Chadha, J.:— The question of law formulated for the opinion of this court in this reference under s. 256(1) of the I.T Act, 1961 (for short called “the Act”), is:

“Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in disallowing the sum of Rs. 30,000 or any lesser sum on the ground of its being capital expenditure?”

2. The case relates to the assessment year 1965-66 for which the accounting period is the year ending March 31, 1965. The assessee is a private limited company engaged in the business of dealing as agents for sale of Tata Mercedes Trucks in Western U.P It has also hire-purchase business. It has no premises of its own. It had taken on lease for its business the premises at 46, Janpath, New Delhi, about 25 years back. The assessee is now paying a monthly rent of Rs. 340.25 and the total area occupied is 5,405 sq. ft. The assessee felt that in the interest of its business certain repairs had to be carried out, and as the need for such repairs had accumulated for a long time, the assessee spent a sum of Rs. 47,186 for carrying out necessary repairs. Out of this the assessee capitalised a sum of Rs. 9,399 and claimed the balance of Rs. 37,787 as revenue expenditure. The break-up or the details of the expenditure are these:

Rs. P. (i) Sanitary fittings 4,25761 (ii) Designing & supervision 75000 (iii) Layout drawings & sketches 300.00 (iv) Consultation fee for structural work 4,00000 (v) Flooring 10,99343 (vi) Cement 63579 (vii) Painting 79106 (viii) Wood work 5,417.31 (ix) Masonary work 3,513.82 (x) Electrical fittings 6,933.92 Miscellaneous 19466 37,787.59

3. At the time of framing the assessment, the ITO expressed the view that apart from construction expenses payments have been made for designing and supervision, layout drawings and sketches and consultation fee for structural work. The ITO concluded that the renovation consisted of additional and modified construction aimed to have long-term advantages and was not of such a nature as could be called current repairs, which would cover only expenses incurred to keep the existing construction in shape. Estimating a sum of Rs. 7,788 on last year's basis, as one spent for current repairs, the ITO added Rs. 30,000. On appeal, the AAC expressed the view that the assessee did not, by incurring this expenditure, bring into existence any new assets nor did the assessee secure any enduring benefit. It was explained before the AAC that no new additions were made, rather nothing was possible and the flat was only redesigned to suit the increased office need and, of course, better fittings and better material was used. The AAC concluded that the assessee by replacing the fittings did not incur any capital expenditure. He, therefore, reversed the finding of the ITO and allowed the entire expenditure as revenue expenditure.

4. The Income-tax Appellate Tribunal, on further appeal at the instance of the ITO, set aside the order of the AAC and restored that of the ITO. The Tribunal held that it could not be said that the repairs were small but a complete change of the structure had been brought about. The amount spent on marble flooring had definitely brought into existence an asset of enduring benefit. Similarly the amount spent on wood work was too high to be called revenue expenditure and that it could not be said to be a current repair or replacement. The conclusion drawn was that, having regard to the circumstances, the Tribunal was unable to agree with the AAC that a sum of Rs. 30,000 was in the nature of revenue expenditure and held that it was a capital expenditure.

5. Section 30 of the Act grants an allowance in respect of the amount expended by the assessee on repairs to the premises. It provides that 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 is allowed as a deduction. The fact found by the Tribunal is that the assessee had taken on lease the premises at 46, Janpath, New Delhi, and has been occupying it for over 25 years paying now a rent of Rs. 340.25 per month. There is no clear cut finding that the assessee had undertaken to bear the cost of the repairs to the premises but such a finding is clearly implied in the orders of the Income-tax Authorities. In the order of the ITO, there is a heading called “Building Repairs”. It is noticed that the total expenditure under this heading had increased from Rs. 7,035 of last year to Rs. 37,788. If the assessee had not undertaken the cost of the repairs to the premises under the lease, then the ITO would not have allowed the expenditure of Rs. 7,035 in the last year and Rs. 7,788 in the assessment year 1965-66. The AAC as well as the Tribunal proceeded on the basis that the assessee had undertaken to bear the cost of the repairs to the premises. It is also found as a fact that the assessee is engaged in the business of hire purchase of vehicles as well as dealing as agents for sale of Tata Mercedes Trucks in Western U.P and the premises are located on the first floor of the building. The further fact found is that the renovation consisted of converting a large number of small rooms into one big hall more suited for office purposes. The AAC also records that the flat was only re-designed to suit the increased office need and of course better fittings and better material was used.

