Commissioner of Income Tax vs Porrits and Spencer (A) Ltd.

Jawahar Lal Gupta, J.—The Revenue has filed his appeal u/s 260A of the Income Tax Act 1961. It maintains that the following two questions of law arise :

"(i) On the facts and in the circumstances of the case and in view of the detailed findings of the Assessing Officer, whether the Tribunal was justified in law in treating the expenditure on extensive renovation and extension resulting in the new assets of enduring nature as revenue expenditure ?

(ii) On the facts and in the circumstances of the case, whether the Tribunal was justified in allowing the commission payment as high as 20 per cent, to the managing director and senior executives without assessee''s being able to establish the business exigency or expediency justifying the said payment ?"

Reg : (i)

Mr. R. P. Sawhney, learned counsel for the Revenue contends that the assessee had carried out extensive renovations at a cost of Rs. 320 per square foot. Thus, it was a capital expenditure. It could not have been allowed as a revenue expenditure.

A perusal of the order passed by the Tribunal shows that on consideration of the entire material, it has come to a firm finding that "no new asset" was "created nor any long and enduring benefit. . . obtained by the assessee . . . The expenses incurred . . . were in the nature of current repairs." Thus, the expenditure claimed by the assessee was allowed as a deduction.

5.Mr. Sawhney contends that two new bathrooms and a kitchen had been constructed. This was clearly a capital expenditure. So far as this matter is concerned, a perusal of the order of the Tribunal at page 110 of the paper-book clearly shows that "the expenses incurred on these two items have not been claimed as deduction." Thus, no deduction had been allowed by the Tribunal. Consequently, it cannot be said that the Tribunal has wrongly allowed the claim of the assessee. In fact, the claim was given up.

6.Mr. Sawhney contends that an amount of more than Rs. 9 lakhs had been spent. It could not be said that the assessee had merely carried out repairs. A benefit of enduring nature had accrued. Thus, the expenditure should have been disallowed.

Admittedly, the respondent-assessee is carrying on business at more than one place. Repairs and renovation of the factory and office premises were carried out at Delhi office. "Renovate" in its ordinary sense means to "restore to life, to a former state (as of freshness, soundness, purity or newness of appearance)". The process of renovation involves expense. But it does not mean acquisition of a new asset. The amounts spent on renovation cannot be the sole measure for deciding the nature of expense. Various relevant factors have to be taken into account. The basic lest is--Has a new asset come into being ? This is admittedly not so. That being the position, we can find no infirmity in the view taken by the Tribunal.

Mr. Sawhney contends that certain sheds had been constructed. Learned counsel is, however, unable to refer to any material on the file to show that it was a new construction.

No other point has been raised.

On a consideration of the matter, we find that the Tribunal has taken a possible view. No substantial question of law arises. Thus, we find no ground to interfere.

Reg : (ii)

12.Mr. Sawhney has not been able to refer to any finding of the Tribunal on the basis of which the second question as raised by the Revenue may be said to arise. In fact, he fairly points out that the Commissioner had allowed the benefit to the assessee. The Revenue had not challenged the order. Thus, the question cannot be said to arise out of the order of the Tribunal.

13.In view of the above, there is no merit in this appeal. It is, consequently, dismissed in limine.