B. P. Jeevan Reddy, J. - (1.) Section 10(2) (v) of the Income-tax Act, 1922, allows deduction of the amount spent on "current repairs" to buildings, machinery, plant, furniture employed in the business. The assessee-appellant carries on the business of exhibiting films in a theater called "Naval Talkies" at Panipat. He had purchased the said building in 1937. It was a ginning factory then. He ran the factory till 1940. In the year 1945, he converted it into a cinema theater and was exhibiting films therein. During the period 1960 to March 1961, the assessee extensively repaired the theatre by expending substantial amounts. The amounts spend by him are:on machinery Rs. 16,002/-, new furniture Rs. 27,889/- sanitary fittings Rs. 5,225/- and replacement of electrical wiring Rs. 13,604/-. In addition thereto, a total amount of Rs. 62,977/- was spent on extensive repairs to walls, to the hall, to the flooring and roofing, to doors and windows and to the stage sides etc. Actually the theatre had to be closed during the aforesaid period for effecting the repairs.
(2.) In the assessment proceedings relating to the relevant assessment year, the assessee claimed deduction of the aforesaid amount of Rs. 62,977/-. The Income-tax Officer disallowed the same. According to him it was capital expenditure. On Appeal, Appellate Assistant Commissioner affirmed the view taken by the Income-tax Officer. On further appeal, however, the Tribunal upheld the assessees case whereupon the following question was referred to the Bombay High Court under Section 66(1) for the Indian Income-tax Act, 1922, at the instance of the Revenue: "Whether on the facts and circumstances of the case, in computing the income of the assessee for the material year a sum of Rs. 62,977/- or any portion thereof is deductible - The High Court answered the question in favour of the Revenue and against the assessee following the earlier decision of the said Court in New Shorrock Spinning and Manufacturing Company Ltd. v. Commissioner of Income-tax, 30 ITR 338.
(3.) The expression used in Section 10(2) (v) is "current repairs" and not mere "repairs". The same expression occurs in Section 30(a) (ii) and in Section 31(i) of the Income-tax Act, 1961. The question is what is the meaning of the expression in the context of Section 10(2). In New Shorrock Spinning and Manufacturing Company Ltd., (supra), Chagla, C. J., speaking for the Division Bench, observed that the expression "current repairs" means expenditure on buildings, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving or maintaining an already existing asset and which does not bring a new asset into existence or does not give to the assessee a new or different advantage. The learned Chief Justice observed that they are such repairs as are attended to as and when need arises and that the question when a building, machinery etc. requires repairs and when the need arises must be decided not by any academic or theoretical test but by the test of commercial expediency. The learned Chief Justice observed: "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure or repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of Rs. repairs because it is only by reason of this definition of repairs that the expenditure is a revenue expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which, the Legislature has permitted under Section 10(2) (v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure." ;