Court Judgmcnt Ir The Case Of Cit v. So,Ra Oana Spinningmills (P) Ltd.,2

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD TUESDAY,THE FIFTH DAY OF NOVEMBERTWO THOUSAND AND TWENTY FOUR PRESENT , , THE HONOURABLE SRI JUSTICE SUJOY PAULANDTHE HONOURABLE SRIJUSTICE NAMAVARAPU RAJESHWAR RAO INCOME TAX TRIBUNAL APPEAL NO: 87 OF 2008 4gpqq]-fiteO [under ][Section ][260-4 of ][the ][lncome ][Tax ][Act, ]1961 against theorder dated 28.09.2002 passed in lrA No. 909tHydl2o04 for Assessment v"ei, ioor-uz on tne trre ot the rncome Tax Appellate Tribunal, Hyderabad 6ench .B',Hyderabad pl+rleq qq?itg! rhe Appetrate order dated ie.otzoiq pisseo inAppeal No 275lAc-3(2)lctr(A)-tvi20o3-04 on the fite of the commt{sioner orlncome.lax lAppeals) lv, Hyderabad preferred against the order dated 3.1.12.2003passed in PAN/GIR No. on the file of the Assistant commissioner oflncome Tax,Circle -3(2), Hyderabad. Between: srinivasa Resorts Limited, a company incorporated under the comoanresAct 1956, having its Registered office at*a-z|lret, Bequmpet, uvJeiiuao -ouu U16, Represented by its Managing Director Mr. Kuldeep Bharteb. ...Appellant AND The Commissioner of lncome Tax, A.p.,, Hyderabad. ...Respondent Counsel for the Appellant : Sri G.V.S. Ganesh Counsel for the Respondent : Sri J.V. prasad, Sr. SC FOR INCOME TAX The Court delivered the following: JUDGMENT THE HCINOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLI' SRI JUSTICE NAMAVARAPU RAJESHWAR RAO INCOME 1IAX TRIBUNAL APPEAL NO,87 OF 2OO8 JUDGMENT: (p<'t Uon bl€t sn .,/uslrr e Narnauarapu Raleslulor Roct) The presenL appcal has been hled under section 260-A ofthe Income Ta-x Ac t, 196 I (for short the "Act") aggrieved by 1fi6order passcd by ncome Tax Appellate Tribunal, H),derabadBench B, H),derz bad (for short "Tribunal") in I.T.ANo.9O9 / Hyd/ 200-1 dated 28.O9.2OO7 lor the Assessment Yt:ar200r-2002 2. We havc ht--irrd thc learned counsel Sri G.V,S. Ganesh,learned counsel for the appellanr, andSri J.V. Prasad, learrned Senior Standing Counsel for therespondent. 3. '11-re brief lac,s leading to liling of [he present appeal areas under: 4. The appellan, is running a S-Star Hotel in Hydcrabad. Inthe relevanL Asr;essmer-rt years, the appellant claimedexpenditure of Rs.9,2 I ,O33/- toivards the cost of carpets,mattrcsses and lanrp shades under Section 31 of the Act. TheAssessing Officer (for short "AO") disallor.r.ed the claim ofexpenditure under Scction 31 of thc Act on the grour-rd that since the appellant purchased new carpets, mattresses andIamp shades rvithout repairing the existing assets, theexpenditure in question did not constitute "current repairs,,,applying the decision of the Supreme Court in the case ofBallimal Na oo-I Kishore and [q.nother ]V. CITI. The AO alsodid not accept [he alternate contention of allorving the amountmentioned above under Section 37(1) of the Act on the groundthat the same \vas in the nature of capital expenditure. 5. The order of the AO was assailed before theCommissioner of Income Tax (Appeal) (for short, 'the CIT(A).The CIT(A) reversed the order of the AO and allowed deductionfor the expenditure incurred under Section 37(1) of the Act onthe ground that the Appellant incurred expenditure forreplacement o[ damaged items and not for acquisition of anasset for the first time. The CIT (A) accordingly, held that theexpenditure was not incurred for bringing into existence anasset of enduring nat u re. 6- On further appeal by the Revenue, the Tribunal reversedthe order of the CIT(A) and held that the expenditure inquestion was not in the nature of current repairs allowablededuction under Section 31(i) of the Act, in view of the Supreme Court judgmcnt ir the case of CIT V. So,ra oana SpinningMills (P) Ltd.,2 7 . Aggrieved b1' he ordcr of thc Tribunal, dated 28.09.2OO7 ,the presenl appeal is filed by the appellant.the presenl appeal is filed by the appellant. 8. This Court, uhile hcaring the mattcr, framed the follor.r,ing substantial questions of [au, 6- On further appeal by the Revenue, the Tribunal reversedthe order of the CIT(A) and held that the expenditure inquestion was not in the nature of current repairs allowablededuction under Section 31(i) of the Act, in view of the Supreme Court judgmcnt ir the case of CIT V. So,ra oana SpinningMills (P) Ltd.,2 7 . Aggrieved b1' he ordcr of thc Tribunal, dated 28.09.2OO7 ,the presenl appeal is filed by the appellant.the presenl appeal is filed by the appellant. 8. This Court, uhile hcaring the mattcr, framed the follor.r,ing substantial questions of [au, 1. Whether <,n the facts and circumstances of the case,the Triburral erred in [au. in not holding that theexpendilu re on the purchase of carpets, mattressesand lamp shacles rnas deductible under Sect.ion 37 (1)of the Act not being in Lhe nature ol capitalexpenctitu re?the Triburral erred in [au. in not holding that theexpendilu re on the purchase of carpets, mattressesand lamp shacles rnas deductible under Sect.ion 37 (1)of the Act not being in Lhe nature ol capitalexpenctitu re? 2. Whether [(,n ]the facts and circumstances of the case,the Triburral erred in [ar,v in nol adjuclicating thealternatc :laim lbr deduc[ion under Section 37(1) ofthe Act?'the Triburral erred in [ar,v in nol adjuclicating thealternatc :laim lbr deduc[ion under Section 37(1) ofthe Act?' 9. Learned colrnsel lor the appellant contended that the Tribunal erred in I ,Lrv in not acijudicating the alternate claim lordeduction undcr Scction 37(1) of thc Act. He further submittedthat the Tribunal erred in larv by not hoiding that Lheexpenditure on th r purchase o[ carpets, matlresses ancl lampshades was deduc ible under Scction 37ll) of the Act, not berngin Lhe nature o[ ca riLal expenditure. 