COMMISSIONER OF INCOME TAX Vs. ANDAVAR CALENDERING MILLS

JUDGEMENT

(1.) THE facts leading to this reference are as follows : THE assessee is a firm which was carrying on business in property taken on lease. For the purpose of installing a machine, the assessee had to construct a bedding on the floor and it is also stated by the Income-tax Officer that some improvement was made to the building taken on lease. THE appellate authorities have mentioned that the improvements include the construction of a room for storing the calendering cloth manufactured by the assessee. THE case of the Revenue is that the expenditure incurred for this amounted to capital expenditure and cannot be allowed as a revenue deduction. THE Appellate Tribunal found that the assessee did not have any enduring benefit being only a lessee and allowed the deduction. At the instance of the Revenue, the following question has been referred :

(2.) LEARNED counsel appearing for the Revenue contended that since there was new construction which was eligible for depreciation under section 32(1A) of the Income-tax Act, the Appellate Tribunal was in error in allowing the deduction. But, we find that the depreciation originally granted by the Income-tax Officer was later withdrawn on the ground that the assessee was not the owner of the structure. Even though it is mentioned in the orders of the appellate authorities that a new room was put up, we find no evidence to indicate the nature of such structure. From what is stated by the Income-tax Officer in the order of assessment, it appears that the assessee has only carried out some improvements for better enjoyment of the leasehold property. Since the benefit derived by the assessee was co-terminous with the lease, it is obvious that there could not be any enduring benefit for the structure, whatever be the nature of the same, whether old or new.