TMI Blog1991 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... lease for the purpose of the business of the assessee. Thereafter, the assessee incurred expenditure to make the godown fit for the purpose of business, which the assessee claims to be the repair work. Similarly, the old dilapidated compound wall was replaced : initially, the property was covered by a barbed wire fence around it, which was replaced by a compound wall. Further, the thatched roof of the shed was removed and in its place, asbestos sheets were put in. The Appellate Tribunal has accepted this factual position at para 7 of its order. The assessing authority had earlier rejected the claim of the petitioner on the ground that these were expenses of a capital nature and not revenue expenditure. The assessing authority proceeds on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the property for better utilisation of the property for business purposes, will be revenue expenditure, while considering the nature of the expenditure incurred, the entire asset will have to be taken as one unit. Several decisions were cited by learned counsel as usual. The distinction between repair and reconstruction is quite narrow and the meaning attributable to the word "repair" depends upon the facts and circumstances of the case. It is generally understood that repair involves renewal ; renewal of a part ; of a subordinate part ... repair is restoration by renewal. The size and importance of the work involved are to be considered. In the context of a building, its roof will be a subordinate part of it and, therefore, its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing formula which can provide a ready solution to the problem ; no touchstone has been devised. Every case has to be decided on its own facts, keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. But a few tests formulated by the courts may be referred to as they might help to arrive at a correct decision of the controversy between the parties. One celebrated test is that laid down by Lord Cave L. C. in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155, 192 (HL), where the learned Law Lord stated: '...when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case." The distinction between fixed and circulating capital, applied as a test in this regard in some of the cases was also held as not a conclusive test. It was pointed out that even this test breaks down on occasions. In this context, the Supreme Court observed (at page 11) : "Moreover, there may be cases where expenditure, though referable to or in connection with fixed capital, is nevertheless allowable as revenue expenditure. An illustrative example would be of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future." (emphasis supplied). In CIT v. Mysore Cements Ltd. [1990] 183 ITR 367, this court had to consider whether the expenditure incurred which is attributable to welfare scheme to put up workers' quarters, which would not vest in the assessee-company, will be a capital or a revenue expenditure. It was pointed out that the test of enduring nature applied to the purpose for which a particular expenditure is incurred is not a conclusive test. In CIT v. T. V. Sundaram Iyengar and Sons P. Ltd. [1990] 186 ITR 276 (SC), the decision of the Madras High Court in CIT v. T. V. Sundaram Iyengar and Sons P. Ltd. [1974] 95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icals Ltd. [1977] 106 ITR 900 (SC) is illustrative of the difficulty involved in applying various tests to find out whether an expenditure involved is a revenue expenditure or capital expenditure. Gurnarain Khanna and Sons v. CIT [1986] 159 ITR 231 is decision of the Delhi High Court referred to by Sri Chanderkumar. The assessee was a lessee of a cinema theatre. In compliance with the order of the District Magistrate, the assessee constructed new urinals and latrines and claimed the expenditure as revenue expenditure. There was a new construction of the boundary wall also. The Delhi High Court negatived the claim of the assessee and held them to be capital expenditure. Even though the urinals, latrines and boundary wall are absolutely nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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