TMI Blog1979 (2) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... cinema theatre in 1945. Originally, the amount invested in the building was Rs. 17,871. The building was, however, extensively repaired and renovated during the period from October 29,1960, to March 4, 1961, during which time it was not used for exhibiting films. Large amount of expenditure was incurred by the assessee on renovation and extensive repairs. Machinery worth Rs. 16,002 was purchased and new furniture of Rs. 27,889 was fitted. Sanitary fittings of the value of Rs. 5,225 were also newly put in. This expenditure was capitalised with regard to which there is no dispute. The assessee, however, claimed expenditure incurred on the following items as revenue expenditure : (a) Repairs to walls by scrapping them at various places and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ". The Tribunal found that there were no structural alterations made by the assessee and all that he had done was that some sheets from the roof were replaced by iron sheets, some portions of the floor were newly cemented and the walls remained the same, except that they received a coat of paint and the electrical wiring also had to be replaced as it was old. Thus, the Tribunal held that the expenditure was of a revenue nature and the entire sum of Rs. 62,977 should have been allowed. Arising out of this order of the Tribunal, the following question has been referred to the High Court under s. 66(1) of the Indian I.T. Act, 1922, at the instance of the revenue : " Whether, on the facts and in the circumstances of the case, in computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f because it was laid out or expended wholly and exclusively for the purpose of the business of the assessee. Under s. 10(2)(xv) any expenditure not being an allowance of the nature described in any of the cls. (i) to (xiv), and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purpose of such business, profession or vocation is made allowable for the purposes of computation of profits or gains of the business. Since it is not claimed that the expenditure in question was allowable under s. 10(2)(v) and since it cannot be seriously disputed that the moneys were expended wholly and exclusively for the purpose of the business of the assessee, unless it is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he repainting of the hall has to be considered. It may be that if an item like repairs to doors and windows, or repairs to flooring is taken or considered separately in isolation, it could be said that the assessee had repaired the flooring or he had repaired the doors or windows. But when we consider these works in totality in the light of the fact that the theatre itself has been closed for about 4 months to enable the assessee to carry out the renovation, it is obvious that such kind of work cannot be described merely as repairs. The statement filed by the assessee shows that more than 72,000 bricks have been consumed by it and 428 bags of cement have been used. It is obvious from the quantity of the stores used that there was a large sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was for the purposes 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." As already pointed out, on the facts as disclosed in this reference, it is patent that when the assessee decided to spend Rs. 1,25,000 odd on the premises which he acquired for only about Rs. 17,000 he was converting that asset into a theatre fairly well equipped and he clearly wanted to have a new advantage which would be of an enduring character because the assessee was the owner of the theatre. In Sri Rama Talkies v. CIT [1966] 59 ITR 63 (AP), the question which was required to be decided by the Andhra Pradesh High Court was wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, that would also be an expenditure of a capital nature. It was pointed out that the aim and object of the expenditure will determine the character of the expenditure, whether it is a capital expenditure or a revenue expenditure. Applying the ratio of the two decisions cited above, it is obvious that the object of the assessee was clearly to make such substantial improvements that it could get an advantage of enduring benefit and the assessee clearly wanted to have a fairly well-equipped theatre in the place of a hall where originally there was a ginning factory. By no stretch of imagination can the extensive work carried out be termed as repairs merely intended to maintain the building in its proper state of repairs. The error ..... X X X X Extracts X X X X X X X X Extracts X X X X
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