1968 PLP 523 (PTD)

A. S. CHOWDHURY, J.‑This Reference under section 66 (2) of the Income‑tax Act. (hereinafter called the Act') arises in the following circumstances: The assessee Gulistan Cinema Co., Dacca, is an unregis tered firm which carries on the business of exhibition of films and in the assessment year 1960‑61, it claimed deductions under section 10 (2) of the Act, a sum of Rs. 34,000 on account of the costs of repairs. The Income‑tax Officer disallowed the sum of Rs. 20,803 which was spent for the purpose of Mosaic flooring of the Cinema Hall, for, he considered it to be capital expendi ture. On appeal, the Assistant Commissioner held that out of the amount of Rs. 20,803 a sum of Rs. 9,240 was spent for oil pain ting the walls of the Hall, and in his view allowance could be claimed for it in law and, therefore, he allowed deduction for the said amount but disallowed the sum of Rs. 11,563 which was spent for mosaic flooring on the ground that it was an expenditure of the capital nature. On further appeal, the assessee was allowed deduction of this amount of Rs. 11,563, by the Tribunal holding that such an amount came within the expression `current repairs' as contemplated in section 10 (2) (v) of the Act. The Tribunal also observed that this deduction would be allowable under section 10(2)(xvi) of the said Act. The Commissioner of Income‑tax was, however, dissatisfied with the order of the Tribunal and asked for a reference to this Court which prayer was rejected. This Court was thereafter moved and it directed a reference of certain questions arising out of the order of the. Tribunal. In response to the said direction the Tribunal has referred the following questions for our opinion: "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in the conclusion reached by it that the expenditure of Rs. 11,563 representing cost of mosaic flooring was allowable either under section 10 (2) (v) or under section 10 (2) (xvi) despite clear provisions under section. 10 (2) (ii) for deductions on account of repairs where the assessee is the tenant only of the premises and has undertaken to bear the cost of such repairs.

2. If the answer to the first question is in the negative, whether the Appellate Tribunal was right in deleting the allowance of Rs. 11,563." Mr. Afzalul Haque, learned Advocate for the Commissioner of Income‑tax, strenuously' argues that the Tribunal failed to notice what the assessee has done in this case is reconstruction of its flooring and therefore it is neither repairs, nor, `current repairs' and as such, no deduction is permissible under clause (ii) or clause (v) of subsection (2) of section

10. He further argues that the amount invested in mosaic flooring is in the nature of capital expenditure and, therefore, the assessee is not entitled to deduction under clause (xvi) either. In his submission therefore, both the questions referred to us should be answered in the negative. Mr. S. M. Hussain, learned Advocate for the respondent submits that the reference is not maintainable inasmuch as the questions formulated do not arise out of the order of the Tribunal made on 23‑12‑

54. His contention is that in the latter part of the first question, reference is made to clause (ii) and that was not considered by the Tribunal and as such the question has been inaccurately framed. We have no hesitation to say that this preliminary objection is not maintainable. The assessee has claimed allowances under, subsection (2) of section

