TMI Blog1978 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... e it could set up its own office as also the offices of several companies managed by it. In the assessment year 1961-62, i.e., accounting year 1960-61, the assessee claimed a further deduction of Rs. 9,206, allegedly incurred as renovation expenses in respect of its office Premises which included the cost of panelling the walls with plywoods, cost of a notice board and book case and the cost of installing the said book case and a safe. In the assessment year 1961-62, the ITO allowed the claim of the assessee in respect of the interest paid to the bank as also the municipal tax paid in respect of the said land but disallowed the assessee's claim for renovation on the ground that the expenses incurred were capital in nature. On appeal, the AAC gave notice to the assessee and the municipal tax should not be disallowed (sic). The AAC found that between the assessment and the appeal the assessee had not taken any steps in furtherance of its purported objective and the scheme of the assessee to have a multi-storeyed building was not even in a blue-print stage. He held further that, even if the avowed object of the assessee was accepted, it followed that the assessee had acquired an inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses and were disallowed. At the instance of the Commissioner, the Tribunal under s. 66(1) of the Indian I.T. Act, 1922, and s. 256(1) of the I.T. Act, 1961, has drawn up statement of case and referred the following questions as questions of law arising from its aforesaid order : For the assessment years 1961-62 to 1964-65: " (1) Whether, on the facts and circumstances of the case, the assessee is entitled to the deduction of the amounts of interest set out earlier, viz., Rs. 42,911, Rs. 31,575, Rs. 32,868 and Rs. 31,315, respectively, in the computation of its profits for the assessment years 1961-62 to 1964-65 as interest on capital borrowed for the purposes of the assessee's business under section 10(2)(iii)/section 36(1)(iii) of the Income-tax Act, 1922/1961 ? (2) Whether, on the facts and circumstances of the case, the municipal taxes paid by the assessee (as set out in para. 3 above) can be deducted as legitimate business expenses in respect of each of the assessment years 1961-62 to 1964-65 ? For the assessment year 1961-62: "Whether, on the facts and circumstances of the case, the expenditure of Rs. 4,796 incurred by the assessee is deductible as revenue expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended further that interest paid on capital borrowed for the purpose of acquisition and construction of house property was specifically deductible in computing income from house property under s. 24 of the I.T. Act, 1961. The assessee could claim deduction of interest paid only under this head and not as a business expenditure. In support of his contentions, Mr. Sen cited the following decisions : (a) CIT v. United Breweries [1973] 89 ITR 17 (Mys). The facts of this case were that the assessee, a public limited company, carried on the business of manufacture and sale of beer. During the relevant assessment years the assessee borrowed money on interest. It also advanced moneys to its subsidiary companies without interest. The ITO held that since interest was not charged by the assessee on advances made by it to its subsidiaries, a part of the interest paid on the amounts borrowed by the assessee was for a non-business purpose and was not allowable as a deduction under s. 36(1)(iii). The Tribunal, however, held that the assessee carried on its business through the agency or medium of its subsidiaries and there was no distinction between the activities of the assessee-company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest had been paid on moneys invested on agricultural land which was not " business " within the meaning of the I.T. Act, 1961. Mr. Sukumar Bhattacharyya, learned counsel for the assessee, has contended before us that it has been found as a fact by the Tribunal that the assessee has utilised the capital borrowed in acquiring a business asset. This finding has not been challenged by the revenue and, therefore, the question must be answered in favour of the assessee. He contended further that the two admitted objects of the assessee in acquiring this capital asset were: (a) the purpose of its own business; and (b) the business of the managed companies to the extent that the assessee intended to house the offices of the managed companies in the same building. These objects undoubtedly were included in the phrase "for the purpose of business" of the assessee. Mr. Bhattacharyya cited CIT v. J. K. Industries (P.) Ltd. [1969] 71 ITR 594 (Cal) in support of his contentions. In this case relating to the present assessee, one of the directors of the assessee had been sent to Europe to explore the possibilities of technical and financial collaboration with foreign concerns in the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stage. Even otherwise, it cannot be said that it would not be conducive to the business of the assessee if all the companies managed by it were housed in the same building. It appears to us that it would lead to some economy and greater efficiency in management. The contention of Mr. Sen that deductions claimed by the assessee are not allowable under s. 10(2)(iii) or s. 36(1)(iii) or s. 37 inasmuch as the same comes under s. 24 of the I.T. Act, 1961, cannot be sustained on a closer scrutiny. The material part of s. 24 is as follows: " 24. Deductions from income from house property.-(1) Income chargeable under the 'head Income from house property' shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely:- . ...... (vi) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. " Admittedly, during the relevant years there was no income from the capital asset acquired and the asset concerned, viz., the land, had not been converted into house property during the relevant period. On these facts, there is no question of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that the assessee's lease was for a short duration and the life of the panels was such that the panelling could not be treated as an asset of an enduring nature. The High Court compared the putting up of such wooden panelling with plastering and painting of walls and held that the expenses incurred were of a revenue nature. In the instant case, the assessee's contention that the wooden panelling did not last long and as such were not an enduring asset has been accepted by the Tribunal. This finding of fact has not been challenged. In view of the aforesaid finding and the decision in Regal Theatre [1966] 59 ITR 449 (Punj) we hold that the expenses incurred by the assessee in putting up the wooden panelling did not result in any enduring benefit to the assessee and, therefore, was deductible as a revenue expenditure. As to the balance amount of Rs. 1,221 spent on renovation, Mr. Sen did not make any particular argument or comment. They appear to be included in the item of sundry repairs and servicing charges. There is no reason why they should not be allowed as revenue expenditure. We, therefore, answer this question also in the affirmative and in favour of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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