6. The Tribunal after considering the nature of the work executed by the assessee, however, came to the conclusion that the amount spent could not be said to be a current repair and that the expenditure had certainly secured to the assessee an advantage of a very enduring benefit and is, therefore, a capital expenditure. This approach of the Tribunal, in our opinion, is erroneous in law. The question of the repairs has to be considered in the larger context of business necessity or of expediency. If the expenditure incurred by the assessee is so related to the carrying on or to the conduct of the business that it may be regarded as an integral part of the profit earning process, then it is not for purposes of securing to the assessee a capital asset. The possession of the premises in the shape of a big hall by converting a large number of small rooms into it makes it more suitable for office purposes. It is a condition of carrying on business more profitably and efficiently by the assessee. In such a case the expenditure can be regarded as a revenue expenditure. The expenditure on the repairs of the building, which ultimately belongs to the owners and not to the assessee, cannot also be said to be in the nature of a capital expenditure. The structural changes made by the assessee and the conversion of small rooms into one big hall cannot be in the nature of creation of a capital asset.

7. The sole basis of the decision of the Tribunal is that the repairs represent capital expenditure because it gives a long-term advantage resulting in providing an enduring benefit to the assessee. As noticed by their Lordships of the Supreme Court in Empire Jute Co. Ltd. v. Commissioner Of Income Tax , [1980] 124 ITR 1, various tests for drawing a distinction between a capital expenditure and revenue expenditure have been evolved but no test is paramount or conclusive. There is no ever-embracing formula which can provide a ready solution to the problem; no touchstone has been devised. Every case has to be decided on its own basis, keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. It was held (headnote):

“There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case.”

8. Applying these tests to the present case, we, are of the opinion that the assessee has obtained an advantage in a commercial sense by redesigning the premises and providing better fittings, better material and marble flooring. The advantage obtained by the assessee is for the purposes of the business of the assessee and not for the acquisition of a capital asset. There is no doubt that an expenditure of Rs. 4,000 as consultation fee for structural work was incurred, but it was incurred by the assessee in view of the structural changes being made in the tenancy premises. The smaller rooms were converted into one big hall more suited for office purposesnd that would have necessarily involved removal of certain walls. The structural engineer was required to consider the safety of the whole building in which the tenancy premises are only a part at the time of the removal of the walls or for supporting the roof by additional pillars. The expenditure is not such which cannot be attributed to the execution of the work in the tenancy premises. By incurring Rs. 10,993.43 for relaying the marble flooring, the assessee has got a benefit but that benefit was for attracting more customers and for facility in the trading operations of the assessee. Similar would be the case to the amount of Rs. 5,417.31 spent on woodwork, Rs. 6,933.92 spent on electrical fittings and Rs. 4,257.61 on sanitary fittings. We assume that the capital asset includes a leasehold right in the premises but the expenditure incurred constituted revenue expenditure as an old asset has been remodelled for commercial expediency. It does not assume the character of capital expenditure as the buildings do not belong to the assessee.

9. In Girdhari Dass and Sons v. CIT, [1976] 105 ITR 339 (All), a similar question arose before the Allahabad High Court. It was held that expenditure incurred by an assessee on renovating, furnishing or remodelling of a business premises can be allowed as a deduction if the expenditure is not of a capital nature. When an owner incurs expenditure on additions or alterations in a building which enhances its value, the expenditure can be of a capital nature. But, if a tenant 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, and that 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.

