1967 (10) TMI 11 - HC - Income Tax

Expenditure incurred by the assessee-family in connection with the installation of an air-conditioning plant in its newly built house - held that it is exempt under s. 5(e) of the Expenditure-tax Act, 1957

Issues Involved:
1. Exemption of expenditure on installation of an air-conditioning plant under section 5(e) of the Expenditure-tax Act, 1957.
2. Inclusion of expenditure on a trip to Kashmir under section 4(i) of the Expenditure-tax Act, 1957.
3. Inclusion of personal expenses under section 4(i) of the Expenditure-tax Act, 1957.

Detailed Analysis:

1. Exemption of Expenditure on Installation of an Air-Conditioning Plant:
The first issue concerns whether the expenditure of Rs. 11,150 incurred by the assessee-family for the installation of an air-conditioning plant in its newly built house is exempt under section 5(e) of the Expenditure-tax Act, 1957. Section 5(e) states: "No expenditure-tax shall be payable under this Act in respect of any such expenditure as is referred to in the following clauses, and such expenditure shall not be included in the taxable expenditure of an assessee---(e) any expenditure incurred by the assessee in connection with the acquisition of any immovable property or in the construction, repair, maintenance or improvement of any immovable property belonging to him."

The department argued that the air-conditioning plant should fall under section 6(1)(d) of the Act, which deals with capital expenditure on household goods and articles for personal use. However, the Tribunal found that the house was specially designed to contain the air-conditioning plant, making it an integral part of the immovable property. The court agreed with the Tribunal, holding that the plant, when fixed to the immovable property, becomes part of it and constitutes an improvement. Thus, the expenditure is exempt under section 5(e), and the first question was answered in the affirmative.

2. Inclusion of Expenditure on a Trip to Kashmir:
The second issue pertains to the expenditure of Rs. 19,808 incurred by the assessee-family on a trip to Kashmir and whether it falls under section 4(i) of the Expenditure-tax Act, 1957. Section 4(i) states: "Unless otherwise provided in section 5, the following amounts shall be included in computing the expenditure of the assessee liable to tax under this Act, namely: (i) any expenditure incurred, whether directly or indirectly by any person other than the assessee in respect of any obligation or personal requirement of the assessee or any of his dependents which, but for the expenditure having been incurred by that other person, would have been incurred by the assessee to the extent to which the amount of all such expenditure in the aggregate exceeds Rs. 5,000, in any year."

The department argued that the expense was incurred by the joint Hindu family and not by the minors individually. However, the Tribunal found that the expenses were later apportioned among the individual family members, who agreed to bear the expenses out of their separate properties. The court held that merely because the amount was initially debited to the Hindu undivided family's account does not conclusively determine who incurred the expenditure. Since the amount was shown to have been spent by the individuals within a reasonable time, the expenditure could be considered borne by the individuals from their separate funds. Therefore, the second question was answered in the affirmative, agreeing with the Tribunal.

3. Inclusion of Personal Expenses:
The third issue involves the expenditure of Rs. 2,880 incurred by the members of the assessee-family for personal purposes such as club expenses, traveling expenses, expenses on outfit, price paid for a watch, etc., and whether it falls under section 4(i) of the Expenditure-tax Act, 1957. The Tribunal held that it was not for the department to dictate that the expenditure was to be met only by the assessee-family. Accepting the assessee's contention that the expenditure had been incurred by the members in their individual capacity from their personal income, the Tribunal held that section 4(1) had no application. The court agreed with the Tribunal's decision, noting that the assessee is entitled to arrange their affairs to minimize their tax liability within the statutory language permissible. Hence, the third question was also answered in the affirmative.

Conclusion:
The court upheld the Tribunal's decisions on all three issues, affirming that the expenditures in question were either exempt or not includible in the taxable expenditure of the assessee-family under the Expenditure-tax Act, 1957. The reference was answered accordingly, with the assessee entitled to costs fixed at Rs. 250.

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