10. Learned cc unsel lor the appellant contended that 1-heorder passed by tlrc Tribunal declining to admit the ahernatcclaim for deducliorr under Section 37(1) of the Act is contrary to ' [(zoot\ ][zgl fiq ][zot] the judgment in thc casc of Saraaana Spinning Mills (p) Ltd.(supra) applied by the Tribunal against the Appcllant. The(supra) applied by the Tribunal against the Appcllant. TheSupreme Court, in that case, did not consider the applicabilityof Section 37(i) ol the Act and did not express any opinionof Section 37(i) ol the Act and did not express any opinionthereon, as is evident from the observations on pages 212_213of the judgment, which are reproduced hereunder _of the judgment, which are reproduced hereunder _ "14. Some of the decisions cited on behalf of theAppeLlants we not being discttssed bg us as thegdeal u.ith cases fallirtg under Section 37. ThatSection is a residuary Section- [Jnder Section 37, aparticular item of expenditure may be deductible ifthe expenditure does not fall utithin Sections 3O to36; that it should haue been incur-red in tLrcaccounting gear; that it should be in respect of abusiness catried on bg the Appeltant, that it shouldnot be on person-al account of the Appellant, that itshottld not be in the nah.Lre of capitat expend.itureand that it sltould be spent wholly and exclusiuelyfor [business. ][Whether ][expenditure ]is ['reuenue, ]or'capital in nature' u.tould d.epend upon seueralfactors, [namelg, nature ]of the expenditure, nature ofthe business actiuity etc. For example, constntctionof tLrc building for self use mag be capital in nahtretuhereas in the hands of tte builder a buitdingconstitutes his slock-in trade and, therefore, on thesale of the building the expenditure has to bereuenue. Therefore, the builder uould be entitled todeduct such expenditure from the saleproceeds/gross income. Therefore, u.thether an-expenditure is reuenue or capital in nature uoulddepend on the facts of each case. 11Learned counsel for rhe appellant further contended thatthe Tribunal has relerred to the later part of the judgment ofthe Supreme Court wherein the issue regarding thethe Supreme Court wherein the issue regarding theapplicability of Section 37(1) of the Ac[ was not allowed to be 11Learned counsel for rhe appellant further contended thatthe Tribunal has relerred to the later part of the judgment ofthe Supreme Court wherein the issue regarding thethe Supreme Court wherein the issue regarding theapplicability of Section 37(1) of the Ac[ was not allowed to be raisedinViewoftlieConcurrentlrndingrecorde<lb.l'theCIT(A),the Tribunal [and ][High ][Court ][(in that ][case) ][that ][since ][t ][hc]expenditure [was ][r ][lvenue, ][it ][constituted ]["currenL ][repairs" ]['I'he]Appellant [had ][noL ][aL ][any earlier ][stage ][claimed ][the ][c:xpenditure]allowable [un<ler ][Section ][37(1) ][of ][the ][Act ln ][that ][vicu' ][of ][lhe]the [Supr-eme ][Court ][did not ][permit ][such ][belated]matLer, contention [to ][be ][raised' ][[n ][those ][circumstances ][that ][the]alternate [claim s'its not ][entertained ][at ][the ][threshold ][The ][said]judgment did noi clccide [rhe ][applicability of ][Section ][37(1) ][of ][the]incurred on [rePairs, ][in ][the]Act with [resPect ][to ][erxPenditure]At the same [time, ][said]aforesaid [peculiar ][circu mstances]judgment cannot [be ][read as ][laying ][down ][a ][bar for entertalnlng]of an alternate [clz ][im ][for deduction by ][the ][Tribunal'] 12.Percontra,learnedcounselfortherespondenlsubmittedthattheorderlassedbytheTribunalisproperandtheTribunalhasrecordedCogentreasonsu,hilesettit:Ig-asidetheorder of the [Ap ][lellatc ][Commissioner ][and ][does ][no[ ][warrant]interfcrence [by this Court ][The ][learned counst:l ][for ][thc]respondent [refel ][rcd ][to ][reasons recorded ][by thc ][Tribunal ][at]paragraph-6 [o1' ][the ][orcler, ][parlicularly ][the ][relevant ][portion]which is as [unde ][r:-] "The CIT(A) [has ][direcLed the AO to ][alloLu ][Lhe ][claim ][oJ ][the]'ipi.tt"i und.er [sec. ][37(1) ][of the ][Income'1ax ]1ct [N:u) ]ii nou. o [examine uthether ][uthen ][the ][ApPellant],p.Ci1noUu [clcLi.nterl ][the ][expencliture ][under ][sec ]['11(i) ][of]'ipi.tt"i und.er [sec. ][37(1) ][of the ][Income'1ax ]1ct [N:u) ]ii nou. o [examine uthether ][uthen ][the ][ApPellant],p.Ci1noUu [clcLi.nterl ][the ][expencliture ][under ][sec ]['11(i) ][of] the Income lax Act. the CIT(A) can dire<:t the A() to ctllou)the the Apex Court scune uncler in sec. tl.Le :17(l cr )_ se [.l.hts ]u1 s"r"u"io irrr" ,ur"-.ro^inetl byLtd. (supra). The Apex c"ir. ,1tir'r"l[mng $inning to Millstheprouisions o/ Stecrrons 3l(i) and 37(ll obserued asfolloLus ot parogruph I J of ihc judq;.;;:' ["] "lS Before concluding, one aspect needs to bein dlscu.ssed. the present It u.,as ca'se, submitea that atthough o" O"nlutJ inJ ol i)i"ttont, tnJ app.ttants,noaclaimeri deduction undar Sectioi sttii, t[[a shouLd bepermitted to claim. d.eductiort unae, Sl.tion s7(1) as onfacts it has been hetcl bu CIT(A), Tibunai. and the Highltnd C-ourt no that ment t.he in e.upend_itire this contention. *o, As ,au"n sLuted "' in oboue. euen nafur"_ W"ifthe expenditure incurred is reuenue in niture, stilL itmag not fall in the connotation. of the u.tords ,,cun-entrepairs" under Secticn 3l (i) uthict :r-st has not kept inmind. As held bg Chagla C.,J. n the case oJ_ NewShonock repairs do -Spinning and not attract 1l",rulo"tiAng Sr-ctioi. 3l(t) ['euen ]Cli'6upra) though theallexpenditure is reut e s t, tD hich h,,t "::iZ ;, :;';;:, I! f ;,!";; !::;expenditure bg CIT(A), Tibunat came ana tuithin hi iliqn tite coui, i{ tan"tn "'#, ,,current, tn"erpiersion tlrc repairs". Instead footing that since o.ll the the three authoities expend_iture ,rrtrs" priceeaed. ,erenue onttconstituted. [,,cutent ]repairs.. it is for this reoson that ueho"ue interfered_ uith the concurlent iiat"i, giuen bgCIT(A). Tibunat and rhr.Hiqh Court.. 