PREM PRAKASH PURSHOTTAM KUMAR v. INCOME TAX OFFICER
[Citation -1984-LL-1016-1]

Citation 1984-LL-1016-1
Appellant Name PREM PRAKASH PURSHOTTAM KUMAR
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 16/10/1984
Assessment Year 1971-72, 1973-74
Judgment View Judgment
Keyword Tags commercial expediency • capital expenditure • written down value • revenue account • cinema building • current repair • wear and tear
Bot Summary: According to him, the expenses of Rs. 38,000 claimed in the above three years could not represent current repair expenses. 1973-74, the assessee claimed to have spent a sum of Rs. 24,915 towards repairs of machinery. In his opinion incurring of an expenditure of Rs. 24,915 could not by any stretch of imagination, be classified as current repairs. Current repairs have been held to mean repairs in the current accounting year, the word current having been used in contradistinction to past or future repairs. The word current also does not mean petty, nor current repairs mean petty repairs. Heavy expenditure may have to be incurred in effecting current repairs. Everything would depend upon the nature of the repairs and the facts of each case.


Since common contentions are involved in these appeals, they are disposed of by this consolidated order foe sake of convenience. assessee owns Basant Cinema in Lakhimpur Kheri. question under consideration relates to determination of income of this cinema. assessee claimed expenditure of Rs. 14,283, in asst. yr. 1971-72, Rs. 11, 933, in asst. yr. 1972-73 and Rs. 12,425 in asst. yr. 1973-74 towards repairs of cinema building in above three years respectively. ITO emphasised fact that most of expenses were not vouched. He was further of opinion that there were new constructions and additions to building. He rejected assessee's explanation that expenditure related to upkeep of building in accordance with requirements of licensing authority. He finally treated Rs. 10,000 in asst. yr. 1971-72, Rs. 7,000 in asst. yr. 1972-73 and Rs. 8,000 in asst. yr. 1973-74 as capital expenditure. He does not seem to have made any other disallowance. assessee appealed to AAC. AAC did not examine nature of expenses as such. He found that written down value of entire building was only Rs. 49,302. According to him, expenses of Rs. 38,000 claimed in above three years could not, therefore, represent current repair expenses. According to him, expenses to extent of 8 per cent to 10 per cent alone could be treated as repairs with reference to written down value of building. He therefore, confirmed disallowances made by ITO. In asst. yr. 1972-73, and 1973-74, assessee also claimed Rs. 8,353 and Rs. 13,905 respectively as expenses relating to repairs of furniture. ITO found that in asst. yr. 1972-73, purchase of sum of Rs. 6,675 towards purchase of Shesham trees. debit was made on last day of accounting year. According to him, therefore, Sheshams could not be utilised for repairs in asst. yr. 1973-74. He as treated this amount as capital expenditure of assessee. In asst. yr. 1973-74, he treated RS. 10,000 on capital account. He rejected explanation of assessee that furniture being old required heavy repairs. In appeal, AAC confirmed treatment given to sum of Rs. 6,675 in asst. yr. 1972-73 as, in his opinion, also that amount could not be treated to have been spent in that year. He also directed ITO to withdraw depreciation already allowed on that amount. About expenditure in asst. yr. 1973-74, he was of opinion that expenditure could not be treated on revenue account as, in his opinion, assessee had been replacing furniture by improved and attractive items. assessee's claim was therefore, rejected by him in this year also. In asst. yr. 1973-74, assessee claimed to have spent sum of Rs. 24,915 towards repairs of machinery. details of expenses was also given to ITO. ITO observed that in first place, second were not totally vouched and in second place, they did not relate to petty repairs but to installing of new instruments, iron chairs and additions to building. He finally treated sum of Rs. 15,000 as capital expenditure. AAC found that value of machinery was only RS. 5,125. In his opinion, therefore, incurring of expenditure of Rs. 24,915 could not by any stretch of imagination, be classified as current repairs. He therefore, confirmed addition of Rs. 15,000. assessee is now in appeal before me. ld. counsel for assessee pointed out to details of expenses under all above heads and submitted that they did not represent any capital expenditure. According to him, most of expenses were in nature of repairs to buildings, furniture and machinery. On behalf of department, reliance was placed on orders of lower authorities. I have considered facts of case. I am of opinion that AAC has committed error in law. He has gone by quantum of expenditure to hold that they were of capital nature. expenditure on repairs to buildings falls to be allowed to businessman under s. 30(b) of Act. It states that allowance will be given to n assessee, who is not tenant to extent of amount paid by him on account of current repairs to premises. "Current repairs" have been held to mean repairs in current accounting year, word "current" having been used in contradistinction to past or future repairs. Accumulation of past repairs would entail expense of capital nature. This does not, however mean that every slight wear and tear, which is found to occur year after year should have to be attended to then and there to constitute "current repair" within meaning of s. 30(b) of Act. time of necessity for repair is matter to be determined on commercial expediency and businessman's judgment, and not always by reference to economies of working or academic and theoretical consideration. word "current" also does not mean "petty", nor "current repairs" mean "petty repairs". Heavy expenditure may have to be incurred in effecting current repairs. magnitude of amount expended is not criterion. real test is whether asset is merely maintained or is replaced or improved by expenditure incurred. periodicity and necessity are two elements implicit in expression "current repairs". Everything would depend upon nature of repairs and facts of each case. AAC has merely gone by quantum of expenditure to hold that they were capital in nature. His finding cannot be upheld in view of principles stated above. I, therefore, set aside his order and direct him to examine each and every expenditure and find out whether it was in nature of current repairs and then consider its allowability. Similarly, I direct him to examine expenses on furniture and repairs to machinery. If necessary, either he himself or through somebody else including ITO can inspect cinema house to find out nature of expenditure incurred or claimed to have been incurred. After ascertaining correct facts and after examining correct legal position as stated above and as mentioned by various commentators on IT Law, he will give fresh finding. In result, all appeals are partly allowed. *** PREM PRAKASH PURSHOTTAM KUMAR v. INCOME TAX OFFICER
Report Error