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Issues:
1. Determination of whether the expenditure incurred in replacing old roofs with new khaprails constitutes capital expenditure or revenue expenditure under Section 10 (2) (xv) of the Income-tax Act. Analysis: The judgment pertains to an assessee with a sugar factory and oil mill business who re-roofed some quarters with concrete and others with new khaprails. The Tribunal raised a question regarding the nature of this expenditure, specifically whether it qualifies as capital or revenue expenditure under Section 10 (2) (xv) of the Income-tax Act. The assessee argued that the re-roofing with new khaprails should be considered current repairs, not capital expenditure. The reference made by the Tribunal to Section 10 (2) (xv) was deemed incorrect, as the relevant provision for current repairs is Section 10 (2) (v). The counsel for the assessee contended that due to the inability to conduct annual repairs during war years, the re-roofing should be treated as current repairs. Reference was made to a judicial decision involving a railway company to support the argument that such expenditure, aimed at maintaining existing assets, should not be classified as capital expenditure. The judgment emphasized that the replacement of roofs with new khaprails enhanced the value of the quarters, indicating a capital asset addition. It was noted that depreciation rates vary based on the building's nature, and the re-roofing would lead to an increase in the company's capital assets. The court highlighted the distinction between capital and revenue expenditure, citing previous cases for context. It was concluded that the replacement of old roofs with new ones using new khaprails did not qualify as current repairs or revenue expenditure. The judgment clarified that while annual repairs may be necessary, complete replacement is not typically required for several years. Therefore, the expenditure in question was deemed to be capital in nature, enhancing the company's capital assets. The Department was awarded costs amounting to &8377;300, and the reference was answered accordingly.
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