9911796707
TMI Blog1982 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... said four theatres, there are other portions let out to certain offices. The assessee originally filed a return for the assessment year 1971-72 on October 8, 1972, claiming a business loss of Rs. 5,01,998. Subsequently, on March 11, 1974, it filed a revised return claiming a business loss of Rs. 5,14,190. In so doing it had deducted Rs. 34,008 being 50% of the expenditure incurred in providing carpets and screens in the two theatres, Devi and Devi Paradise, which were inaugurated on May 23, 1970, and July 5, 1970, respectively, as revenue expenditure. It also claimed depreciation at 15% on Rs. 4,27,231, being the cost of the partition works and false ceiling in the above-mentioned buildings. The ITO disallowed the claim regarding 50% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as revenue expenditure. As regards the assessee's claim for depreciation in respect of the partition works and false ceiling, the Tribunal held that though the partition works and false ceiling may not come under the expression " furniture ", yet they would clearly fall within the expression " fittings " in item 2 of Pt. I of Appx. I of the I.T. Rules, 1962, and, therefore, the depreciation has to be allowed therefor at the rate of 15%. Thus, the assessee has succeeded before the Tribunal in respect of both the claims. Aggrieved by the decision of the Tribunal the Revenue sought for and obtained a reference to this court under s. 256(1) of the I.T. Act, 1961, hereinafter referred to as the Act, on the following questions : "1. Whether, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture and that the fact that it was provided before the inauguration of the theatres could not make them a part of the building, which was a capital asset. On a due consideration of the matter, we are of the view that the contention of the assessee has to be accepted as tenable. Even the Revenue concedes that if such carpets and screens had been provided by way of replacement in the subsequent years, that can be allowed as deduction, but not the original provision of carpets and screens. We are not in a position to see any difference between the original provision of the carpets and screens and their replacement. As already pointed out, the theatres can be run even without the carpets and screens, but the same have been provided by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out that it was not easy to define the term " capital expenditure " in the abstract or to Jay down any general or satisfactory test to discriminate between a capital and a revenue expenditure, observed that it was possible to cull out the following broad principles from the decided cases: (1) Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment, (2) expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, (3) whether for the purpose of the expenditure, any capital was withdrawn, or, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the Revenue. But, in that case, it had been found that the expenditure was incurred by the assessee on linen and blankets and for uniforms for its employees as a part of the initial equipment of the hotel and that a five star modern hotel cannot be said to be fully equipped without linen, blankets and uniforms which form an integral part of the income-earning apparatus. But that is not the position here. Here, even without the carpets and screens the theatre can be run and they cannot be said to be an integral part of the apparatus, that is, the theatre. In Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, the Supreme Court has laid down that it was not every advantage of enduring nature, acquired by an assessee, that would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation should be allowed only at 7 1/2%. The Tribunal has taken the view that the partition works and false ceiling cannot be taken to be part of the building but they will fall under the expression " fittings ", though not under the expression " furniture ". We agree with the Tribunal that the partition works and false ceiling come under the expression " fittings " coming under item 2 of Pt. I of Appx. I of the I.T. Rules, 1962, in which case the rate of allowance can be only 15%, and not 7 1/2%, which is applicable only to buildings. Therefore, this question also has to be answered in the affirmative and against the Revenue. The assessee will have its costs from the Revenue. Counsel's fee Rs. 500.
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