- (1.) THE assessee is a limited company carrying on business as distillers, rectifiers, brewers, maltsters and in the manufacture of carbon-dioxide gas. The return of income for the assessment year 1968-69, relevant to the accounting period ending 30th November, 1967, was filed by the assessee declaring an income of Rs. 2,75,634. The assessment was completed by the ITO on a total income of Rs. 4,68,320. During the course f the examination of accounts, the ITO found that the assessee-company aimed a sum of Rs. 75,702 on account of "general repairs" in connection (sic) the tenanted house in Daiya Ganj at Delhi, totally used by the assessee (sic) branch office. The ITO disallowed the assessee's claim to the extent Rs. 48,367 after scrutinising the details of expenditure.
(2.) ON appeal filed by the assessee, the AAC allowed partial relief in respect of the expenditure on tractor repairs but upheld the disallowance of Rs. 40,176 by observing that a sum of Rs. 40,176 had been incurred on "renovation of the living room, bath-room, back verandah, study, kitchen-cum-pantry, stairway, dining-room, etc. " The AAC thus upheld the disallowance of Rs. 44,054 out of the total addition of Rs. 48,367 made by the ITO holding these expenses to be in the nature of capital expenditure.
(3.) THE assessee filed an appeal before the Appellate Tribunal. The Tribunal held that out of the total disallowance of Rs. 44,054 upheld by the AAC out of the "general repairs" account an expenditure to the extent of Rs. 40,176 could not be characterised as capital expenditure but it was only an expenditure incurred at the branch office necessarily requiring frequent or periodic repairs and hence this was allowable as business expenditure.;