10. The counsel for the Department vehemently contends that the word “repair” used in s. 30 of the Act is required to be given its true meaning. According to him “repair” means bringing the premises to its original shape which had deteriorated because of wear and tear or damage. Repair would mean the restoration of the premises to its original condition and it would not by any stretch of imagination apply to a case where there have been structural additions or alterations and conversion of smaller rooms into one big hall. Reliance is placed on Humayun Properties Ltd. v. CIT, [1962] 44 ITR 73 (Cal), wherein it was held that the words “repair” and “renew” are not words of clear contrast; for, repair always involves renewal and repair may be restoration by renewal or replacement of subsidiary part of a whole and where renewal, as distinguished from repair, is said to be reconstruction of the entirety, meaning by the word “entirety” not necessarily the whole but substantially the whole subject-matter. These observations were made by the Calcutta High Court at the time of construing the provisions of s. 10(2)(v) of the Indian I.T Act, 1922. An interpretation was being given to the statute using the term “current repairs” made by a person other than a tenant. It is in those circumstances that the observations were made that “current repairs” includes repairs for ordinary wear and tear, and those which were needed for the maintenance of the building. In our opinion, the Legislature has used different language in the provisions of s. 30(a)(i) and 30(a)(ii). A tenant is entitled to the deduction of the amount spent on account of the cost of the repairs to the premises when he has undertaken to bear the cost of the repairs. If the amount is spent by the assessee otherwise than as a tenant, the amount paid by him on account of only “current repairs” is allowable. The latter provision applies to the assessee occupying the premises otherwise than as a tenant, as an owner or mortgagee in possession, and in those cases the deduction is restricted in respect of the “current repairs” to the premises. So far as a tenant is concerned, it is the “repairs” to the premises and if the assessee had undertaken to bear the cost of the repairs to the premises, then those repairs may be even in the nature of a capital expenditure. Such an expenditure incurred by the assessee if it is in relation to the commercial activity would be in the nature of revenue expenditure.

11. Counsel for the Revenue has also relied on Commissioner Of Income-Tax… v. Jagat Cinema…), [1971] 81 ITR 488 (Delhi). In that case, the amount was spent towards reconstruction of the lintel and restoration of the stage and the screen of a cinema in the tenancy of the assessee. It was held that so much of the amount spent on the reconstruction of the lintel and restoration of the stage and the screen to the state in which they were before the collapse could legitimately be held to have been incurred on repairs. The question arose about the balance of the amount for widening the screen and the stage. On the facts in that case, it was found that there was nothing to show that the assessee was entitled to remain in possession of the cinema hall on the expiry of the period of the lease, though the expenditure was incurred in the last year of the lease and that it was not also shown that the lessee was entitled to any compensation from the lessor for the amount spent by the assessee in the widening of the stage and the screen. Even then it was held that as the expenditure made for the widening of the screen did not bring into existence to the assessee the advantage of an enduring benefit, it could not be deemed to be a capital expenditure. We are unable to see how this ratio helps the case of the Revenue.

12. During the hearing, the counsel for the assessee invited our attention to CIT v. Kalyanji Mavji & Co., [1980] 122 ITR 49 (SC), CIT v. Rama Krishna Steel Rolling Mills, [1974] 95 ITR 97 (Delhi), Keshav Mills Co. Ltd. v. CIT, [1965] 56 ITR 365 (SC), CIT v. S. Zoraster and Co., [1982] 133 ITR 559 (Raj) and the counsel for the Revenue invited our attention to Lakshmiji Sugar Mills Co. P. Ltd. v. CIT, [1971] 82 ITR 376 (SC) and AM. CIT v. Trikamji Punia & Sons, [1977] 106 ITR 597 (AP) [FB] to refute the arguments of the opposing counsel. We are not making any reference to the cases cited at the Bar. We are not called upon in this case and it is also unnecessary because of the view we have taken and, therefore, we do not wish to express our opinion whether or not the expenditure has been made in the course of the ordinary commercial activity of the assessee allowable as business expenditure under s. 10(2)(xv) of the 1922 Act or s. 37 of the Act. The finding of the Tribunal is:

“It is not shown that incurring of this expenditure was necessary for the purpose of carrying on the business of the assessee.”

13. For the above reasons, we answer the question in the negative, i.e, in favour of the assessee, and against the Revenue. We make no order as to costs.