13. Learned counsel for the appellanL lurther contencied that the claim of expenditure of Rs.9,2 1 ,O33/ _ toi.i.ards the cost ofcarpets, mattresses and lamp shades under Section 31 of theAct is justified, and he relied upon the judgment of theSupreme Court in the case of Commtssio rrer oJ Income_Tax V. 13. Learned counsel for the appellanL lurther contencied that the claim of expenditure of Rs.9,2 1 ,O33/ _ toi.i.ards the cost ofcarpets, mattresses and lamp shades under Section 31 of theAct is justified, and he relied upon the judgment of theSupreme Court in the case of Commtssio rrer oJ Income_Tax V. La.ke Palace Hotels and Motek p. Ltd.,3 u,here the Income_tax Appellate Tribunal, Jaipur Bench, Jaipur, has underSection 256(1) of the lncome_ta_x Act, 1961, referred thefollowing ques[ion of law for the opinion of the Supreme Court:' 1zoo21 z5s lrR soz "W'rether. on [tltc ]facts [and ][in ][the ][ciratmstctnces ][of] on the "ir"tiia case, [the ][ltcome ][tax ][Appellate ]- [Tribunal ][tttcis]in holclitg tha-t .the. i"y. o[, Rs 5'30'5o3i'in.uo.a on otd uing of the hotel buitd-it [Lg ][outned ][bt1]the assessee [not ][not ][a ][capitol expenditure ]["] Learned [counsel ][for ][the ][appellant also ][relied ][upon ][the] 14. judgment of the [Supreme ][Court ][in ][the ][casc ][of ][Commissioner] of Incotne [Tox, ][Madt'as ][V' ][Maho;laksh,rrti ][Textlle ][Milts ][Ltd' ]['4]Wherein it [rvas ][deall ][with ][the ][expenditure ][as ][a ][pcrmissiblc]allowance [in ][the ][comlrutation ][of ][thc ][assessee's ][taxablc income'] 15. Learned [counsel ][for ][the appellant also relied ][upon ][lhe].fuclgment [of ][the ][Sup'eme ][Court ][in ][[hc ][case ][ol ][Cornmissioner] of Income-tax, [Madurai ][V' ][Sara ][oana ][Spg' Mitls ][(n ][Ltd''s]whereinitwasdealtrvithaparticularitemofexpenditurcnral'be deductible [if ][the ][e ][<penditure ][does ][not fall ][within ][sec:tions ][30]to 36. [Whether expe:rditure ][is "revenue" or ]["capilal ][in ][trzrturc'"] 16. Learned [count'el ][for ][the ][appellant also relied ][upon ][tht:]judgmenl of the [Su1'reme ][Court ][in ][the ][case ][of ][Comtnissioner] oJ Income-tax, [Viclarbha ][V' ][SmL ][God'auari ][Devi ][So,raf6]r,,",he rein it [was ][dealt ][\^.ith ][Section ][14oA(3) ][was ][non-existcn|, ][th(]]order of [penalty ][tnere under ][cannot ][be ][imposed ][by ][Lhe]authority [under the ][Act' ][Until ][a ][contrary dccision ][is ][grven ][b-v]any other [competelll ][High ][Court'] o (rsoz) oe trR zto s (2007) 163 Taxman 201 (5c61977 SCC Onlline Bom 215 17. Learned counscl for lhe rcspondent relied upon thejudgment of the Supreme Court in the case of Ba.llirrral Nauo.lKishore and another V. Commissioner of Income Ta-x.7wherein it r.r.as dealt with - \,vhether current rcpairs come undercapital expenditure or not. 18. I-earned counsel for the respondent also relied upon thejudgment of the Delhi Court in the case of Ashoka Hotels Ltd.., V. Commissioner of Incotne Tax, Neut Delhis wherein it wasdealt with - Hotel business Initial issue of Linen, Blanketsand Uniforms - Expenses wl-rether allor.r,able lor deduction ornot. Those expenses were treated as tritten off and consumedat the time they were issuecl for actual use lrom the store to thedealt with - Hotel business Initial issue of Linen, Blanketsand Uniforms - Expenses wl-rether allor.r,able lor deduction ornot. Those expenses were treated as tritten off and consumedat the time they were issuecl for actual use lrom the store to therooms of the employees and not at the time w.hen they werepurchased or replaced. The expenses thus incurred wereclaimed as revenue expenditure. The [ncome Tax Officerrejected the claim on the ground Lhat the expenses were of acapital nature.capital nature. 19. Learned counsel for the respondenl also relied upon thejudgment of the Andhra Pradesh High Court in the case of Sri Rqmo. Talktes V. Comtnissioner ol Income Tax, Andhra ' [r,tggt) ]na rrR 414 (sc) dr.10.01.1997 t lrsesl zz rrR 306 dt. 12.08 1968lrsesl zz rrR 306 dt. 12.08 1968 Pradeshe u,here n it u'as dealt u'ith rvhether Lhe expetrsesincurred is allou'e ble as a revenue expenditurc or not 20. Learned cornscl lor the respondent also relicd upon the 19. Learned counsel for the respondenl also relied upon thejudgment of the Andhra Pradesh High Court in the case of Sri Rqmo. Talktes V. Comtnissioner ol Income Tax, Andhra ' [r,tggt) ]na rrR 414 (sc) dr.10.01.1997 t lrsesl zz rrR 306 dt. 12.08 1968lrsesl zz rrR 306 dt. 12.08 1968 Pradeshe u,here n it u'as dealt u'ith rvhether Lhe expetrsesincurred is allou'e ble as a revenue expenditurc or not 20. Learned cornscl lor the respondent also relicd upon the judgment of the liupreme Court in Assam Bengal Cement Co.LtdV. Comtn,i.ssioner of Income Tax, West Bengal [10]u,herein it rl,as dealt u,ith that the expcnses comes under-capital expcnditu [-e] FINDINGS OF TTIE COURT: 21. This Court analyses whether the appellant's expendir,urecomes under cur [-ent ]expenditure or capital in naturc. Belbrcgoing into thc sa id aspect, it is essential to knou, about thecLirr('!rt rcpair-s :rnd capiterl expenditurr:. Ctlrrc'nL rcpairsmcans, rcpairs undcrtaken in tirc usei's normarl cor.rrscprcscn:rLior-r, maintcnancc or propcr utilization or lbl rtsto-inqit Lo its origrna condition. ;i r:erpilal rxpr:ncii ii,-lr rs il.)i[(]tr:r\{ [!i ][loirrl-l.rrtrt ]1;ilvsir:al [0r ][1l ][-.