Law:

Section:

Section 31(i) of the income-tax act, 1961-Current repairs-Assessee-company carried on business of manufacturing and sale of lime from limestone-Whether expenditure incurred on complete relining of kilns, with fire bricks of very superior quality for maintaining them in working condition would constitute current repairs and was thus allowable revenue expenditure-Held, on facts, yes Facts The assessee-company carried on the business of manufacturing and sale of lime from limestone. During the assessment years 1970-71 and 1971-72, the assessee incurred an expenditure of Rs. 27,714 and Rs. 23,977 on maintenance of kilns respectively. The ITO and the AAC held that the impugned expenditure was capital in nature on the ground that the assessee had done a complete relining of the kilns with fire bricks of a very superior quality (both in respect of achieving the quantity of heat and of restoring the normal productive capacity of the kiln) giving an entirely new shape to the kilns, and enhancing its value as a capital asset and also its efficiency. The Tribunal, however, allowed the impugned expenditure as "current repairs" within the meaning of section 31(i), observing (i) that the facts placed by the assessee showed that the same had been incurred to protect and preserve the insulation layer of the kiln; ( ii) that the innermost lining of the bricks had to be replaced because of the constant wear and tear involved in the process of manufacture and such replacement either with red bricks again or with superior refractory bricks did not bring into existence any enduring advantage or asset; and (iii) that the produc- tive capacity of the kilns had not improved very substantially as a result of these repairs. On reference: Held The Tribunal's conclusion was essentially a conclusion of fact. The present case was a case in which the brick kiln was the plant of the assessee, the portions of which were getting worn out and damaged on account of coming into contact with high temperature and also as a result of material being dumped down with force, and periodical repairs were, therefore, necessary to keep the plant in working order. The impugned expenditure had been incurred…

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