COMMISSIONER OF INCOME TAX Vs. RUPRAG P LTD

JUDGEMENT

(1.) THE Revenue applied to this Court under S. 256 (2) of the IT Act of (hereinafter referred to as the ('Act') and by order dt. 17th Sept., 1975, the Tribunal had been called upon to state a case and refer the following question for opinion of the Court :

(2.) ASSESSEE is a private limited company maintaining accounts according to mercantile system. The relevant asset. yr. is 1966-67. Assessee was engaged in the business of exhibiting films and claimed a deduction of Rs. 18,178/- on building account. The ITO found that the amount had been spent to make the exhibition hall taken on rent more suitable for exhibiting films. He was of the view that the assessee was likely to derive benefit of enduring nature and therefore, the expenditure was not Revenue in character but was out and out capital investment. Accordingly he disallowed the deduction.

(3.) IN second appeal, the Tribunal found that the assessee had introduced the oscillating system for removing the defective echo of sound in the cinema hall. It noticed that there was no finding that this exhibition hall did not have any system to resist vibration of sound. Therefore, the introduction of the oscillating system was more by way of replacement than introduction of a new unit of sophisticated machinery. Accordingly, it came to hold that the claim for deduction was permissible and directed the same to the deducted while computing income.