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Issues involved: Determination of whether the expenditure on replacing old electric wiring in a cinema house is revenue or capital in nature for the assessment year 1969-70.
Summary: The assessee had purchased two cinema houses and made substantial renovations to Plaza Cinema in New Delhi. The expenditure of Rs. 99,284 on replacing old electric wiring was in question. The Income-tax Officer treated it as capital expense, but the Appellate Assistant Commissioner allowed it as "current repairs" based on the Supreme Court's decision in CIT v. Mahalakshmi Textile Mills Ltd. The Department argued that the new wiring provided an enduring benefit, making it a capital expense. The Tribunal considered similar cases and rulings from various High Courts, including CIT v. Atherton West and Co. Ltd., CIT v. Dehri Rohtas Light Railway Co. Ltd., and New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT. They concluded that the replacement of electric wiring, due to wear and tear, did not alter the cinema's capital asset. The court agreed with the Tribunal's reasoning, stating that the change in electric wires did not change the nature of the cinema as a capital asset. Therefore, they ruled in favor of the assessee, considering the expenditure as revenue in nature. Each party was directed to bear their own costs. In conclusion, the court answered the question in the affirmative, supporting the assessee and rejecting the Department's claim regarding the nature of the expenditure on replacing the old electric wiring in the cinema house.
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