Standard Mills Co. Ltd. vs Commissioner of Income Tax

S.P. Bharucha, J.—The question posed in this reference made at the instance of the assessee reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 22,448 incurred by the assessee for the replacement of staircase was capital expenditure, not entitled to deduction as revenue expenditure ?"

The question relates to the assessment year 1967-68, the relevant previous year being the calendar year 1966. During the previous year, the assessee replaced an existing wooden staircase with an R.C. staircase with steel structural support and wider steps. The assessee claimed a deduction in respect thereof which was disallowed by the Income Tax Officer and also in appeal by the Appellate Assistant Commissioner on the ground that it was expenditure of a capital nature. The Tribunal noted the argument of the assessee before the Appellate Assistant Commissioner and before it that the existing roof had been leaking and, being very old, required substantial repairs. Instead of carrying out these repairs, the assessee had replaced the existing staircase with one of reinforced concrete and in doing so it had not incurred an expenditure of a capital nature. The Tribunal, however, took the view that the new staircase with reinforced concrete stairs of wider dimensions brought into existence an enduring asset and that, therefore, the expenditure incurred thereon was capital expenditure.

Mr. Kolah, learned counsel for the assessee, had drawn our attention to the judgment of this court in Additional Commissioner of Income Tax Vs. Indian United Mills Ltd., . The expenditure incurred there was for substituting old worn out doors by fire-proof doors and for the renewal of the roof of a bleaching house so as to get more light. The court noted that the expenditure had to be laid out for the purposes of the assessee''s business and that it should not be a capital expenditure for the purposes of getting a deduction. It found that it was impossible to hold that the amounts had not been expended for the purpose of the business of the assessee. In regard to the argument that an enduring advantage had been obtained, the court found that this could not be sustained. In so holding, the court referred to its earlier judgment in Commissioner of Income Tax, Bombay City-iv Vs. Excel Industries Ltd., and the Delhi High Court''s judgment in Hindustan Times Ltd. Vs. Commissioner of Income Tax, . The court found that no capital asset had been acquired nor could the assessee be said to have acquired any advantage of an enduring nature.

The principle of the decision in the case of Additional Commissioner of Income Tax Vs. Indian United Mills Ltd., applies to the case before us. Following that decision, we must hold that the Tribunal was in error in the view that it took. We answer the question, accordingly, thus :

The expenditure of Rs. 22,448 incurred by the assessee for the replacement of staircase was not capital expenditure and was entitled to deduction as a revenue expenditure.

No order as to costs.