Revenue expenditure on replacement of worn-out building parts remains allowable where no new asset or enduring capital benefit is created.

Expenditure incurred in replacing a worn-out ceiling component in an existing building was treated as revenue expenditure because the work only preserved the building's continued use and did not bring into existence a new asset. A building must be viewed as a whole, and replacement of part of it, even with new material, does not by itself make the cost capital in nature. The expenditure was therefore allowable as revenue and not capital.

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Issues: Whether the extra expenditure incurred in replacing an old ceiling with thermostat wood insulation board set in aluminium frames was allowable as revenue expenditure or was capital in nature.

Analysis: The expenditure related to replacement of a worn out part of an existing building for its continued use. A building is to be viewed as a structure as a whole, and replacement of a part of it, even with new material, does not by itself create a new asset. Where the work only preserves the utility of the structure and does not result in an enduring benefit of a capital character, the expenditure is treated as revenue.

Conclusion: The expenditure was revenue expenditure and not capital expenditure; the issue was answered in favour of the assessee and against the Revenue.

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