JUDGMENT Gulati, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961. It is a consolidated reference relating to assessment years 1964-65, 1965-66 and 1966-67. The question arising in all the three assessment years is common.
2. The assessee is a partnership firm carrying on business in crockery, glassware, etc., in a rented shop. The shop was rented in 1939 on Rs. 40 per month. On 6th June, 1963, the assessee and the landlord entered into an agreement. The assessee wanted to make some alterations and improvements in the shop. The landlord permitted him to do so and increased the rent to Rs. 150 per month with effect from 1st August, 1963. The assessee obtained the necessary permission from the Municipal Board and carried out the additions and alterations during the accounting years relevant for the assessment years under consideration. The expenditure incurred in this behalf was as under :
Assessment year Expenditure Rs.
1964-65 10,859.00 1965-66 9,865.00 1966-67 1,000.00
3. The assessee claimed these amounts as deduction from its income as being expenditure incurred on current repairs. The claim was disallowed by the Income-tax Officer. His appeal to the Appellate Assistant Commissioner of Income-tax also failed. Before the Tribunal, a ground was raised that the expenditure should have been allowed under Section 37 of the Act as being expenditure wholly and exclusively laid out for purposes of business. The Tribunal admitted this ground and remanded the case. The Appellate Assistant Commissioner of Income-tax on remand upheld the claim of the assessee holding that the expenditure was incurred wholly and exclusively for purposes of business and it was not an expenditure of capital nature. The department went up in appeal before the Tribunal. The Tribunal has reversed the finding of the Appellate Assistant Commissioner of Income-tax holding that the expenditure was allowable neither as an expenditure on current repairs under Section 30(a)(i) of the Act nor under Section 37, as it was an expenditure of capital nature. At the instance of the assessee the Tribunal has now made this reference on the following question of law :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sums of Rs. 10,859, Rs. 9,865 and Rs. 1,000 were not allowable as admissible expenditure either under Section 30(a)(i) or under Section 37 of the Income-tax Act, 1961, for the assessment years 1964-65, 1965-66 and 1966-67 respectively ?"
4. Section 30 relates to allowances of certain expenditures relating to rent, taxes, repairs, etc., for premises used for the purpose of the business. Under clause (a)(i) where the premises are occupied by the assessee as a tenant, the rent paid for such premises and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs, may be allowed. Clause (ii) then provides that where the premises are occupied by the assessee otherwise than as a tenant, the amount paid by him on account of current repairs for the premises may be allowed. It would be immediately noticed that under Clause (ii) only current repairs are to be allowed, if the premises are not occupied by the assessee as a tenant. But, in case the premises are occupied by him as a tenant, then he has to be allowed the repairs of the premises, if he has undertaken to bear the cost of repairs. There is a difference between "repairs" and "current repairs". "Current repairs" means only such repairs as are necessitated by the day to day wear and tear during the relevant previous year only, while "repairs" may mean accumulated repairs of several years.
5. The exact nature of work done in the shop in question is not known in the instant case. The assessee contended that he had spent the amount on renovating and furnishing the shop, whereas the Tribunal has taken the view that the assessee must have made some structural changes, otherwise it would not have been necessary for him to obtain permission from the municipality.
6. Repairs of building in ordinary parlance means making good the wear and tear and may involve replacement of minor nature. However, any expenditure incurred on reconstruction or remodelling of a building or on renovating or furnishing it shall be outside the purview of "repairs". Accepting the finding of the Tribunal that a part of the expenditure at least must have been incurred on making structural changes in the shop, we must proceed to examine whether the view taken by the Tribunal that the expenditure was of a capital nature is correct.
7. Now, expenditure incurred by an assessee on renovating, furnishing or remodelling of a business premises can be allowed as deduction under Section 37 of the Act, if the expenditure is not of a capital nature. The distinction between a capital and revenue expenditure is not precise. Some tests are applied for determining whether a particular item of expenditure constitutes revenue or capital disbursement. But they must be applied with proper regard to the facts of each case, because as the House of Lords reaffirmed in Strick v. Regent Oil Co. Ltd., [1969] 73 ITR 301 (HL).no one test or principle or criterion is paramount or conclusive or of universal application.
8. The first and the most commonly applied test is to see whether the expenditure brings into existence an asset or advantage of enduring nature. When a person constructs or purchases a building, he acquires an asset and the expenditure on such acquisition or construction would be a capital expenditure. Similarly, when he incurs expenditure on addition or alteration in a building which enhances its value, the expenditure can again be of a capital nature. If the building is used for business purposes, the owner is allowed depreciation on the cost of acquisition or construction as also on the cost of addition and alteration. Depreciation allowance is nothing but allowance of the expenditure as a whole spread over a number of years. But the case of a tenant is different. If he incurs an expenditure on a rented building for its renovation or alteration, he does not acquire any capital asset because the building does not belong to him. Ordinarily, such an expenditure will be of a revenue nature. To hold otherwise would amount to denying him the benefit of deduction of the expenditure at all because he will not be entitled to any depreciation allowance.
9. Clearly, the assessee has not acquired an asset by incurring an expenditure on the rented shop. The next question is as to whether he has acquired a benefit of an enduring nature. The word "enduring" means "enduring in the way that fixed capital endures" and it does not connote a benefit that endures in the sense that for a good number of years it relieves the assessee of a revenue payment. See Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, [1955] 27 ITR 34, 46 (SC).
10. In the instant case the expenditure incurred might have relieved the assessee of a recurring expenditure for a good number of years. But that by itself does not render the expenditure as being of a capital nature. It still retains its quality of revenue expenditure. The finding in the instant case is not that the assessee has made any addition to the shop. The finding on the other hand is that the assessee might have made some structural changes inside the shop. In my opinion such structural changes also do not create a capital asset or bring into existence an advantage of enduring nature. The assessee must have made structural changes to make the shop more useful for purposes of its business. There is no finding that the lease in favour of the assessee was a perpetual lease so that the advantage acquired by him by structural changes could be said to be of enduring nature.
11. A large number of cases have been cited, but in my opinion none of them is to the point. The case which is nearest to the case of the assessee is that of Lakshmiji Sugar Mills Co. P. Ltd. v. Commissioner of Income-tax, [1971] 82 ITR 376 (SC).
12. There the assessee engaged in the business of manufacture and sale of sugar paid to the Cane Development Council certain amounts by way of contribution for the construction and development of roads between the various sugarcane producing centres and sugar factories of the assessee. This expenditure was incurred under a statutory obligation for the development of roads which were originally the property of the Government and remained so even after the improvement had been done. There was no finding that the roads were to be altogether newly made or that the assessee would get an enduring benefit from those roads. The Supreme Court held that the expenditure was not of a capital nature and had to be allowed as an admissible deduction in computing the profits of the assessee's business. The expenditure was incurred for the purpose of facilitating the running of its motor vehicles and other means employed for transportation of sugarcane to its factories and was, therefore, incurred for running the business or working it with a view to producing profits without the assessee gaining any advantage of an enduring benefit to itself. Applying the ratio of this case to the facts of the instant case, if can safely be held that the expenditure incurred on the structural changes made in the shop did not bring into existence any capital asset for the assessee or any benefit of enduring nature. The expenditure was incurred for the purpose of facilitating the carrying on of its business and must therefore be held to be of a revenue nature.
13. We, accordingly, answer the question by saying that the sums of Rs. 10,859, Rs. 9,865 and Rs. 1,000 were admissible allowance not under Section 30(a)(i) but under Section 37 of the Act.
14. The assessee is entitled to the costs which we assess at Rs. 200.