Dwarka Prasad, J. - (1.) THIS is a reference made by the Income-tax Appellate Tribunal, Delhi Bench, 'B ', under Section 66(2) of the Indian I.T. Act, 1922 (hereinafter referred to as " the Act "), by which the following question has been referred by the Tribunal to this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the entire expenditure of Rs. 85,620 incurred by the assessed on renovation of its picture house was an expenditure of revenue nature allowable in its assessment for the assessment year 1957-58?"
(2.) THE circumstances which have given rise to this reference may be, briefly, stated : M/s. S. Zoraster and Company, Jaipur (hereinafter referred to as " the assessee "), is carrying on business, inter alia, of running a picture house known as "Prem Prakash Talkies ". In the year of account corresponding to the assessment year 1957-58, the assessee carried out renovation of the picture house and expended a sum of Rs. 85,620 on this account. In its return for the financial year 1957-58, the assessee claimed deduction of the said sum as expenditure laid out on renovation, under Section 10(2) of the Act. The assessee had also claimed, in addition to the aforesaid sum, an expenditure of Rs. 6,796 on account of maintenance and repairs of the cinema building. The ITO disallowed a sum of Rs. 10,000 out of the expenditure of Rs. 85,620 incurred by the assessee in the renovation of the cinema building and capitalized the rest of the amount, on which depreciation was allowed under the head "buildings", as in his opinion the expenses incurred by the assessee in respect of renovation of the cinema building was of the nature of capital expenditure. The assessee preferred an appeal against the assessment order and claimed 1/5 of the aforesaid amount of Rs. 85,620, as he estimated the life of the renovation to be five years. The assessee thought it proper to claim 1/5 of the amount of expenditure incurred in respect of renovation in that assessment year and 1/5 each in the remaining succeeding four years. The AAC held that the renovation was carried out for the first time in the assessment year in question and though the expenditure had increased the life of the asset, yet, at the same time, it did not bring into existence a new asset. Considering the life of the renovation carried out as five years, the AAC held that the claim of the appellant was not unreasonable and so he allowed a deduction in respect of a sum of Rs. 17,124, representing 1/5 of the expenditure incurred by the assessee on renovation in the assessment year 1957-58. The AAC also allowed an equivalent sum of Rs. 17,124 in the succeeding assessment year 1958-59 as well. The revenue department filed appeals before the Income-tax Appellate Tribunal in respect of both the assessment years 1957-58 and 1958-59, challenging the correctness of the order passed by the AAC, allowing a sum of Rs. 17,124 in both the aforesaid assessment years. The Appellate Tribunal, while dismissing the appeal of the department for the assessment year 1957-58, held, by its order dated November 30, 1963, that the expenditure was incurred by the assessee on account of repairs carried out for the upkeep of the picture house and that 1/5 of such expenditure was rightly allowed by the AAC, as claimed by the assessee, and since the assessee did not file an appeal in the matter, nothing further could be done. Thus, the finding of the Appellate Tribunal was that the quantum of expenditure of Rs. 85,620 was revenue expenditure relating to the assessment year 1957-58. In this view of the matter, the Appellate Tribunal allowed the appeal preferred by the department in respect of the subsequent assessment year 1958-59 and held that the assessee was not entitled to an allowance of Rs. 17,124 during that assessment year, as no expenditure in this respect was expended by the assessee during the later year 1958-59. The assessee then filed an appeal before the Income-tax Appellate Tribunal against the order of the AAC for the assessment year 1957-58 and although the appeal was filed late, yet the Tribunal condoned the delay in submitting the appeal and admitted the appeal. On merits, the Appellate Tribunal took the same view which it had already taken in the appeal preferred by the revenue and, consequently, the appeal was allowed and the entire sum of Rs. 85,620 was deducted as revenue expenditure in the assessment year 1957-58 by the order of the Tribunal dated September 4, 1964. Thereafter, the Commissioner filed an application for making a reference but the same was rejected by the Tribunal. However, this court directed the Appellate Tribunal to draw up the statement of the case and refer the question of law mentioned above to this court, which arose out of the order of the Appellate Tribunal dated September 4, 1964. Mr. S. M. Mehta, appearing for the revenue, argued that the expenditure incurred by the assessee on renovation of the cinema building could not be allowed as a deduction permissible under Section 10(2)(v) of the Act, because the expenditure was not of the nature of current repairs. Moreover, it was pointed out by the learned counsel that the assessee had separately claimed an amount of Rs. 6,796 on account of maintenance and repairs during the relevant assessment year, which fact also went to show that the amount spent on renovation was not spent on current repairs. On the other hand, Mr. S. K. Keshote, appearing for the assessee, submitted that even if the amount spent on renovation may not be considered as current repairs, so as to come within the purview of Clause (v) of Sub-section (2) of Section 10 of the Act, yet the aforesaid amount was an allowable deduction under Clause (xv) of Sub-section (2) of Section 10 of the Act as it was an expenditure of revenue nature, not being an allowance coming within any of the Clauses (i) to (xiv) and not being of capital nature or of the nature of personal expenses of the assessee, but it was expended exclusively for the purpose of business. It was also argued by Mr. Keshote that the Appellate Tribunal had recorded a finding in its order dated November 13, 1966, which was affirmed by the subsequent order of the Tribunal dated September 4, 1964, that the expenditure in question was incurred on account of repairs carried out for the upkeep of the picture house and that the aforesaid finding is one of fact which could not be challenged by the revenue before this court, as no question relating to the correctness of the finding has been called for and referred to this court. Before embarking upon a discussion of the question referred to us, it would be proper to read Clauses (v) and (xv) of Sub-section (2) of Section 10 of the Act, which are as under : "10. Business.--(1) The tax shall be payable by an assessee under the head ' Profits and gains of business, profession or vocation ' in respect of the profits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely :--... (v) in respect of current repairs to such buildings, machinery, plant or furniture, the amount paid on account thereof ;...... (xv) any expenditure (not being an allowance of the nature described in any of the Clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation."