<r.'ri ][i'rs!i.'ls ][lrsi,il]i; i i:, i1 [,. ]:l :i :r ' ) I ; 1 r : : r 1 Oll S 2'2. In La.ke Pa'lace Hotels dnd Motels P. Ltd., (3.d supra),thc qr-restion o[ as' raised by the Rajasthan High CourL isr,l,hether, on the fircts and in the circumstances of thc case, thcIncomc-tarx Appe I ate Tribunal was justified in holding that the 9\lR 1966 rP 18.- Dl. :S.l l. 961IOl9ii \lRAq dr rllr l9il\lR 1966 rP 18.- Dl. :S.l l. 961IOl9ii \lRAq dr rllr l9il sum of Rs.5,30,503/ incurred on Lhe old u'ing of thc hotelbuilding owned by the assessee was not a capital cxpenditure?ln this case also, thc cxpenditurc incurrcd by the assessee isalso reflecting lour handmade r.r.oolcr-r carpets forRs.2,24,2BOl-, eight room mattresses for Rs.5,366/ and lampshades for Rs.11,950/-. At para No.S, thc Supreme Cour[observed as under: "8. The Supreme Court in Bombay Steont NauigattonCo. (1953) Put. Ltd. u. CIT [1965] 56 ITR s2 has heldthot ant expenditure made under a transactiott tthichis so closely related to the bttsiness that it could beuieu.ted as on integral pail of the conduct of thebusiness, mag be regarded as reuenue expenditurelaid out u,,hollg and exclusiueht for the purposes ofthe business. It is contended bg Mr. Bllanda utat thatthe decision of the Delhi High Court in AshokaHotels Ltd. u. CIT, [1969] 72 ITR 306, is more closeto the facts of the instant case. We haue carefullgread the judgment in Ashoka Hotels Ltd. s case,[1969] [72 ] [3O6(DeIhi). ][In that ][case, ][the ][assessee]u.tho otuned a huury hotel, purchased linen andblankets for use in the rooms of the h.otel and theuniforms for its emplogees for the first time at orbefore the commencement of the hotel business. [TLrc]court found that the expenditure was incuned bg theassessee on linen and blanket and unifonns for itsemplogees as a part oI tle initial equipment of thehotel and that a fiue star modent hotel cannot besaid to be fullg equipped uithout the linen, blanketsand uniforms uhich form- an Integral part of theincome eorning apparatus. The case is clearlgdistinguishable on facts. In the instant case becantseof the order placed to accommodate the guests in tl'teForeign Ministers' Conference of in.ternotional leuelpurchasing u)as made of carpets, mattresses,folding [tables, ][larnp ][shades, ][etc.. ][bg ][no stretch ][of]imagination can st-tch items be said to [be ][durable.]catarlot be treated as [capital]Such expenses expenditure. In fact the [decision ][of the Madras ][lTigh] Coutl irt CIT u. Dttsaprakash, (1978) 114 ITR 210 isrnore clos<, to the facts of the instant case. In thesaid cas< f he assessee uas carryittg ott thebusiru ess <,f ttutning a hotel. ?"he assessee made cltlexpendihu e in a sum of Rs.37,39O/ ott r..,aiousitens liA:e ftxing carpets in the receptiort hctLl,replaceme,t of old and utonr-out hinges, pLtttingfrosted [gliss in ][the ]Hnk hal| putting decoratedntirrors and pictures of religious personages irt thedinninq-ctttrt le<:ture hal| etc. Tlae court held that theexpenditur e utas incured uith o uieu to beautifgthe premises to ottract guests. Thus, the expensescarutot scriC to be of enduing nature. The questionuhether tle expenditure was copital or reuenu.e inthe pafticular facts acts of the case is laid dou.tn. in alarge nuntiter of judicial decisions bg the apex courtctn.d diffentnt High Courts. Hotaeue4 ute are of theuieu tha.t ordinarilg it is essentictllg a question offact. [The ][teu ][u)hich ]the apex court laid down lrrAssam. BsTtgal Cement Co. Ltd. u. CIT, (1988) 2T ITR34 stiLl hcthls good, tohich is extracted as follotLts: "The aim and object of the expenditure utoulcidetermtte its character, namelA, uthether it u,sascapitaL e^'penditure or reuenue expenditure. If theexpenditur,z uos made for acquiring or bringing intoexist.ence (rn asse, or oduantage for the endurutgexist.ence (rn asse, or oduantage for the endurutgbene,ftt of the business, it uas properlg attributableto capitctl and uas of the nature of capitalto capitctl and uas of the nature of capitalexpenditun:. If, on the other hand, it uas made forrunning flzr: business or uorking it utith a uiett.t torunning flzr: business or uorking it utith a uiett.t toproduce profits, it was reuenue expenditure. " 23 . Whether the expenditure comes under capital expenditure or the current expenditure, in the atrove decision, the assessee was carrying on the business of runninsa hotcl, The ass,essce made an expenditure in the sum ofRs.37,39O/ on various items like hxing carpcts in thereception hall, replacing old and worn-out hinges, pulringfrostcd glass ir-r t he Pink hall, putting decorated rnirrors ancl pictures of religious personages in the dinning cum-lecturehall, etc. The court held that the expendi[ure was incurred u'iLha vieu, to beautify the premises to alLract guests. Thus, theexpenses cannot said to be of enduring naturc. The questionu,heLher the expenditure was capital or revenuc in theparticular facts acts of the case is laid down in a large nurtberof judicial decisions by the apex court and diflerent HighCourts. However, we are of the viev,' that ordinarily it isessen lially a question of fact. In the present case also, the assessee is running aHotel, and he incurred expenditure for the replacement ofcarpets, mattresses and lampshades and the saidexpenditure comes only under current expenditure and not acapital expenditure. 