J.V. Gupta, J.
1. The facts giving rise to this reference are these : The assessee is a registered firm. The assessment relates to the year 1969-70, for which the accounting year ended on 31st March, 1969. The assessee purchased a cinema in 1958 for a sum of Rs. 1,62,000. At the time of its purchase, the cinema building was an old one. The assessee carried on exhibition business in this cinema building from year to year. By a letter dated 19/20th July, 1968, the Executive Engineer, Jind Provincial Division, Jind, after inspecting the cinema building informed the District Magistrate, Jind, that the ceiling was sagging at various places and some of the wooden members needed to be changed. This needed replacement or repairsimmediately. In view of the defects pointed out by the Executive Engineer, the assessee carried on some repairs. A sum of Rs. 24,000 was, inter alia, spent for the purpose of fixing a false ceiling. This amount was treated as capital expenditure by the ITO, but on an appeal by the assessee, the AAC held that the cost of repairs and replacement of false ceiling was of a revenue nature. He, therefore, accepted the assessee's contention and deleted the amount of Rs. 24,000 from the assessment. The revenue feeling aggrieved against this order, went up in appeal before the Tribunal, which dismissed the same with the following observations :
'The assessee carried out only urgent repairs to the ceiling and that too after the Executive Engineer's visit to their building on 15th July, 1968, If the assessee had not carried out the repairs to the ceiling and certain other repairs and replacement, there was a danger of the assessee's license not being renewed beyond 3Ist July, 1968. In my opinion, the assessee did not derive any benefit of an enduring nature and I, therefore, hold that the Appellate Assistant Commissioner was justified in allowing the amount of Rs. 24,000 as revenue expenditure.'
2. On the application of the revenue, the Tribunal has referred the following question to this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that Rs. 24,000 spent on cost of replacement of false ceiling was an expense of revenue nature ?'
3. On behalf of the revenue, it has been argued that the amount of Rs. 24,000 spent by the assessee on fixing the false ceiling, is by way of improvements of great magnitude carried out for giving an enduring advantage to the assessee, and, therefore, the expenditure being with the sole object of getting an enduring benefit for the business, must be deemed to be in the nature of a capital expenditure. In support of his contention, he relied upon Sri Rama Talkies v. C/r : 59ITR63(AP) .
4. On the other hand, the learned counsel for the assessee, contended that the assessee did not derive any benefit of enduring nature by fixing the false ceiling ; rather it was necessary because of the letter of the Executive Engineer, Jind. According to that letter, the false ceiling, which is an integral part of the cinema building, was sagging and needed immediate repairs. If the assessee had not carried out the repairs to the ceiling and certain other repairs and replacements, there was a danger of the assessee's license not being renewed beyond 31st July, 1968. He also relied upon Hylam Ltd. v. CIT : 87ITR310(AP) .
5. After hearing the learned counsel for the parties, we are of the opinion that it will be a question of fact to be decided in each case on the findings arrived at by the Tribunal. Certain tests have been laid down by theAndhra Pradesh High Court in Hylam's case : 87ITR310(AP) , in order to determine whether an expenditure incurred by the assessee in any year is or is not an expenditure of revenue nature. One of the tests laid down therein is, if the expenditure is for the initial outlay or for acquiring or bringing into existence an asset or advantage of an enduring benefit to the business that is being carried on, or for extention of the business that is going on, or for a substantial replacement of an existing business asset, it would be capital expenditure ; whereas if, on the other hand, the expenditure, although for the purpose of acquiring an asset or advantage, is for running of the business or for working out that asset with a view to produce profit, it would be revenue expenditure. We are inclined to agree with the tests laid down by the Andhra Pradesh High Court and keeping the same in view, on the facts and in the circumstances of the present case and on the findings arrived at by the Tribunal, as reproduced above, we are of the opinion that the Tribunal was right in holding that as the assessee did not derive any benefit of enduring nature, the amount of Rs. 24,000 spent on the cost of replacement of false ceiling was an expenditure of revenue nature.
6. For the reasons given above, the answer to the question is to be in the affirmative, i.e., in favour of the assessee and against the revenue. We answer accordingly. The revenue will pay the costs of this petition.