TMI Blog1985 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... In this reference, we are concerned with the assessment years 1964-65, 1966-67 and 1968-69. In regard to the assessments for these years, deductions were claimed by the assessee, a private limited company, on account of repairs and renovation to the furnace. For the year 1964-65, the expense incurred over repairs and renovations was to the tune of Rs. 4,26,427, for the year 1966-67 it was Rs. 4,05,971 and for 1968-69, it was Rs. 5,02,654. The Income-tax Officer rejected the claim of the assessee holding that the repairs did not fall within the meaning of current repairs and thus those expenses did not fall within the category of amounts paid on account of current repairs to the factory as laid down under section 31 of the Act. In coming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner also found that the sums claimed were not excessive. He observed that in glass factories in the country, the percentage allowed for repairs to furnaces varied between 3 percent to 3.8 per cent. The expenses incurred by the assessee were in the vicinity of 3.4 per cent. in the various years. The order of the Appellate Assistant Commissioner, which is annexure B series to the statement of facts, shows that the furnace is to undergo cold repair every year. The Appellate Assistant Commissioner, therefore, held that the renovations were not of capital nature but of revenue nature. The Revenue filed an appeal before the Appellate Tribunal. The Tribunal, in agreement with the Appellate Assistant Commissioner, also held that the expenses claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. That case related to section 10(2)(v) of the Indian Income-tax Act, 1922, which is equivalent to section 31 (1) of the 1961 Act. In that case, the allowance claimed by the assessee bad been rejected on the ground that the repairs were not of petty nature and were thus capital in nature. In that situation, Ramaswami and Imam JJ. observed (at p. 23) that the word " current " in the context of the Act merely meant something which arose in the course of ordinary use of machinery, i.e., during the currency of the life of the machinery. In their view, the true distinction would be between replacement of a subsidiary part which becomes worn out by use at shorter or longer intervals and of a main part which may, with ordinary attention, be exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent years, we do not find any enduring benefit resulting from the expenditure in question. We agree with the Appellate Assistant Commissioner that the reasons given by the Income-tax Officer were not enough to come to the conclusion that the expenses under consideration were capital in nature in view of the decisions cited by him. We, therefore, see no reason to interfere with his findings. " From the above, it will be seen that the expenditure was essential to replace and repair the damaged parts. The parts had been damaged. Therefore, they were replaced. This certainly must be held to be current repair. In the very nature of the industry, it had to work at high temperature and, therefore, the furnace has to be refurbished every yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the order of the Appellate Assistant Commissioner and affirmed by the Appellate Tribunal, we have no difficulty in holding that the expenses on account of repairs and renovation to the furnace of the assessee must be held to be current repairs within the meaning of section 31 (1) of the Act. They cannot be dubbed as capital in nature. For the reasons stated above, it is obvious that the Tribunal was fully justified in law in holding that the expenditure incurred on repairs and renovations were of the nature of current repairs and thus revenue in nature. The reference is, therefore, answered in favour of the assessee and against the Department. There shall, however, be no order as to costs. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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