Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following question of law has been referred to this court : "Whether, on the fact and in the circumstances of the case, the expenditure of Rs. 2,12,266 incurred for repairing the premises No. 4, Council House Street, Calcutta, was an allowable expenditure in computing the income of the assessee from business?"
(2.) Shortly staged, the facts are that the assessee is a company and the (reference relates tq the assessment year 1975-76, for which the previous year ended on June 30, 1974. The assessee-company claimed deduction of Rs. 2,12,266 as expenses for repairing of the business premises at No. 4, Council House Street, Calcutta. The Income-tax Officer disallowed this claim of the assessee as he was of the opinion that the assessee having been a tenant of the premises had no obligation to make extensive repairs to the rented building. According to the Income-tax Officer, the extensive repair and renovation of the existing building had resulted in a new advantage of enduring benefit and so it was a capital expenditure.
(3.) The assessee appealed to the Commissioner of Income-tax (Appeals) and contended that the building was in a dilapidated condition and, in 1963, the Calcutta Corporation served a notice for its demolition on Sri B.N. Jhunjhunwala, one of the partners of the assessee-firm. The assessee, on receipt of the demolition notice, took time from the Corporation authorities and undertook repairing works and for that it engaged an architect for the repairing work. The said architect submitted a report on April 11, 1973, to the effect that the premises have been thoroughly rapaired, that the cracks on most of the walls have been rectified, that the floors have been made secure, that the weak beams are changed and reinforced, that all corrosions of steel works have been removed and that the old parapets have been demolished and rebuilt. It was pointed out that, on the basis of the said report of the architect, the city civil court held that the insecurity of the building has been removed and so it dismissed the suit brought by the Calcutta Corporation for demolition of the assessee's business premises. It was, therefore, claimed that the amount of Rs. 2,12,266 was business expenses inasmuch as the amount had been spent for repairing the said premises.;