INSTALMENT SUPPLY PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF DELHI
INSTALMENT SUPPLY P. LTD
COMMISSIONER OF INCOME TAX
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S.S.CHADHA, J. -
(1.)THE question of law formulated for the opinion of this Court in this reference under S. 256(1) of the
IT Act, 1961 (for short called "the Act"), is:
"Whether, on the facts and circumstances of the case, the Tribunal was right in disallowing the sum of Rs. 30,000 or any lesser sum on the ground of its being capital expenditure ?"
(2.)THE case relates to the asst. year 1965 -66 for which the accounting period is the year ending March 31, 1965. The assessee is a private limited company engaged in the business of dealing as
agents for sale of Tata Mercedes Trucks in Western U.P. It has also hire -purchase business. It has
no premises of its own. It had taken on lease for its business the premises at 46, Janpath, New
Delhi, about 25 years back. The assessee is now paying a monthly rent of Rs. 340.25 and the total
area occupied is 5,405 sq. ft. The assessee felt that in the interest of its business certain repairs
had to be carried out, and as the need for such repairs had accumulated for a long time, the
assessee spent a sum of Rs. 47,186 for carrying out necessary repairs. Out of this the assessee
capitalised a sum of Rs. 9,399 and claimed the balance of Rs. 37,787 as revenue expenditure. The
break -up or the details of the expenditure are these :
. Rs. P.
(i)Sanitary fittings 4,257.61 (ii) Designing and supervision 750.00 (iii) Layout drawings and sketches 300.00 (iv) Consultation fee for structural work 4,000.00
At the time of framing the assessment, the ITO expressed the view that apart from construction expenses payments have been made for designing and supervision, layout drawings and sketches
and consultation fee for structural work. The ITO concluded that the renovation consisted of
additional and modified construction aimed to have long -term advantages and was not of such a
nature as could be called current repairs, which would cover only expenses incurred to keep the
existing construction in shape. Estimating a sum of Rs. 7,788 on last year's basis, as one spent for
current repairs, the ITO added Rs. 30,000.
(3.)ON appeal, the AAC expressed the view that the assessee did not, by incurring this expenditure, bring into existence any new assets nor did the assessee secure any enduring benefit. It was
explained before the AAC that no new additions were made, rather nothing was possible and the
flat was only redesigned to suit the increased office need and, of course, better fittings and better
material was used. The AAC concluded that the assessee by replacing the fittings did not incur any
capital expenditure. He, therefore, reversed the finding of the ITO and allowed the entire
expenditure as revenue expenditure.
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