(3.) AS regards the argument of the learned counsel for the assessee that the preliminary facts found by the Tribunal and the factual inferences drawn by it were not open to review by this court, as the question as to whether the expenditure incurred on renovation was spent on repairs or otherwise was essentially a question of fact. We may observe that the question referred to this court for opinion proceeds on the basis that the facts and circumstances of the case, as found by the Tribunal, are not open to question but oniy the legal effect of such facts and circumstances has to be considered by this court. In Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11 (SC), their Lordships of the Supreme Court observed as under (p. 13) : " When a question refers to the facts and circumstances in the case, it means the facts and circumstances as found by the Tribunal. If any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that the same is not supported by any evidence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse, a question raising any one of those grounds must be sought for and obtained. It is needless to say that the jurisdiction of the High Court in a reference under Section 66 is only an advisory jurisdiction. That being so it can only pronounce its opinion on the questions referred to it. It is trite to say that it cannot sit as an appellate court over the decision of the Tribunal." In Hazarat Pirmahomed Shah Saheb Roza Committee v. CIT [1967] 63 ITR 490 (SC), the question raised was whether the income of the Roza properties was assessable to tax during; the relevant assessment year or were exempted from payment of tax. The Tribunal held that the original purpose of the wakf was confined to the maintenance of the Roza and the mosque and celebration of festive occasions, that all Muslims had unrestricted access to the Roza and the mosque, and that, therefore, the wakf was established for a wholly religious purpose. The Madras High Court on a reference considered that the maintenance of " Madrasa" and the library by the wakf must be taken to be one of the original purposes of the wakf and rejected the finding of the Appellate Tribunal that the wakf was created wholly for religious purpose. On appeal, their Lordships of the Supreme Court in the aforesaid case held that the question as to what was the object of the wakf was essentially a question of fact and the High Court could not interfere with the finding of fact recorded by the Tribunal that the purpose of the wakf was wholly religious. Their Lord: hips of the Supreme Court observed as under in this context in the Roza Committee's case [1967] 63 ITR 490, 495 : " The Tribunal, therefore, held that the original purpose of the wakf was confined to the maintenance of the Roza and the mosque an 1 celebra- tion of festive occasions and, therefore, the wakf was established for a wholly religious purpose. At the hearing of the reference, the High Court has interfered with the finding of the Tribunal on this point. The High Court considered that the maintenance of madrassas and the library must be taken to be one of the original purposes of the wakf and the finding of the Tribunal that the wakf was wholly for a religious purpose must be overruled. It is manifest that the question as to what was the object of the, wakf is essentially a question of fact and the High Court had, therefore, no justification for interfering with the finding of the Tribunal on the point. It was pointed out by this court in India Cements Ltd. v. Commissioner of income-tax [1966] 60 ITR 52 (SC) that in a reference under Section 66 of the Act the High Court must accept the findings of fact made by the Appellate Tribunal, and it is not open to the High Court to reopen the findings of fact unless the party concerned has applied for a reference to challenge those findings first by an application under Section 66(1) of the Act, If he has failed to file an application expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the findings are vitiated for one reason or another." In CIT v. Manna Ramji and Co. [1972] 86 ITR 29 (SC), the question referred to the High Court was whether, on the facts and circumstances of the case, the amount received by the appellant as compensation from the Government for the requisition of a property was taxable as income, and was of the nature of capital receipts in its hands. The Appellate Tribunal found that the business of the assessee had not come to a standstill altogether and that he continued to carry on business, though at a reduced scale, after requisitioning and that if any injury was caused to his business it was to the volume thereof and not to the profit-making apparatus. The High Court of Bombay, on a reference, held that the amount received by the assessee for the requisitioning was in the nature of capital receipt, for damages in the profit-making apparatus. On appeal, the Supreme Court reversed the judgment of the Bombay High Court and held that as the question was framed, the High Court could not go behind the findings of fact recorded by the Tribunal. The observations of their Lordships of the Supreme Court, in this respect, are as under (p. 37) : " It may also be mentioned that Mr. Hajarnavis has assailed the findings of fact of the Tribunal. In this respect we are of the view that the Tribunal is the final fact-finding authority. It is for the Tribunal to find facts and it is for the High Court and this court to lay down the law applicable to the facts found. Neither the High Court nor this court has jurisdiction to go behind or to question the statement of facts made by the Tribunal. The statement of case is binding on the parties and they are not entitled to go behind the facts of the Tribunal in the statement. When the question referred to the High Court speaks of ' on the facts and circumstances of the case', it means on the facts and circumstances found by the Tribunal and not on the facts and circumstances as may be found by the High Court." (emphasis* ours) ;