JUDGMENT

The assessee has a sugar factory and oil mill business. In connection with its business the assessee owns buildings some of which are used as quarters for labourers. In the assessment year in question the assessee removed the old khaprails and seventeen quarters were re-roofed with concrete while thirty-four quarters were re-roofed with new khaprails. As regards re-roofing with concrete it was admitted that this was a capital expenditure and the assessee was not entitled to claim a deduction for it out of his income. With regard to the re-roofing of thirty-four quarters with new khaprails a point was raised that this was current repairs and was not capital expenditure. The questions referred to us the Tribunal is as follows :-

"whether in the circumstances of the case, the expenditure incurred in the replacement of the old roofs by using new khaprail in place of old ones is an item of capital expenditure or revenue expenditure u/s 10 (2)(xv) of the Income Tax Act ?"

Clause (xv) of the said Act is as follows :-

"Any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation."

For the buildings owned by the assessee depreciation is allowed by the Department in accordance with clause (vi) of Section 10(2) of the Indian Income Tax Act and the Tribunal appears to have made a mistake a referring to Section 10(2)(xv) instead of to Section 10(2)(v). Section 10(2)(v) is as follows :-

"In respect of current repairs of such buildings, machinery, plant or furniture, the amount paid on account thereof;"

Learned counsel has urged that during the war years the assessee was not able to carry on the annual repairs to the roof with the result that in the assessment year 1945-46 it became necessary to re-roof the thirty-four quarters and the repair must, therefore, be deemed to be current repairs of the buildings. Reliance is placed by learned counsel on the decision of their Lordships of the Judicial Committee on Rhodesia Railways Ltd. v. Income Tax Collector, Bechuanaland Protectorate. That was a case where the assessee was a railway company and it owned extensive railway lines, 394 miles being situate in the in the Bechuanaland Protectorate. Out of these 394 miles of track Protectorate 74 miles were the subject of treatment in the year in question, 33 1/2 miles having new sleepers, new rails and new fasteners. As regards the rest, the old rails were relaid but new sleepers were put in, steel sleepers for 38 1/2 miles and wooden sleepers for 2 miles. The question arose whether that was a capital expenditure, or a revenue expenditure, it being admitted that the repair to the track brought it back to its normal condition and the line was not capable of giving more service than the original line. Their Lordships held that the expenditure was not a capital expenditure and it is on this part of the decision that reliance is being placed and it is urged that the roofs of thirty four quarters only were changed by new roofs and not of all the quarters nor were the quarters rebuilt from the foundation. The basis of their Lordships decision in the case is given at page 232 where their Lordships said :-

"The expenditure here in question was incurred in consequence of the rails having been worn out in earning the income of previous years on which tax had been paid without deduction in respect of such wear and represented the cost of restoring them to state in which they could continue to earn income. It did not result in the creation of any new asset; it was incurred to maintain the appellants existing line in a state to earn revenue. The analogy of a wasting asset which appears to have affected the minds of the Special Court has really no application to such a case as the present. Nor do their Lordships agree that expenditure in order to form a permissible deduction must have been incurred in the production of the act