Court allows building materials company to claim Rs. 33,800 as revenue expenditure rather than capital.

The court ruled in favor of the assessee, a building materials company, allowing the expenditure of Rs. 33,800 on extra amenities in lease-hold premises as revenue expenditure rather than capital expenditure. The court held that since no enduring capital asset was created, the expenditure qualified as revenue. Consequently, the claim for depreciation under section 32(1A) of the Income-tax Act was not applicable due to the nature of the expenditure, and no costs were awarded in the case.

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Issues Involved:
The judgment addresses two main issues:
1. Whether the expenditure incurred by the assessee-company in providing extra amenities in the lease-hold premises is allowable as revenue expenditure.
2. Whether the question of application of section 32(1A) for depreciation arises based on the nature of the expenditure incurred.

Issue 1 - Expenditure as Revenue or Capital:
The assessee, a company in the building materials business, incurred expenditure of Rs. 33,800 in providing extra amenities in lease-hold premises at Nehru Stadium Shopping Complex, Coimbatore. The Income-tax Officer initially disallowed the claim, considering it as capital expenditure. However, the Commissioner of Income-tax (Appeals) allowed the claim, viewing the expenditure as revenue in nature. The Tribunal upheld this decision, stating that since no enduring capital asset was created, the expenditure of Rs. 33,800 qualifies as revenue expenditure. This aligns with precedents such as CIT v. Andavar Calendering Mills and CIT v. Kisenchand Chellaram (India) P. Ltd., where similar expenditures were deemed revenue in nature. The court answered the first question in the affirmative, in favor of the assessee.

Issue 2 - Depreciation Claim under Section 32(1A):
Regarding the claim for depreciation under section 32(1A) of the Income-tax Act, 1961, the assessee's expenditure being treated as revenue expenditure negated the need for allowing depreciation. As the Tribunal's order did not trigger the application of section 32(1A) due to the nature of the expenditure, the question of depreciation did not arise. Therefore, the court concluded that question No. 2 does not stem from the Tribunal's order. No costs were awarded in this matter.

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