Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Capital or revenue expenditure - Assessee-cloth mill maintaining retail cloth depots incurred expenditure on furniture and racks and electric fittings in new as well as old depots - Whether expenditure incurred on purchase of new furniture and racks for replacement in old retail depots was of revenue nature - Held, on facts, no - Whether Tribunal was justified in restricting the deduction of expenditure on electric fittings to such expenses as related to old depots only - Held, on facts, yes Facts The assessee-cloth mill maintained a number of retail cloth depots for the sale of cloth manufactured by it. During the relevant assessment year, the assessee incurred expenditure on furniture and racks and on electric fittings in its old as well as new depots. Before the Tribunal the assessee confined its claim under the head furniture and racks to the extent of expenditure incurred for replacement of furniture in old depots but the Tribunal disallowed the assessee's claim. In regard to the expenditure on electric fittings, the Tribunal directed that the expenditure should be disallowed as capital expenditure only insofar as it related to electric fittings to new depots. On reference, the assessee contended that so far as the expenditure on furniture and racks was concerned, it was revenue in nature inasmuch as having regard to modern methods of business, it became necessary for the assessee to modify the appearance of the show rooms and effect changes in the outfit of the show rooms from time to time with a view to make it more attractive so as to secure larger business. It further contended that expenditure on electric fittings was also of the same nature and should be allowed. On reference : Held On the material on record which was very meagre, the view taken by the Tribunal was the correct one. Normally, expenditure incurred on furniture and racks will be of capital nature and so also where new depots are established by the assessee expenditure on electric fittings thereto will be capital in nature. There were no facts to support the contentions of the assessee. Accordingly, the Tribunal was justified in holding that…

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