee was admissible to the assessee under section 37(1) of the Income-tax Act?" The dispute relates to the assessment year 1976-77. The factual position in a nutshell is as follows: The assessee was carrying on the business of running Volga Restaurant at Connaught Place, New Delhi. On June 12, 1975, the business premises got damaged because of a fire and the air-conditioner plant installed in the premises also got damaged. A sum of Rs.1,45,516 was claimed as expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... replacement of the damaged air-conditioning plant. The amount in question should have been held to be capital expenditure. So far as the question relating to applicability of section 80VV is concerned it was submitted that the retainer's job is not merely advisory and has links with appearance of the assessee before the authorities and, therefore, the disallowance should have been sustained. Section 31 of the Act applies to repairs, insurance, machinery, plant and furniture. The said provision reads as follows: "31. Repairs and insurance of machinery, plant and furniture.-In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or profession, the following deductions shall be allowed- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As was observed by the Bombay High Court in the last quoted case, the test that has to be applied is that as a result of the expenditure which is claimed as an expenditure for repairs, what is really being done is to preserve and maintain an already existing asset. The object of such expenditure is not to bring a new asset into existence nor is its object the obtaining of a new or fresh advantage. But if the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure. Coming to the facts of the case, it has to be noted that the Tribunal has recorded the following finding on the factual as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remove them and replace them with new motors and new pumping sets, starters, etc. But that does not mean that what the assessee put up was an entirely new air-conditioning plant after scrapping the old plant which was damaged in the fire as a total loss. The materials placed before us clearly establish that the assessee had tried to retain as much as possible of the existing air-conditioning plant which was not damaged by the fire and tried to restore the same by replacing the damaged parts of the plant with new parts of machinery of the plant. The order of the Commissioner of Income-tax (Appeals) shows that the cost of providing a new air-conditioning plant of 27.5 tons would approximately be Rs.2,15,000. In the light of the above fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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