Repairs to installed equipment and routine office outgoings were treated as revenue expenditure and allowed on business grounds.

Expenditure incurred after an air-conditioning plant had been installed and put to use, where it merely rectified defects, restored proper working and did not create a new asset or enduring advantage, was treated as revenue expenditure. The replacement of defective pipes was part of repair and maintenance of the existing asset, so the claim was allowable. Routine office expenses for tea, coffee and similar business outgoings were also accepted, because the absence of detailed vouchers by itself did not justify rejection where the expense was of a business nature and consistent with prior-year treatment.

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Issues: (i) Whether expenditure incurred on repairs and replacement of parts of air-conditioning equipment after the equipment had been installed and put to use was capital or revenue expenditure; (ii) Whether the disallowance of office expenses of Rs. 1,756 for want of details was justified.

Issue (i): Whether expenditure incurred on repairs and replacement of parts of air-conditioning equipment after the equipment had been installed and put to use was capital or revenue expenditure.

Analysis: The air-conditioning plant had already been installed and actually used, but it was found defective because it did not achieve the required cooling effect. The defect was traced to leakage and unsuitable pipe lines, and the assessee replaced the china-clay pipes with galvanised pipes to restore proper working. The mere fact that the expenditure was incurred soon after installation did not make it capital in nature. The decisive test was whether the expenditure brought a new asset into existence or merely preserved and maintained an existing asset. On the facts, the expenditure was incurred to rectify defects in an existing asset and to make it function properly for the business.

Conclusion: The expenditure was revenue expenditure and the disallowance was not sustainable.

Issue (ii): Whether the disallowance of office expenses of Rs. 1,756 for want of details was justified.

Analysis: The amount represented tea, coffee, and similar business-related outgoings incurred for persons connected with the assessee's business. The absence of detailed vouchers by itself was not sufficient to reject the claim, particularly when the expenditure was of a routine business nature and comparable relief had been granted in an earlier year.

Conclusion: The disallowance was not justified and the claim was allowable.

Final Conclusion: Both additions were deleted and the assessee succeeded on all contested grounds.

Ratio Decidendi: Expenditure incurred after an asset has been installed and put to use, if directed only to repair defects and preserve the existing asset without creating a new asset or enduring advantage, is revenue expenditure.

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