Law: Income Tax Act, 1961

Section: 37

Income-tax---Capital or revenue expenditure---Expenditure on repairing ceiling--­Revenue expenditure---Indian Income Tax Act, 1961, S.37. While expenditure incurred in bringing a building into existence is undoubtedly capital in nature, the repairs and replacements to portions of the building for the continued enjoyment of that building is not capital expenditure. The fact that new material has to be used while replacing a worn-out or damaged part or portion of a building does not result in a new asset being created. Every part of the building is not to be regarded as a separate asset. It is the structure as a whole which has utility and repairs and replacements to that structure for the continued utility of the structure as a whole, cannot be regarded as capital expenditure: Held, that the Tribunal was right in holding that the extra expenditure of Rs.70,000 incurred by the assessee in replacing an old ceiling made of hardboard set on wooden frames with thermostat wood insulation board set in aluminium frames should be allowed as a revenue expenditure. CIT v. Binny Ltd. (1995) 215 ITR 536 (Mad.) and CIT v. Jawahar Mills Ltd. (No.2) (1997) 226 ITR 231) (Mad.) fol. JUDGMENT R. JAYASIMHA BABU, J.---For the assessment year 1973-74, the following question has been referred for our decision at the instance of the Revenue: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the extra expenditure of Rs.70,000 incurred by the assessee in replacing an old ceiling made of hardboard set on wooden frames with thermostat wood insulation board set in aluminium frames should be allowed as a revenue expenditure?" Our answer to this question is in the affirmative, against the Revenue and in favour of the assessee. A similar question arose before this Court in the cases of CIT v. Binny Ltd. (1995) 215 ITR 536 and CIT v. Jawahar Mills…

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