Law: Income Tax Act, 1922

Section: 10

Indian Income Tax Act, 1922 (XI of 1922)---Section 10--Capital or revenue expenditure-Exhibition of cinema films-Cost of improvement to leased cinema hall- Whether revenue expenditure -Held no. The assessee, an exhibitor of cinema Elms, spent a sum of Rs. 16,499 on improving the cinema hall and claimed the sum as revenue expenditure; Held-that-as the improvement was of a permanent character it could not be taken to be revenue expenditure even if the assessee was the lessee of the hall. The sum of Rs. 16,499 "must, therefore, be held to be expense of a capital nature. JUDGMENT R. N. MISRA,-The Income Tax Appellate Tribunal has stated a case and referred the following question under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of the court pursuant to a direction given by the count: "Whether, on the facts and in the circumstances of the case the claim of the assessee in respect of Rs. 16,499 on the heard of expenditure was of revenue character and, therefore, admissible or was of capital nature and, therefore, not to be allowed?" The year of assessment is 1965-66. The assessee was engaged in the Business of exhibiting cinematograph films. It laid claim for deduction on two counts, namely, (i) repairs and replacements to the tune of Rs. 27,158, and (ii) directors remuneration of Rs. 24,000. For the purposes of cinema exhibiting business, the assessee had engaged an exhibition hall. According to the assessee Rs. 18,659 were spent on furniture and machinery account and the remainder out of Rs. 27153 went for improvement of the cinema building. All the claims were rejected. The claim with regard to the remuneration of directors has become final and need not be discussed. Similarly" rejection of Rs. 18,659 which represented expenditure on furniture and machinery account is also no more in dispute. The deductibility of about Rs, 17,000 which represented expenditure for improvement of the cinema hall is known to be considered. There is no dispute that if the expenditure is of revenue character it would be admissible as a deduction and if it is in the nature of capital expenditure no deduction would be permissible.…

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