10. It is the ditty of the Income‑tax Officer to consider as to whether such a claim is sustainable. In discharging that duty, an examination of all the relevant provisions are necessary and, therefore, merely mentioning clause (ii) would not render the question non‑maintainable, and in fact, the Tribunal observed: "We may also observe that the assessee has not come up for the claim of deduction under section 10 (2) (ii)". Therefore, if the question merely refers to existence of such a clause while, giving relief under other clauses, that would not render the framing of the question invalid and the preliminary objection is therefore overruled. The question, therefore, on merits is as to whether the money spent on mosaic flooring can be brought within the ambit of any of the clauses under subsection (2) of section 10 which permits certain allowances. The Tribunal, however, has found that such deduction is permissible under clause 10 (2) (v) and in the alternative, under clause 10 (2) (xvi). We find that the Tribunal has observed in its order dated 29‑7‑63, allowing the appeal in the following terms: "It was, however; elucidated before us that the original flooring had deteriorated and become unsuitable for a fashionable and high class Cinema Hall. It is agreed that Gulistan Cinema is a top‑class Cinema Hall and in fact acclaimed as the best in Dacca. We were also informed that the valuation of the Cinema Hall would be rupees fifteen lacs approximately." While refusing to refer the question, the Tribunal further observed in its order dated 23‑12‑64: "Mr. Hossain has argued before us that the replacement of the floor was a revenue expenditure. Mosaic floor required a little more extra cost which we were informed was about 25% more than the cost of white cement flooring. He admitted that mosaic flooring was more attractive, but in a fashionable Cinema Hall, the replacement undertaken was a necessity. The assessee was a mere tenant and in the advocate's opinion, there could be no motive of matting any permanent improve ment which would either enhance the value of the asset or result in acquisition of a new asset and added that the Cinema Hall was constructed in 1953 and due to the nature of use in such a place, deterioration took place quicker and in fact restoration had to be undertaken in six years time in 1959." Subsection (1) of section 10 provides that the "tax shall be payable by an assessee under the head profits and gains of business, profession or vocation, in respect of the profits or gains of any business, profession or vocation carried on by him". After having made that provision, subsection (2) is added therein to provide that in computing such profits and gains certain allowances should be made and these circumstances are enumerated in clauses (i) to (xvi). I shall now refer to clauses relevant to the facts of this case. The Assessee is a tenant and he does not produce any agree ment to the effect that it was his duty to undertake the repairs as such clause (ii) does not apply. I now proceed to consider clause (v) which in its turn requires consideration of clause (iv) also. I, therefore, read here clauses (iv) and (v) of subsection (2) of section 10. "(iv) In respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation, the amount of any premium paid;" "(v) in respect of current repairs to such buildings, machinery, plant, or furniture, the amount paid on account, thereof." The expression "current repairs" has to be considered but before that I have to notice that the words "such buildings" refer to buildings contemplated in clause (iv). Clause (iv) refers to buildings "used for the purposes of business, profession or vocation". This is the combined effect of reading clauses (iv) and (v) together. Gulistan Cinema building is admittedly a building for business purposes. Therefore, this building comes within the term `building' occurring in clause (v). Allowance is therefore permissible to such buildings. I am to further consider as to whether the nature of the repairs comes within the ambit of the expression `current repairs'. Mr. Afzalul Hoque places his reliance in the case of Humayun Properties Ltd. v. Commissioner of Income‑tax Calcutta ((1962) 44 I T R 73) and submits that converting a floor of white cement into a mosaic floor is a renovation or a reconstruction. On the authority of the decision referred‑ to above, he contends that neither renovation, nor even repairs comes within the expression `current repairs. He elaborates his argument by saying that the expression `current repairs' indicates repairs undertaken in a continuous process and not repairs as may be necessary after long interval. In this case I have found that the Tribunal has recorded a finding of fact that the flooring had decayed and repair was thus necessary. We have now to remember that floor was not repaired with white cement as was originally done but this time it was mosaic flooring. It will be seen that even previously it was not an ordinary cement flooring. It was white cement flooring. When it had to be done anew, the assessee made it mosaic which would not make much difference from the floor which was in existence. The only question, therefore, is that the flooring does not require attention very often. It requires attention after a few years or a number of years; but that would not be sufficient to hold that a repair which is to be done after a number of years would not be `current repairs': A repair is done when need arises and if it arises after a long interval or a lapse of years it will still be `current repairs'. The view expressed above finds support in the case of New Sherrock Spinning and Manufacturing Co. Ltd. v. Commissioner of Income‑tax, Bombay North ((1956) 30 I T R 338). In that case Chagla, C. J. delivering the judgment of the Court, took the view that changing of a loom after 60 years would still be a `current repair' for the loom was a machinery used for the purpose of the business and it was repaired when such a need arose. In the case before us the floor was of a building utilised for a business and it was repaired when it decayed as found by the Tribunal. I, therefore, find that if the repair of a loom after sixty years could still be held to be a `current repair' on the ground that it was done when the need arose, there is no reason as to why a flooring, done again should not be considered to be a `current repair'; for, it was done when the need arose. The learned Chief Justice observed: "If the need arose .for the first time after 60 years and if the expenditure was a revenue expenditure in order to preserve and maintain an asset, viz., the looms then it would be current expenditure irrespective of the fact that the expenditure was incurred a long time after the asset was first used by the assessee." In reaching the conclusion indicated above, we are in respectful agreement with the view of the learned Chief Justice who observed as follows: "To suggest that if the need for repairs arises within five or ten years then the expenditure should be a permissible deduction, and if the need for repairs arises after along time it should not be permissible deduction, would really induce assessees, if they want to claim a deduction under section 10 (2) (v), so to use their plants or machineries that they would have to be repaired constantly from time to time. It is impossible to say with regard to any particular asset when the need for repairs would arise. It would depend upon various circumstances, and in this case it so happens that the particular parts that were used by the assessee for 60 years were such parts that the need to repair them did not arise earlier." It cannot be denied that whitewashing of a building or even repairing a oil painting of a wall would be a current repair, for it is done at quick intervals. In the case of mosaic the interval would be a little longer and on the fact found by the Tribunal, it is clear that even mosaic flooring is not immune from decay and that it also requires repairs after an interval of years. We are, therefore, clearly of opinion that mosaic flooring in the facts and circumstances of the case would be a current repair within the meaning of clause (v) of subsection (2) of section 10 of the Act. Since we have held that the assessee is entitled to deduction under clause (v), it is not necessary for us to consider clause (xvi) in this case. We are, therefore, of opinion that the Tribunal was right in deleting the disallowance of Rs. 11,563 and we are also of opinion that the Tribunal was right in allowing deduction under section 10 (2) (v) of the Act and we answer the question accordingly. A. H. KHAN, J.‑I agree. S. Q. Question answered.