24. In Maholakshmi Textile Mills Ltd,, [(4tt' ]supr:r) lhe Supreme Court heid as follorvs: The subject-matter of the of the assessee to claimallouance for Rs.93,215. Whether the allouanceuas admissible under one head or the other of sub-section (2) of Section 1O, the subject-matter for theappeal remained the same, and the Tribunal hauingheld that the expenditure incutred fell utithin thetenns of Section 1O(2)(u), though not under Section1O(2) (ui-b), it had juisdiction to admit thatexpenditure as a permissible allowance in thecomputotion of the taxabie income of the assessee. The above [saicl discussion ][goes ][to ][shoq' ][that ][the]expencliture [incured ][comes ][withirl the ][tcrms ][of ][Section]1O(2)(v), lhough [nr-'t ][uncler ][Scction ][lO(2) (vi-b)'] 25. ln Satavana [Spg' ][Mills ][(P) ][Ltd'' ][(Sttr ][supra) ][thc ][Suprentc] Court held [as follou ][s:] The subject-matter of the of the assessee to claimallouance for Rs.93,215. Whether the allouanceuas admissible under one head or the other of sub-section (2) of Section 1O, the subject-matter for theappeal remained the same, and the Tribunal hauingheld that the expenditure incutred fell utithin thetenns of Section 1O(2)(u), though not under Section1O(2) (ui-b), it had juisdiction to admit thatexpenditure as a permissible allowance in thecomputotion of the taxabie income of the assessee. The above [saicl discussion ][goes ][to ][shoq' ][that ][the]expencliture [incured ][comes ][withirl the ][tcrms ][of ][Section]1O(2)(v), lhough [nr-'t ][uncler ][Scction ][lO(2) (vi-b)'] 25. ln Satavana [Spg' ][Mills ][(P) ][Ltd'' ][(Sttr ][supra) ][thc ][Suprentc] Court held [as follou ][s:] " I 4. Sone oJ' the [decisions ][cited ][on ][behalf ][of ][tlrc]assessee's [ote ][rtot ][being ][discttssed ][bg ][us ][as ][theg]deal utith [c,tses ]falting [under ][section ][37' ][That]'prrrrir:,rt", sectiott is [a ][residu'ary ][section' ][IJnder ][se-ction ][37' ][a]ite n of cxienditure [mag ][be deductible ][if]Itt...e expenclinre'does [not ]foll [tt'tithin sections ][30 ][to]36, tiat it [shot ][cl ][haue ][been incurred ][in ][the]u.ccotttl.ttrl(J 't:a-,- [year, ][that ][it ][shoutd ][be ][in ][respect ][of ][a]brtsines-s tecl on by [the ][dssessec' ][that ][i't ][shouLd]ttot be otL [persortal alcount ][o.f ][the ][assess ][ee: ][that it]slnuki rroi [I'e ][h ][the ][nature ][of ][capital ][expend ][iture]attd tllot it [slnulcT ][be ][spent utholly ][and ][exclusiuelg]/or [busines-s Whetlrcr expenditure ][is ]['reuenue ][or]tn [rtuture ][utould depend upon ][seueral ][factors']capital te [of ][the ][expenclitu-re' ][nature ][of ][the]ncunely. [rtot ]ba.sine.ss [aci ][tuttLl ][etc' ][For ][example' ][cons.ttttction ][of]the building for [setf use ][maA ][be ][capital ][in. ][nature]tultereas in [the ][ltinds ][of ][the ][buitder ][a ][building]conslitutes [ltis ][stock-in-trade ][and ][therefore' ][on ][the]srrte- d [t.he ][builc)ing ][the ][expenditure ][has ][1o ][be],.uun i.. [Therefore, ][lh" ][b'itd"t ][rttould ][be ][entitled ][to]rleduct [sucl ][. ][expenditure ]from [the ]['sale ][proceeds]-r.r"n gro"t ur.o,,',. . or capital [Tierefore, ]in nature [u'thether ]uould [an ]depend [expenditure ]on the[is]facts [of ][€aCtl ][cc.se'2'. ][We ][do not ][tuish ][to ][express onu]'opirtio,i of section 37(1) in theapplicability on 'he iretert [ca.'e. ][Ti"'" *t'" ][certain ][ciuil ][appeals]'*rongly tagged tuith the present batch uthich utill [be]clecidecl [seltaratelg ][by us as ][tley ][concern ][tuith]section 37(11. [Hence ][we do not ruish to ][express ][anA]on [appticability ][of section ][37(1)']opiniolr 15. Befot-e [concluding, ][one ][aspect needs ][to ][be]al.r.."a. [ft ][toas ]"ib^itted [on ][behalf ][of ][the]assessees, [it ][the ][present ][case, ][that ][although ][the] assessees, ,."...." " [hacl ][claimed deduction ][under ][section] 15. Befot-e [concluding, ][one ][aspect needs ][to ][be]al.r.."a. [ft ][toas ]"ib^itted [on ][behalf ][of ][the]assessees, [it ][the ][present ][case, ][that ][although ][the] assessees, ,."...." " [hacl ][claimed deduction ][under ][section] 3 1(i), tl-teg shoultl be pennitted to claim clecluctiorryy!3.r.se9ti9n 37(1) as on facts it n." b..r,iJ{ irsclr(il, Tribunat and the High Coii- lnii ,netpenditure u)as reuenue in nalire. We Jind n-o- *"r,in this contention. As stated. aboue,' euen" tf theexpenditure incurred is reuenue in rtature, iti itmay not fall it the connotation of the uorcls',currentrepairs" under section .? 1(i) tDhi;h t""t irr, ,ot' t in,mind. A9 held bg Chagla, C.J. in the o'f ru"*"ptyy!3.r.se9ti9n 37(1) as on facts it n." b..r,iJ{ irsclr(il, Tribunat and the High Coii- lnii ,netpenditure u)as reuenue in nalire. We Jind n-o- *"r,in this contention. As stated. aboue,' euen" tf theexpenditure incurred is reuenue in rtature, iti itmay not fall it the connotation of the uorcls',currentrepairs" under section .? 1(i) tDhi;h t""t irr, ,ot' t in,mind. A9 held bg Chagla, C.J. in the o'f ru"*"ptShoruock Spg A Mfg Co. ftd. (supra) "o-r. aonot attract section 31(i) euen though ihe "it-'r.r"iio exjenditurenot attract section 31(i) euen though ihe "it-'r.r"iio exjenditurets reuenue in nature. Therefore, the basic tist, tohtchhad not in Tribun-al ,been applied., and ,tie present .r"., t g' Jn1alhad not in Tribun-al ,been applied., and ,tie present .r"., t g' Jn1althe High iourt, i" *n"in r'tnexpenditure came utithin the lburr.rtexpression expression repair". lnstead a the three autioities p*"..,a"aon the footing that since the expendiun-"*o"reuenue it constituted [,'current ]on the footing that since the expendiun-"*o"reuenue it constituted [,'current ]repaiis,,. it is for ttisreason that tue haue i erfered. taith the coricunent*!.,:n" toun.[giuen ][bs crT(fl ][rnbunat ][and ][ti- ][utsn]reason that tue haue i erfered. taith the coricunent*!.,:n" toun.