Revenue expenditure and generator allowances: factual findings and a binding circular left no referable question of law.

Expenditure on theatre improvements was treated as revenue in character because the decorative, furniture, electrical and sanitary works were found to be non-permanent, alterable with tastes and fashions, and not to confer any enduring advantage; on those factual findings, no referable question of law arose. The allowance of investment allowance and extra-shift allowance on a generator was also upheld because the Tribunal applied Circular No. 1454, which clarified that generators were not covered by the electrical machinery entry in the Income-tax Rules, 1962 and were eligible for extra-shift allowance; again, no referable question of law arose. The reference application therefore failed.

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Issues: (i) Whether the Tribunal was justified in treating the expenditure on decorative items, furniture, electrical works and sanitary works for improving the theatre as revenue expenditure and in holding that no referable question of law arose; (ii) whether the allowance of investment allowance and extra-shift allowance on the generator gave rise to any referable question of law.

Issue (i): Whether the Tribunal was justified in treating the expenditure on decorative items, furniture, electrical works and sanitary works for improving the theatre as revenue expenditure and in holding that no referable question of law arose.

Analysis: The nature of the decorative work, including plaster of paris work and decoration of walls, ceilings and verandas, was found to be non-permanent and liable to change with tastes and fashions. The furniture-related work was treated as rearrangement and remodelling which reduced the seating capacity, and no enduring advantage was obtained. The same factual finding applied to the electrical and sanitary fittings. These were factual determinations leading to the conclusion that the expenditure was revenue in character.

Conclusion: The Tribunal's finding that the expenditure was revenue expenditure was upheld, and no referable question of law arose on this issue.

Issue (ii): Whether the allowance of investment allowance and extra-shift allowance on the generator gave rise to any referable question of law.

Analysis: The Tribunal relied on Circular No. 1454 of the Central Board of Revenue, which clarified that generators were not covered by the entry relating to electrical machinery in the Income-tax Rules, 1962, and were entitled to extra-shift allowance. The circular was applied to the assessee's case on that basis.

Conclusion: The allowance granted on the generator was correctly applied, and no referable question of law arose on this issue either.

Final Conclusion: The application for reference failed because the Tribunal's findings did not disclose any referable question of law, and the dismissal of the petition followed from the absence of a legal issue warranting reference.

Ratio Decidendi: When the Tribunal's conclusions rest on factual findings as to the character of expenditure and a binding circular is correctly applied, no referable question of law arises under the reference jurisdiction.

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