ORDER
PRADEEP PARIKH, A.M. :
By these two applications the Revenue seeks to refer the following four questions, stated to be of law, to the Honble Rajasthan High Court for its esteemed opinion. Since the two applications arise out of the common order of the Tribunal they are being disposed of by a consolidated order for the sake of convenience.
Asst. yr. 1988-89 :
(i) Whether, on the facts and in the circumstances of the case, the Honble Tribunal was right in holding in law that the expenditure of Rs. 35,207 incurred for the purchase of T. V. set for the staff was a revenue expenditure ?
(ii) Whether, on the facts and in the circumstances of the case, the Honble Tribunal was legally correct in holding that the expenses of Rs. 1 lakh incurred by the assessee to get extension of mining lease was a revenue expenditure ?
Asst. yr. 1989-90 :
(i) Whether, on the facts and in the circumstances of the case, the Honble Tribunal was right in law in holding that replacement of electric motor was a revenue expenditure ?
(ii) Whether, on the facts and in the circumstances of the case, the Honble Tribunal was legally correct in holding that the expenses incurred by the assessee to get extension of mining lease was revenue expenditure ?
2. The staff and workers of the assessee-company had framed a recreation club for their own use. The assessee purchased a T. V. set for Rs. 35,207 and gave it away to the club. The assessee claimed it as a revenue expenditure. The AO rejected this claim and treating the same as capital expenditure, allowed depreciation thereon. The CIT(A) confirmed the disallowance.
3. The Tribunal allowed the claim of the assessee on two grounds, one, as it was a routine staff welfare measure and, hence, a legitimate business expenditure, and two, because the ownership of the asset rested with the club and not the assessee. It was not proper to treat it as a capital expenditure as there was no creation of an asset for the assessee and hence it was wrong to allow depreciation also. Thus, the first question is not a referable question of law.
4. Even otherwise also, as per Boards instructions, where the tax effect involved is too small, no reference need be made to the High Court even if it is a question of law. Accordingly, we decline to refer the first question.
5. The second questions also pertains to the dispute as to whether the impugned expenditure was a revenue expenditure or a capital expenditure. During the year, the mining lease obtained by the assessee was getting over. In order to renew the lease, the assessee engaged the services of M/s Dynamic Consultants (P) Ltd. who provided necessary assistance to prepare the renewal application and attended to the matters pertaining to the renewal of lease. M/s Dynamic Consultants were paid consultancy fees of Rs. 1,00,000 for the services rendered. In the opinion of the AO, by renewing the lease, the assessee was acquiring benefit of an enduring nature and hence treated the same as capital expenditure, thereby rejecting the claim of the assessee that it was revenue expenditure. The CIT(A) also confirmed the same as capital expenditure relying on certain decisions.
6. When the matter came up before the Tribunal, on facts it distinguished the case law relied upon by the assessee. The Tribunal itself, relying on a catena of judicial pronouncements, held that the test of “enduring benefit” is not the ultimate test, solely on which the lower authorities relied upon while treating the impugned expenditure as capital expenditure. The main fact on which the Tribunal rested its decision was that the payment was to facilitate the extension of the lease which was already there but its term was expiring. Neither a capital asset was being acquired nor the lease was being acquired afresh. Hence, the Tribunal respectfully applied the principles laid down by the superior Courts on the facts of the case.
7. In our opinion, therefore, no referable question of law arises and, accordingly, the application No. RA 293/Jp/1995 for asst. yr. 1988-89 is dismissed.
8. The assessee replaced electric motors worth Rs. 82,534 in some of its machineries and claimed the same as expenses towards repairs and maintenance. The AO treated it as capital expenditure whereas the CIT(A) allowed the claim of the assessee as revenue expenditure. The Revenue relied on the decision of the jurisdictional High Court reported in Manoj Dyeing Co. vs. CIT (1995) 212 ITR 299 (Raj), wherein it was held that substantial replacement of equipment would entail capital expenditure. In the instant case, however, the Tribunal gave a finding of fact that replacement of electric motors did not amount to substantial replacement of equipment and accordingly upheld the order of the CIT(A). Thus, the decision being on a vital finding of fact that there was no substantial replacement of equipment, in our opinion, no referable question of law arises and reject the same.
9. The next question proposed for asst. yr. 1989-90 is also liable to be rejected as it stands on the same footing as the second question for asst. yr. 1988-89 discussed above. We, therefore, do not refer the same to the Honble High Court.
10. In the result, both the applications are dismissed.