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TMI Blog1970 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... nated on December 31, 1961. Clauses (6), (10) and (11) of the lease deed read as under : " (6) That on the termination of the lease, the lessee will be entitled to remove his talkie equipment with its wiring and all fittings and furnitures and deliver possession to the lessor without any damage to the building whatsoever. (10) That the lessee will keep the fixture, decoration, etc., in good condition and in order and will allow the lessor or his nominee to inspect his property any time except at the time of actual show. The lessee will replace all shortages, breakages, etc., with due expedition. (11) That the repairs of the building will be made by the lessee and the annual white-washing and painting, etc., will be made by the lessee at his own cost according to their taste, but the lessor will contribute Rs. 120 (one hundred and twenty) annually towards white-washing and painting to the lessee. " During the relevant previous year the lintel near the stage of the cinema hall collapsed as a result of which damage was caused to the screen and the stage. The lintel was reconstructed by the assessee in pursuance of the aforesaid terms of the lease deed. While reconstructing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses held by an assessee as an owner. The reason for using different expressions, viz., 'repairs' in section 10(2)(ii) and 'current repairs' in section 10(2)(v) is not far to seek in the case of a building owned by an assessee, the expense incurred for anything beyond current repairs would be of a capital nature, while in case of premises held by an assessee as a tenant repair expenses incurred in pursuance of a term of the lease deed cannot, speaking broadly, be said to be of a capital nature inasmuch as the assessee does not normally thereby acquire any interest or benefit of an enduring nature. Such a repair would appear to form a part and parcel of the consideration of rent agreed to be paid for the use and occupation of the property. " It was further observed : " The only point that remains to be considered is whether the repair expense, even to a limited extent, can be said to be of a capital nature. It has been pointed out that the stage has been widened and the screen has been enlarged. Unless the construction brings a benefit of an enduring nature to the assessee, or unless it changes the identity of the property, it cannot be categorised as a capital construction. So f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the stage. The amount to the extent it was spent on the reconstruction of the lintel and the restoration of the screen and stage to the state in which the lintel, screen and stage were before the wearing out and collapse of the lintel, can legitimately be held to have been incurred on the repairs. Any amount which was spent over and above that for the purpose of the widening of the screen and the stage cannot be held to have been expended on repairs. The dictionary meaning of the word " repair ", as given in Shorter Oxford English Dictionary, is " the act of restoring to a sound or unimpaired condition ; the process by which this is accomplished. Restoration of some material thing or structure by the renewal of decayed or worn out parts, by refixing what has become loose or detached ". In the case of Highland Railway Co. v. Balderston, the railway had relaid a portion of the main line and in doing so had substituted steel rails of greater weight for the previous iron rails. No question was raised as to the cost of relaying the rails except as regards the additional weight and cost of the improved rails as compared with the original rails. The railway company claimed to deduct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reen and stage was in the nature of a capital expenditure and as such the assessee cannot claim deduction to that extent under sub-section (1) of section 37 of the Act. In this connection we are of the view that if the assessee had been the owner of the cinema building the above amount would have been characterised as capital expenditure. The same would have been the position if the assessee, though not an owner of the cinema building, was to retain its possession as a lessee for some years after the year in which the amount was spent. Where, however, as in the present case, the expenditure was incurred for the widening of the screen and stage in the last year of the lease, the expenditure cannot be held to be one in the nature of capital expenditure. There is nothing to show that the lessee was entitled to remain in possession of the cinema building on the expiry of the period of the lease or that he in fact continued in possession of that building after the expiry of the above period. It has also not been shown to us that the lessee was entitled to any compensation from the lessor for the improvement effected by the assessee in the widening of the stage and screen. As the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. " In the light of the above observations and the facts of the present case we are of the opinion that the expenditure in question cannot be held to be a capital expenditure as the object of the incurring of that expenditure was not to bring into existence an asset or advantage for the enduring benefit of the business of the assessee. The assessee as such would be entitled to claim the amount of expenditure for widening the screen and stage as permissible deduction under sub-section (1) of section 37 of the Income-tax Act of 1961. We would, therefore, answer the question referred to this court, in the affirmative, i.e., in favour of the assessee. Looki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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