[giuen ][bs crT(fl ][rnbunat ][and ][ti- ][utsn] In the above said cases, the Apex Court discusseclu.hether the expenditure rs revenue or capital1n nature,rvould deper-rd on the several factors i.e. nature of expenses,nature of business activity. For example, the construction ofthe building for self-use may be capital in nature, whereas inthe hands of the builder, a buikling constitutes his stock_in-trade and [herefore, on the sale of the building, the expenditurehas to be revenue 26. In the present case, the assessee only incurredexpenditure lor replacing of carpets, mattresses and lampshacles as the.y w-ere damaged. This expenditure comes undercurrent expenditure but not capital expenses. 27. Per contra, [iearned counsel ][for ][the ][respondent ][/ ][revellue]reliecl upon tlrc [llatlirno,l ][Nauat ][Kishore ][(7d' ][supra) ][u'herein]the Apex Courl [hcld ][as ][under:] "The expression used [in ][Sectiort ][1A@@ ][is ]["curent]repoirs'; [a' ]rcl [tTot ][mere ]["repairs" ][The ][some].ipression occurs [in Section ][30(a)(ii) and]in Sectiort [3 ][1(l) ][of ][the ][Income ][Tax Ac1 ][1961 ][' ][The]is uhat [is lhe ][meaning ][of ][the ][expres.sion ][in]question the contex, of [Sectitttt ][10(2) ][ln ][Netu ][Shorrock]Spinning [,rri ]Manufo'cturing [Compang ]-Ltd''inogb,"C.,l. speaking for [the ][Diuision ][Bench']obsJruecl ll7at [the ][expression ]["a)rrent ][repairs"]means expendifitre [on ][buildings, ][machinery, ][plant ][or]furniture [rt, ][rich ][is ][not ][for ][the ][purpose ][of ][reneuol ][or]restoration but [tuhictt ][is ][ottly ]for [the purpose ][of]sr [mainlaining an alreadg ][eisting. ][asset]preseruittg 'ond uhiclt loes not bnng a neu asset into existenceor does nol [giue ][to the ][assessee ][a ][neut ][or ][different]aduantage. "The shtplt: test that must [be ][constantlA ][bome ][in]mind is ih"t o" [a ][result ][of ][the expenditure ][uhich ][is]claim.ecl as [an. ][expenditure ][or ][repairs ][uhat ][is ][reallg]is [to preserue ][and ][maintoin ][an ][olready]being dotte asset. ['fh.e ][obiect ][of tlrc ][expen'diture ][is ][not ][to]exisiing bnng i r?el, [assea into ][existence, ][nor ][is ][its oblect the]obtiinitg of [a ]neu [or ]fresh [aduantage' ][Tltis ][can ][be]the ontg" cleJinition [of ]['repairs' ][because ][it ][is ]-only [by]reosorl of this [deJinition ][of ][repairs ][thot ][the]expenditur,t [is ][a ][reue.nue ][expenditure ]['] If the arnotutL [spent ][uto.s ]for [the ][purpos.e ].of [binging]into existence o [neu) ][osset ][or ][obtoining ][a ][neu)]then [obuiously such ][an ][expenditure]aduantage. would nZt [te ][an expenditure ][of ][a ][reuenue ][nature but]it uoulcl [Lte ][a ][cnpital ][expend-iture, ][and ][it ][is ][clear ][that]the rlecluctiort- [,ihi"h, ][th" ][I'egislature ][has ][permitted]under -\ec'rctrt [1O(2)(u) ][is a ][deduction tuhere ][the]expendittLrz [is o ][reuenue ][expenditure ][and not ][a]capital e [x ]P [etlditure. ]["] In tr.king [he ][ctboue ][uieu, ][the ][Bombag ][High ][Cottrl] clissentii from [the ][uieut ][ktlglt ][bg ][the ][Allahabad] tligh Coutl irt RanrArishrtr, Sunderlal r,,s.Cornmissiortet' of lrtcome Tax, tr.p. I j gS j) 1gI.T. R. .3241 where it luas held that the expression"c1tn ent repairs" in Sectiort l0(2)(u) utas iestrictedto pettA repairs onlA uhich are carried outpeiodicallg. The Learned Judge agreed uith thelieu) [taken bg the ][patna ][- High ][Court]in Conrnrissio ner of lncorne Tctx tss. Darbhar ryusugar co Ltd. [(1956) 29 I_T.7.21] and bg theMadras High Court in Cornmissionei oi Incorie Taxu.s. Srr Rrrrnn Sugar tills Lt(l. [(195j) 2l l.T.R. jg j]In LiIrcfiy Cinema us_ Conrmi,ssioner of Income Ta,<,lalcut:? [[s2 ][1.7.R.153], ][p.B. Mukharji, ][J., ][speaking]for [a Diuision Bench ]of the Calcutta Uigt, Coin, n"tathat an expenditure inatred. with a uieu.t to binginto existence a neu) asset or an aduantage ifenduing nature cannot qualifu for dedictionunder Sectiott. 10(2)(u). ht our opition the test inuolued" by Chagta C.J. in!7to. [st1grock Spinning ][& ][Manufacturing Co*pong]r,.imited is the most appropiate one hauiig regird tothe context in tuhich the said expressioi oclurs. Ithas also C.ottrts irt been India. follottted We respectfullg bg a maioity of accept - ond_ the ad.optHighthe test. Applging the aforescLid test, if ute look at the facts ofthis case, it toill be euident that uhat the assesseedid tlos not rlere repairs but a total renouation ofthe theatre. Neut machineru, new furnitureneu)sanitaru fittinqs and neu.t electical uirinq u)ereinstalled besides extensiuelu repannna the structureof the buildinq. Bu no stretch of imaqination, can itbe said that the soid repanrs oualifu as "currentrepatrsuithin the meaninq of Section 10l2){u). Itu)as a cose of total renouation and has nghtty beenheld bg the High Court to be capital in iature.Indeed, the finding of the high Court is that asagainst the sum of Rs. 1Z,OOO/ - for uhich theassessee had purchased the factory in 1937, theexpenditure incurred in the releuant accounting gearutas in the region of Rs.1,2O,OOO/ -." 28. In Ashoktr Hotels Ltd..,(8n' supra), the Delhi High C)ourt held as follou,s It also cla.imed an expense of Rs. 1,96,931/ cts the cost ofunifomts cf the emplogees. In the course of russessmerrtproceedin.gs it was explairted. that, ctccording to theaccount.ing practice foLlowed by the ossessee the blankets,linen and unifornt utere treated as witten off andconsumed at the time theg were issued for actual use fromthe state kt the rooms of the emplogees and not at the timewhen they utere purchased or replaced. The expense thusinanted uere clairned reuenue expenditure deductible outof the iname o tle assessee. The Income Tct-x Officerrejected th: claim on tlte ground that the expenses were ofa capital tutture as theg related to tLe first year of thebusiness. 