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Issues Involved:
1. Whether the sum of Rs. 24,498-12-6 incurred for repairs and renovation of the cinema hall could be allowed as an expense under section 10(2)(v) or section 10(2)(xv) of the Indian Income-tax Act. 2. Whether the sum of Rs. 9,890 incurred for legal expenses could be allowed as an expense under section 10(2)(v) or section 10(2)(xv) of the Indian Income-tax Act. Detailed Analysis: 1. Repairs and Renovation Expenses: The assessee claimed that the sum of Rs. 24,498-12-6 incurred for repairs and renovation of the cinema hall should be allowed as an expense under section 10(2)(v) or section 10(2)(xv) of the Indian Income-tax Act. The Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal all found that these expenses were of a capital nature and were incurred before the commencement of the business. The Tribunal noted that the renovation expenses were not current repairs within the meaning of section 10(2)(v) but were actually a renewal or restoration. The Tribunal disallowed the claim under section 10(2)(xv) based on a misinterpretation of the clause, stating that if an expense is not allowable under one head, it cannot be allowed under another. The High Court emphasized that the burden of proving the nature of the expenses as deductible lay on the assessee. The expenses were found to be of a capital nature, and the assessee failed to provide specifics of the repairs. The Court referenced the Supreme Court decision in Commissioner of Income-tax v. Calcutta Agency Limited, which established that the High Court must base its answers on facts found by the Tribunal. Given that the expenses were capital in nature and incurred before the business commenced, the Court concluded that these expenses could not be claimed under section 10(2)(v) or section 10(2)(xv). 2. Legal Expenses: The assessee also claimed Rs. 9,890 incurred for legal expenses under section 10(2)(xv). The Tribunal found that these expenses were incurred "for the purpose of completing the title of the assessee," making them part of the capital expenditure for acquiring the asset. The High Court reviewed various precedents, including the Supreme Court's decisions in Commissioner of Income-tax v. Finlay Mills Ltd. and Commissioner of Income-tax v. H. Hirjee, which discussed the nature of legal expenses as capital or revenue expenditure. The Court noted that legal expenses incurred in creating, curing, or completing title to capital assets are capital expenditures. The sale under the Public Demands Recovery Act involved statutory stages for confirming and making the sale absolute. The legal expenses were incurred within this period, making them necessary for completing the title. The Court distinguished this from cases where legal expenses are incurred independently of the root of the title. The High Court concluded that the legal expenses in question were capital expenditures, as they were incurred to complete the title of the assessee. The Court referenced the Lahore High Court decision in Mahabir Parshad & Sons v. Commissioner of Income-tax, distinguishing it based on the statutory nature of the sale in the present case. Conclusion: The High Court held that both sums of money, Rs. 24,498-12-6 for repairs and renovation and Rs. 9,890 for legal expenses, could not be deducted as allowances under section 10(2) of the Indian Income-tax Act, either under sub-clause (v) or sub-clause (xv). The question was answered in the negative, and the assessee was ordered to pay the costs of the reference.
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