COMMISSIONER OF INCOME-TAX, WEST BENGAL-II, CALCUTTA versus KALYANJI MAVJI & COMPANY

Citation: [1980] 2 S.C.R. 758 · Decided: 14-01-1980 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Dismissed

Judgment (excerpt)

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758 
COMMISSIONER OF INCOME-TAX, WEST BENGAL-IT, 
CALCUTTA 
v. 
KALYANJI MAVJI & COMPANY 
January 14,. 1980 
[N. L. UNTWALIA AND R. S. PATHAK, JJ.] 
Indian Income 1ax Act 1922 (11 of 1922), Ss. 10(2)(v) & 10(2)(xv)-
Assessee d1Jing business in coal-Working various collieries--One colliery requi~ 
sitioned for n1ilitary use-Later cferequisitioned-Expenditure incurrred far 
re~ 
suniing operation of Colliery-Whether capital or revenue expenditur~. 
The respondent~asses.&ee carried on business in coal as the owner of various 
collieries. One of the collieries, was' occupied by the niilitary from 1942 until 
it was derequisitioned in 1955. During that per)od the assessee did not work 
the said colliery : M.though the business 
in coal and working 
of the other 
collieries were carried on. While the colliery remained under military occupation 
the assessee incurred expenditure in respect of the colliery on account of payment 
of surlaco rent, minimum royalty and; sala•ry for the watch and ward staff, which 
expenditure was claimed and allo\ved as business expenditure\ of the assessee. 
After the colliery was handed over to the 
assessce 
upon dorequisiticn the 
assessee incurred an expenditure of about Rs. 1.6 lakhs in renovating the build~ 
ing, reconditioning tha machinery and. clearing the land of all debris accumulated 
over a number of years. 
In the assessment proceedings for the assessment year 1959-60 th~ a8Se,s.iee 
claimed deduction of the aforesaid amount under section 10(2) (xv) 
of the 
Indian Income Tax Act. 
The deduction was disallowed by the Income! Tax 
Officer on the ground that the expenditure was capital in nature~ 
The appeals by the assesseei to the Appellate AssistMlt' Comn1issioner and the 
Income Tax Appellate Tribunal were dismissed. 
In the reference to the 1-Iigh Court· at the instance of the ·assessee 'the High 
Court observed that the business of the assessee had to be considered as a 
wholei and not on the basis1 of its different sources of supply or units of produc-
tion, and held thM: on the facts admitted and found it could not be said that 
any fresh asset had been acquired by the assessee by spending Rs. 1.6 lakhs 
and that the expenditure: was incurred by the assessee for the purpose of carrying 
on an existing concern. The expenditure was, therefore, in the nature of a 
·revenue expenditure. 
In the appeal by the Revenue to this Court, it wao contended : (a) where 
repairs are effected to buildings and machinery a deduction under section 10(2) 
is permissible only in respect of "current r~pairsl' and, repairs which are not 
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1current repa-irs" are not intended to be the subject of relief, (b) the repairs 
made by the assessee cannot be described as "current repairs", and (c) if section 
10(2) (v) is the relevant clause, being the specific provision in respect of expendi-
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C.!.T. V. KALYANJI MAVJI 
759 
ture on "current repairs" to buildings and machinery, there is nu justifiration 
for relying on section 10(2)(xv) a residuary clause. 
Dismisoing the appeal, 
HEI.D: I. The High Court Wa.9 right in holding that the expenditure was 
eot of a carital nature. [764 EJ 
2. The expenditure of Rs. 1.6 Jak.hs was expenditure laid out. as part of the 
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process of profit earning. The nature of tho expenditurr. was clearly revenue 
in characfer. (764 DJ 
3. There can be little doubt that the expenditure incurred was incidental to 
the business of the assessee. It was involved in renovating the buildings, recondi· 
tioning the m&.<::hinefy and clearing the debris~ fron1 the land, for the purpose 
of resuming the operation of the co1liery. The expenditure \Vas laid out wholly 
for the pUrpQSe of the business. [763 DJ 
4. There must be stroug evidence that in, the case of repairs which arc not 
"current repairs'' the Legisl<c1ture intended a depc:·rturc from the principle that 
an expenditure iaid out or expended wholJy and exclusively for the purposes of 
the business, and which expenditure is not capital in n<:.•ture, should not be 
allo'ved in computing the incon1e from business. 
There is nothing in the language 
of section 10(2)(v) \vhich declares or necessarily implies that repairs, other than, 
"current repairs", will not qualify for the benefit of that principle. 
On accepted 
commercial practice anJ trading principles an item of business expenditure must 
be deducted in order to arrive at the true figure of profits and gains for ta·x 
purposes. [76

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