Case: M/s Ballimal Naval Kishore and Another Vs. Commissioner of Income Tax

The assessee-appellant carries on the business of exhibiting films in a theatre called "Naval Talkies" at Panipat. He had purchased the said building in 1937. It was a ginning factory then. He ran the factory till 1940. In the year 1945, he converted it into a cinema theatre and was exhibiting films therein. During the period 1960 to March 1961, the assessee extensively repaired the theatre by expending substantial amounts. The amounts spent by him are: on machinery Rs.16, 002/-, new furniture Rs.27, 889/- sanitary fittings Rs.5, 225/- and replacement of electrical wiring Rs.13, 604/-. In addition thereto, a total amount of Rs.62, 977/- was spent on extensive repairs to walls, to the hall, to the flooring and roofing, to doors and windows and to the stage sides etc. Actually the theatre had to be closed during the aforesaid period for effecting the repairs.

Reasoning: "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure or repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of `repairs because it is only by reason of this definition of repairs that the expenditure is a revenue expenditureIf the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which, the Legislature has permitted under Section 10(2)(v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure." *Applying he aforesaid test, if we look at the facts of this case, it will be evident that what the assessee did was not mere repairs but a total renovation of the theatre. New machinery, new furniture, new sanitary fittings and new electrical wiring were installed besides extensively repairing the structure of the building. By no stretch of imagination, can it be said that the said repairs qualify as "current repairs" within the meaning of Section 10(2)(v). It was a case of total renovation and has rightly been held by the High Court to be capital in nature. Indeed, the finding of the high Court is that as against the sum of Rs.17, 000/- for which the assessee had purchased the factory in 1937, the expenditure incurred in the relevant ac counting year was in the region of Rs.1, 20, 000/-