28. In Ashoktr Hotels Ltd..,(8n' supra), the Delhi High C)ourt held as follou,s It also cla.imed an expense of Rs. 1,96,931/ cts the cost ofunifomts cf the emplogees. In the course of russessmerrtproceedin.gs it was explairted. that, ctccording to theaccount.ing practice foLlowed by the ossessee the blankets,linen and unifornt utere treated as witten off andconsumed at the time theg were issued for actual use fromthe state kt the rooms of the emplogees and not at the timewhen they utere purchased or replaced. The expense thusinanted uere clairned reuenue expenditure deductible outof the iname o tle assessee. The Income Tct-x Officerrejected th: claim on tlte ground that the expenses were ofa capital tutture as theg related to tLe first year of thebusiness. I shall Jirst tak.e up the question regarding the tuo sums o/Rs.1,79,9[4/ - representing expenditure on linen andblankets o nd Rs. 1 ,96,931/ - representing expenditure ot7unifonns- ['rhe ]facts tLndisputecl ond indisputable are thotthe linen, blankets ctrtd unifonns in question u)erepurchased b,y lhe assessee for the Jirst time on or beforethe comme.Lcemett of its business. Instead of shou.tinq theexpenditu.rz incured on the purchase of these articles asand uhen the purchases u)ere actuallg made bg it. theassessee u.dopted a rnethod of accountancy uherebtl theblankets a'td linen u)ere t.reoted in ils books as ulitten offat the time o/ issue of those mateials for actual use frontthe stock cnd not at the time uhen they uere purchased.Likeuise, the pice of unifunns was also witten off at tLrctime when theg were issued from stock to the emplogeesas distinct from the time uthen theg u,tere purchased. Nou the c)nt.rouersa as to whether a partia ar item ofexpenditur'z falls under one category or the other has comeup before lhe coutls in this country as utell as in Dnglandin a uaietu of circumstances- As obserued by the SupremeCoutl in Aiisorll Bengal Cement Co. Ltd. u. Oommissionerof Income-'ax, the Line of demarcation betuteen the twotypes of e,rpenditure is uery thin and learned judges inthis countr.l as utell as in England haue from tirne to timepointed out the d.fficulties besetting the task of separatingone from the other. Decided co,ses no doubt lag dotuttcertain brr ad tests tuhich are intended to be utorking guides; but ultinatelg, as obsen)ed by l-ord [Macnaghten ][in]Douey Coreg' there neuer has been, [atTd ][I think ][there]neuer will be, much dffiatltg in [dealing with- ][anA]partia ar case on its outn facts and circumstances [- ]["] In the case of Assam Bengal [Cement ][Co. ][Ltd. ][tlrc ][Supreme]Court reuietoed th.e leading cases, [Indian ][as ][uell ][as]English, and surnmaised the broad [tests ][laid ][doutn]therein. guides; but ultinatelg, as obsen)ed by l-ord [Macnaghten ][in]Douey Coreg' there neuer has been, [atTd ][I think ][there]neuer will be, much dffiatltg in [dealing with- ][anA]partia ar case on its outn facts and circumstances [- ]["] In the case of Assam Bengal [Cement ][Co. ][Ltd. ][tlrc ][Supreme]Court reuietoed th.e leading cases, [Indian ][as ][uell ][as]English, and surnmaised the broad [tests ][laid ][doutn]therein. It is, therefore, neither necessary [nor desiroble ][to ][attempt]a fresh surueg of those [cases ][as ][the ][broad ][pinciples]uhich should gouern the decision [of ][this ][case ][are no longer]in doubt. It should, houeuer, [be ][borne ][in ][mind ][that, ][euen]after setting ottt those [pinciptes, ][tLrcir ][Lordships ][obserued]"Tlrcse tests are th.us mutuallg exclusiue and haue [to ][be]applied to the facts of each [partianlar ][case ][in ][the manner]iboue irlicctted. It hc.s been [rightlg ][obserued ][that ][in ][the]greot diuersitg of human affairs and [the ][complicated]nature of business operations it [is ][dfficult ][to lag ][doun ][a]test uthich tLtould apply to all [situations. ][One ][has,]therefore, got to apply [these ][citeia ][one ][after ][the ][other]from [tlrc ][busirzess ][point of ][uieut ][and ][come ][to ][the ][conclusion]tthether on a fair appreciation [of ][the ][uhole ][situation ][the]tncured. [in ][a ][particular ][cose ][is of the nature ][of]experLrliture capital expencl,iture [or ][reuenue ][expenditure ][in ][uh'ich ][latter]euent onlll it tuould be [a ][deductible ][allou-tance ][under]section 1o(2)(xu) of the [lncome- ][tax ][Act. ][T?rc ][question has]all along been consiclered to [be ][a ][question ][of ]foct [to ][be]detenninecl by the [income-tax ][authoities ][on ][on ][application]of the broad principles [laid ][doun ][aboue ][and ][the courts ][of]law uould rtot orc)inarily [interfere ][uith ][such ]findings [of]-thosi fact [if ][theg haue ][been ][arriued ][at ][on ][a ][proper application ][of]pnncipLes." One of the principles laid dou-m bg theirLordsiips is Lhat. in cases [uhere ][the ][expenditure ][is ][made]for [the initial ][outlay ][or ]fot [extension ][of ][a ][business ][or ][a]substantial replacement [of ][the ][equipment there ][can ][be no]doubt that it is capital expenditure- The above discussion [shows ][that the ][expenditure]incurred by the asscssee [lor ][the ][total ][renovation ][but ][not for ][the]existing one, and also, he [incurred ][expenditure ][for ][extension ][of]the business cr substantial [replacement ][of ][equipment ][The] Courl [observed ][that ][it ][is ][a ][capital ][expenditure ][llu[' ][tn]Apex the present [case. ][-here ][is ][no renovation of ][thc ][Hotcl ][and ][therc]isnosubstantiirlrcplaccmelrtoftheequipment,itiSonlyment [of ][ex ][sting ][damaged ][carpets' ][maLtrcsses ][and ][lelmp]replace shadcs. [So, ][the ][expenditure ][incurred ][b-v ][the ][asst ][ssee ][corne s]only under [currer ][t ][exPenditure'] 29. In [the ][abore ][case, ][the ][assessee ][incurred ][expenditure]for initial [outlay ][extension ][of ][a ][business' ][or ][a ][substantial]replacement [of ][the ][equipment; ][thcrc ][can bc ][no ][doubt that ][it ][is]capital