Revenue expenditure on leased premises renovation upheld; section 32(1A) held inapplicable on limited flooring replacement.

Expenditure on limited renovation of leased premises, confined to replacement of mosaic flooring with marble, was treated as revenue expenditure because no capital asset of enduring nature was brought into existence. Section 32(1A) of the Income-tax Act, 1961 was held inapplicable on these facts. The questions referred were answered in favour of the assessee and against the revenue.

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Issues: Whether expenditure incurred on renovation of leased premises by replacing mosaic flooring with marble constituted capital expenditure or revenue expenditure, and whether section 32(1A) of the Income-tax Act, 1961 was attracted.

Analysis: The premises were taken on lease and the work carried out was confined to replacement of the flooring. The Court followed earlier decisions holding that renovation expenditure of this nature on leased premises is revenue in character and that section 32(1A) does not apply in such circumstances.

Conclusion: The expenditure was held to be revenue expenditure and not capital expenditure, and section 32(1A) was held inapplicable. The questions referred were answered in favour of the assessee and against the revenue.

Final Conclusion: The reference was answered against the revenue and the assessee succeeded on the taxability issue.

Ratio Decidendi: Expenditure on limited renovation of leased premises, where no capital asset of enduring nature is brought into existence, is revenue expenditure and does not attract section 32(1A) of the Income-tax Act, 1961.

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