1977 (8) TMI 8 - HC - Income Tax

Court allows repair expenditure as revenue expenditure, not capital.

The court ruled in favor of the assessee, determining that the expenditure on repairs was revenue expenditure and allowable. The repairs were deemed ... Revenue Expenditure Issues Involved:1. Whether the expenditure incurred by the assessee on repairs was revenue expenditure and allowable as such.2. Whether the repairs constituted 'current repairs' u/s 10(2)(v) of the Indian I.T. Act, 1922.3. Whether the expenditure could be allowed u/s 10(2)(xv) if not allowable u/s 10(2)(v).4. Whether the process of guniting constituted capital expenditure.5. Applicability of the decision in CIT v. Oxford University Press.Summary:1. Revenue Expenditure:The Tribunal found that the repairs were necessary to preserve and maintain the 'Crescent House' and prevent further deterioration. The repairs did not create any additional space or structural alterations, and the building's original condition and life were not improved or extended. The Tribunal concluded that the entire expenditure was revenue expenditure and allowable as such.2. Current Repairs u/s 10(2)(v):The Tribunal did not entertain the argument that the repairs were not current repairs because the Commissioner of Income-tax did not raise this issue in the application for reference. The court noted that even if the repairs were not current repairs, the expenditure could still be allowed u/s 10(2)(xv) if its conditions were fulfilled.3. Allowability u/s 10(2)(xv):The court held that an expenditure not allowable u/s 10(2)(v) could still be allowed u/s 10(2)(xv) if the conditions of the latter section were met. The court did not express an opinion on the contention regarding the observations of Mr. Justice P.B. Mukharji on 'current repairs.'4. Process of Guniting:The court was not convinced by the argument that the process of guniting constituted capital expenditure. The Tribunal found that guniting was a modern process of plastering and did not bring into existence any new or additional advantage or benefit of an enduring nature. The process did not change the nature, character, or identity of the building.5. Applicability of Oxford University Press Case:The court agreed with the principles laid down in the Oxford University Press case, which held that the expenditure on guniting was revenue expenditure. The court noted that the distinction argued by Mr. Pal, that no major or heavy structural repair was done in the Oxford case, did not make a difference. The Tribunal's finding that the expenditure was incurred to maintain and preserve the building and not to create an enduring benefit was accepted.Conclusion:The court answered the question in the affirmative, in favor of the assessee, holding that the entire expenditure incurred on repairs was revenue expenditure and allowable as such. No order as to costs was made.