1964 (11) TMI 108 - HC - Income Tax

Summary

Issues Involved:
1. Whether the amount of Rs. 6,991 is allowable as a deduction in the assessment year 1959-60.
2. Whether the amount of Rs. 15,275 is allowable as a revenue expenditure.

Detailed Analysis:

Issue 1: Deductibility of Rs. 6,991
The first issue pertains to whether the Rs. 6,991 deposited by the assessee under court orders qualifies as "rent paid for the premises" under Section 10(2)(i) of the Indian Income-tax Act, 1922. The court noted that the lease period had expired in April 1950, and the assessee continued in possession unlawfully, leading to a decree for eviction and mesne profits. The sum of Rs. 6,991 was deposited as mesne profits, not rent. The court emphasized that mesne profits are not equivalent to rent, as they are compensation for unlawful occupation. Furthermore, the payment was provisional and not final, making it ineligible as an allowable deduction under Section 10(2)(i). Therefore, the court answered the first question in the negative.

Issue 2: Revenue Expenditure of Rs. 15,275
The second issue concerns whether the expenditure of Rs. 15,275 on theatre renovations is a capital or revenue expenditure. The assessee argued that the expenditure was for current repairs and should be deductible under Sections 10(2)(v) and 10(2)(xv). The court examined various judicial precedents to interpret "current repairs" and concluded that the term implies necessary, periodic maintenance rather than extensive renovations or improvements. The court found that the renovations were substantial, aimed at providing an enduring benefit to the business, and thus constituted capital expenditure. Since the expenditure was for substantial improvements and not merely for maintenance, it did not qualify as "current repairs" under Section 10(2)(v) or as deductible under Section 10(2)(xv). Therefore, the court answered the second question in the negative.

Conclusion:
The court concluded that neither the Rs. 6,991 deposited as mesne profits nor the Rs. 15,275 spent on theatre renovations were allowable deductions under the relevant sections of the Indian Income-tax Act, 1922. The reference was answered accordingly, and the assessee was ordered to pay the costs of the reference, with an advocate's fee fixed at Rs. 250.