SETHURAMAN J.

In this reference under s. 256(1) of the I.T. Act, 1961, the following three questions have been referred to this court

"(i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in declining to allow the entire expenses incurred by the assessee on the three rented buildings at (a) 3/4, Godown Street, Madras; (b) 181, Mount Road, Madras, and (c) 86, Wallajah Road, Madras, as a revenue expenditure ?

(ii) Whether, on the facts and in the circumstances of the case, and having regard to the provisions of section 40(c)(ii), the Appellate Tribunal was right in holding that the entire claim of depreciation on the flat, furniture and air-conditioning machinery in Carmichael House should be allowed ?

(iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 2, 350 paid by the assessee-company to the Registrar of Companies as fees for increasing the capital of the company should be allowed as deduction under section 37(1) ?" *

We shall deal with each of these questions separately

The assessee took three buildings on lease, viz., 3/4, Godown Street, Madras, 181, Mount Road, Madras and 86, Wallajah Road, Madras it effected improvements to these three buildings. This expenditure was disallowed on the ground that it represented capital expenditure, and depreciation was not allowed on the ground that the assessee was not the owner of these buildings. The AAC, on appeal, found that a sum of Rs. 51, 070 was spent on the construction of a wooden wall in the centre of the hall with show windows on both the sides with fittings; construction of wooden ladder for going to a mazzanine floor; wall panelling of the shop to prevent moisture; and construction of two cabins in the mazzanine floor for accounts section and one big show window near the entrance of the shop. This expenditure on the Mount Road property was considered to be a capital expenditure by the AAC also. As regards the Godown Street property, the assessee had spent a sum of Rs. 26, 362 on cost of wood, labour charges, etc., for making four cabins on the first floor for accommodating the accounts section. The expenditure was held to be in the nature of capital expenditure. There was similar confirmation of disallowance in respect of improvements to the Wallajah Road property. The assessee took the matter on appeal to the Tribunal. The Tribunal held that the assessee had incurred the expenditure only as and by way of repairs to the rented buildings, Since the assessee was not the owner of the property and the tenancy could be terminated even before the expiry of the full term, it was held that the expenditure could come only under the head "revenue expenditure" and allowed it as a deduction. It is this part of the order of the Tribunal that has given rise to the first question referred to alreadyThe Tribunal has proceeded on the basis that the assessee is not the owner of these buildings and that any improvement or repairs effected to these properties would not be of enduring benefit to the assessee so that it could be capital expenditure in its hands. The fact that the assessee is not the owner of these buildings is not in dispute. There is also nothing to show that there is any long lease in respect of these properties so that the assessee would have the benefit of this expenditure over a reasonable length of time. There can be no enduring benefit on the facts here. The expenses were incurred for carrying on the business. In these circumstances, on the peculiar facts here, we consider that the assessee is eligible for deduction of the amounts claimed in respect of the repairs and improvements to these properties. The first question therefore, is answered in the affirmative and in favour of the assessee

The second question relates to the disallowance of depreciation in respect of the flat, furniture, etc., in Carmichael House being partly used by L. K. Chel