GULAMHUSSEIN EBRAHIM MATCHESWALLA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under section 66(2) of the Indian Income -tax Act, 1922 (hereinafter referred to as 'the Act'), the following question is referred to us for our determination at the instance of the assessee :

(2.) FROM the question framed it is clear that it refers to the assessment years 1956 -57 and 1958 -59, for which the corresponding accounting periods were Samvat year 2011 and Samvat year 2013, respectively. The assessee was manufacturing match boxes in its factory at Kurla and selling them in the market. It owned several godowns, sheds, etc., and they formed part of the said business assets. The business of manufacturing matches was stopped from Samvat year 2009 and the godowns once used for that business were let out to different people and rent was received therefrom by letting out the same. Some time prior to Samvat year 2011 the machinery and stored in a part of the factory shed. In Samvat year 2011 the Food and Agriculture Ministry, Government of India, took a portion of the factory sheds on lease from January 7, 1955, on a monthly rent of Rs. 1,763. In Samvat year 2011 the assessee received approximately Rs. 12,341 as rents from the Food and Agriculture Ministry in respect of Kurla godowns and sheds property and also received storage charges of Rs. 11,792 from other persons who had stored their goods in other parts of these buildings. The assessee incurred a sum of Rs. 29,356 for certain repairs during this assessment year. As the present reference is not concerned with the assessment year 1957 -58, it is unnecessary to refer to the income derived by the assessee during Samvat year 2012. From March 18, 1957, most of the godowns (but not all the floor area) were leased out to Messrs Mahindra and Mahindra Ltd. under an indenture of lease dated July 10, 1957, at a rent of Rs. 7,500 per month. In Samvat year 2013 the assessee recovered Rs. 48,500 and Rs. 9,678 as rents and storage charges in respect of these properties. During Samvat year 2013 the assessee incurred a sum of Rs. 27,377 over repairs.

(3.) AS in his opinion these expenses on the godowns were of a capital nature they could not be allowed against the receipts of hiring charges, but depreciation on the amount spent has been allowed. For the assessment year 1958 -59, the Income -tax Officer took the view that the expenses incurred were of a capital nature in relation to repairs and renewals of the godowns and so depreciation only could be allowed but it could not be allowed as an item of expenditure of a revenue nature.