Revenue expenditure on cinema building renovation allowed where repairs served business upkeep and created no enduring capital advantage.

Expenditure on renovation and upkeep of a cinema building was held not to qualify as current repairs because the nature and extent of the work went beyond that category. It was nonetheless deductible as revenue expenditure because the outlay was incurred wholly and exclusively for business, was aimed at maintaining the asset in working condition, and did not create a new asset or enduring capital advantage. The commercial expediency and aim-and-object test therefore favoured revenue treatment under section 10(2)(xv) of the Indian Income-tax Act, 1922.

---

---

Issues: Whether the expenditure incurred on renovation of the cinema building was allowable as revenue expenditure, and whether it could be treated as current repairs.

Analysis: The finding of fact was that the expenditure was incurred for repairs carried out for the upkeep of the picture house. On that basis, the amount could not be treated as "current repairs" within section 10(2)(v) of the Indian Income-tax Act, 1922, because the nature and extent of the work went beyond that description. However, the decisive test was whether the outlay brought into existence a new asset or an enduring advantage, or whether it was incurred in the ordinary course of business for maintaining the asset and earning profits. Applying the commercial expediency and aim-and-object test, the expenditure was found to have been incurred wholly and exclusively for business and not to be capital in nature.

Conclusion: The expenditure was not allowable as current repairs, but it was allowable as revenue expenditure under section 10(2)(xv) of the Indian Income-tax Act, 1922, and the answer was in favour of the assessee.

Ratio Decidendi: An expenditure incurred for upkeep and repairs of business premises, even if not falling within current repairs, is deductible as revenue expenditure if it is incurred wholly and exclusively for the business and does not result in a new asset or an enduring capital advantage.

---