COMMISSIONER OF INCOME TAX Vs. VOLGA RESTAURANT

JUDGEMENT

(1.) AT the instance of Revenue, following questions have been referred for opinion of this Court by the Income tax Appellate Tribunal, Delhi Bench (in short, the 'Tribunal'), under S. 256(1) of the IT Act, 1961 (in short, the 'Act') :

(2.) FACTUAL position in a nutshell is as follows : Assessee was carrying on business of running Volga Restaurant at Connaught Place, New Delhi. On 12th June, 1975, business premises got damaged because of a fire and the air conditioner plant installed in the premises also got damaged. A sum of Rs. 1,45,516 was claimed as expenses under the head "current repairs". The AO however allowed a sum of Rs. 25,563 and treated the balance as capital expenditure. He was of the view that the plant was so extensively damaged that it was to be replaced and necessary components were supplied by M/s Voltas Limited. It was noted that the assessee had claimed Rs. 6,000 on account of legal charges which were paid to Mr. H.L. Chadha in addition to Rs. 5,170 which was paid for appearance before the IT authorities. Placing reliance on S. 80VV of the Act the ITO disallowed Rs. 6,000. This addition was also maintained by CIT(A). The matter was carried in further appeal before the Tribunal which reversed the finding and directed deletion of addition of Rs. 1,21,752 being of the view that the expenses were revenue in character. Before the Tribunal, assessee's stand was that payment was made to chartered accountant and, therefore, S. 80VV had no application. Tribunal referred to the certificate issued by the retainer and held that disallowance was improper. Revenue's prayer for reference was accepted and the question as set out above was referred.

(3.) SEC . 31 of the Act applies to repairs, insurance, machinery, plant and furniture. The said provision reads as follows :