expencliture [tsut, ][in ][the ][prcsent casc' ][it ][is ][not ][an ][iniLial]a substarrtiaioutlal' or [lor ][the]extension [o[ :r ][busincss ][or]onlvthereplacement [of]equipment, [tt ][ts]replacement [of ][the]A[1 thesc [threc]existing [carpets, ][mattresses ][and ][lampshadcs]items arc [in ][clamaged ][condition' duc ][to ][damage' ][the-v ][have ][bcen]replaced [u'ith ][nerv ][one ][The ][above ][saicl ][citaLion ][does ][not ][appl-v]to the [present ][s:t ][of ][facts' ][In ][the ][samc ][case' ][n ][ith ][regard ][to]whether the [assess ][incurred ][expenditurc comcs ][under ][the]revenue nature [)r ][capital ][in ][nature, the ][Dcll.ri ][High ][Court ][held]as follows "In the present [case ][the Tribunal ][has ][found ][that]o*.oendiiu'e [uas ][inanned bg ][the ][assessee ][on ][linen']'ii""i)i" ""a [hueries ][of ][peo,ts ][antd ][bearers as ][a ][paft]of ,,nn i"iri"t [equipment ][of ][the ][hotel' ][The TnbunaL ][has]it"o \ouna, andin [my opinion, ][nghtlg ]' [that ][just ][as ][a]hotel ca nnoi [be ][said- ][to ][haue been ][uthollg]^"aL,- "i"ipla .ir-,rr-rit be [*ithout ][said ][to ][its ][be ][furniture ]fullA [equipped ][ond' ][ftxtures' ][tDitl'Lout the][etc ][' ][it] liner L, blankets arrcl the uniforms which form anintegral part of the incorne appctrotus."aiti,rg appctrotus."aiti,rg "ht the ccLse of a hotel it is not tLe builcling and.certain futures onl11 witich constitute initial iutlag.ltems of funtiture, cuftains, crockery, cutlery,cooking utensils. linert, blartkets and irtlorn ["i1]steutards, peorls arLd bearers, a fonn the essentictlhotel i.nitial equipment of uhich, accordinq a hotel, ro the ^or. assess io, ee,s in tlrc own case claim,of ais a fiue star hL_ntry hotel. The Tibunal is, thereforei:,ight in holding that the expenditure incurred on theinitiol issue of linen, blankets and. uniforms isexpenditure on the initiai equipment of the incomeeanning dpparatus ancl ls, therejore, not (7permissible deduction under Section iO12yxul of theAct, being of a cctpit.al nqture. In the above discr rssior.r also, the expcnditure incurred bythe assessee is an initial cxpenditure to establish a Hotel. It iscailed initial equtpment to rt.tn the Hotel. In the present case,the expenditure incurred b], ihc assessee is only forreplacement of existinq carpcts, matlresses and lamp shades. Itis not an initial expcnditure or for starting a business. So, theabove decision is not applicable to the present set of facts. Assuch, the expenditurc incurrecl bv the assessee in the presentcomes under current expenditure but not capital expenditure. 30. In Sn Rq.ma Talkies (grh supra) the Andhra pradesh High Court held as folkrrvs: " [n respect of curent repairsto such buildings,machinery, plant ol funtiture,the amount paid onaccount thereof. . .... ...account thereof. . .... ... nature (xu). ang descibed .expenditure (not in ang beitg o.l' the an allouance of clauses (i) to (xiu)the inchtsiue, ctrtd not being in the nature oJ' cctpitalexpenditu [-e ]or personol expenses of the a:;sessee)loid out o' expended uhollg and, exclusiuellt for thepurpose or- such business, profession or uocatiort. 30. In Sn Rq.ma Talkies (grh supra) the Andhra pradesh High Court held as folkrrvs: " [n respect of curent repairsto such buildings,machinery, plant ol funtiture,the amount paid onaccount thereof. . .... ...account thereof. . .... ... nature (xu). ang descibed .expenditure (not in ang beitg o.l' the an allouance of clauses (i) to (xiu)the inchtsiue, ctrtd not being in the nature oJ' cctpitalexpenditu [-e ]or personol expenses of the a:;sessee)loid out o' expended uhollg and, exclusiuellt for thepurpose or- such business, profession or uocatiort. "We next consider uthether the sctid ilerns rtsrneunder section 1 O(2)(xu). In ord.er to attract sub-clarr-se(xu), it m.ust be establi-shed that the expen.c)iture isnot an c 'ortable deduction corning it antl of theclauses (i) to (xiu) and further it is ttot in the n'ahtreof capital expenditure or personal expenses of Lleassessee 'tnd utas Laid out uhollg and exchLsiuelyfor [the ][purpose ]o;f business. The claim un(ier sLb_clause (u) being negatiued., it nay be safely lrcld onthe facts of the cctse that it d.oes not fall iitLrm u,.rgof the sub-clauses (i) to (xiu). The onLq question tltattoould rern,tirt is whelher il rs not art e.rpertdilure irtthe natur< of a capital expencliture. IJ it Lte cntexpenditurz of that nature, it is not an allounblededuction under sub-clause (xu) euen though. t.heexpenditur': may be tuholly or exclusiuely laid ottt Jbrthe purposes af business. The expression capitaLexpenditunt" of course is not deftned. in the Act. Bttt.as obseruzd bg the Supreme Court itt pingle[ndusties Ltd. u. Commjssioner of htcone_tr.;t, thedktinction betueen capital ancf reuenue expettclitureis u,tell recoqnised in income-tax Ia u., and is based oncetlain pri.n ciples tuhich are easg of applicatictrt anrltuhich cme ge from lhe uariorts cascs. A s37l/lrr.sl.sLuas attemptecl bg the Full Bench of the Latrcre HighCourt in Be,narsidas Jaqannath, tuhere MahtLjan j.(as he then uas) sumiartsed- the position o,id th"uarious tests tohich emerge. This summanl u.trtsapproued oj by the Supreme Couft irt Assanr BengalCement Co, Ltd. u. Commissioner of hlcome tar etpage 43. BL agutati J. there obseruecl thus: '?n cases t,there the expenditure is macLe for theinitial outlagl for extension of a business ir for c,.substantial replacement of the equipment ther<: is nodo^ubt that it is capital expenditure. A capital assetof the busiless is eilher ocquired. or eitencjecj orsubsta ntiall.,1 replaced and that outlay uthateuer beits source uhether it is drawn from thi capital or theincome of tlrc concern