Law: Income Tax Act, 1961

Section: 32(1A),37

Income-tax---Capital or revenue expenditure---Expenditure on renovation of rented show-room---No finding that expenditure would fall under S.32(1-A)--¬Expenditure was deductible---Indian Income Tax Act, 1961, Ss.32(1-A) & 37. For the assessment year 1980-81, the assessee, an authorised dealer of Godrej Products, claimed deduction of a sum of Rs.42,000 in respect of expenses on renovation of its rented show-room. The Income-tax Officer held that the expenditure was of capital nature. The Tribunal held that the expenditure incurred on renovation of the rented shop was revenue expenditure. On a reference: Held, that since there was no finding of fact that the assessee had incurred any capital expenditure by way of renovation, section 32(1-A) of the Income Tax Act, 1961, would not be applicable. The expenditure on renovation was deductible. JUDGMENT At the instance of the Revenue, the Income-tax Appellate Tribunal, Patna Bench, has referred to this Court for its opinion the following question: "Whether, on the facts and in the circumstances of the case, the expenditure incurred of Rs.42,000 over the renovation charges of the show-room was capital expenditure or revenue expenditure specially in view of the provisions contained in section 32(1-A)?" This reference has been made under section 256 of the Income Tax 1961 (in short, "the Act"), for the assessment year 1980-81. The assessee, an authorised dealer of Godrej Products, claimed renovation charges of its rented show-room at Rs.42,000. The Income-tax Officer held that the expenditure was of capital nature as the benefit for renovation would last from year to year. He, therefore, added the expenditure but he allowed the depreciation at the rate of five per cent. The Commissioner of Income-tax (Appeals) did not agree with this view. He held that the renovation in the rented premises did not become the property of the assessee and he, therefore, held that the expenditure of renovation was revenue expenditure. The Revenue filed an appeal before the Tribunal. In the quantum appeal, the Tribunal observed that the assessee, the tenant, had made certain renovation for the show-room and the rented premises did not…

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