TMI Blog1970 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... hav Lal, (3) Ram Dayal and (4) Nathu Ram in equal shares. Sadhu Ram and Madhav Lal, two out of four owners of the factory, took on lease half share in the factory from Ram Dayal and Nathu Ram, the other two co-owners, on an annual rent of Rs. 3,000. This was done by these two partners with a view to lease out the whole of the factory to the assessee-firm which in fact they did. The assessee-firm came into existence on the 9th November, 1957, and consists of four partners, namely, (1) Sadhu Ram, (2) Madhav Lal, (3) Sohan Lal, son of Nathu Ram, and (4) Mangal Sain, brother of Sadhu Ram. Thus it would be seen that Ram Dayal and Nathu Ram are not the partners of the assessee-firm, although Sohan Lal, son of Nathu Ram, is the partner of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 11, 1960. The assessee-firm claimed the entire expenses incurred after the repairs of the factory as a permissible deduction. The Income-tax Officer rejected the assessee's claim for repairs to the building on the ground that the expense was not incurred actually for repairs but was incurred for the construction of the building and was as such of a capital nature. He also rejected the assessee's claim regarding the expenses incurred on machinery, on the same ground. The appeal of the assessee-firm before the Appellate Assistant Commissioner was dismissed holding that both the expenses were of a capital nature. The assessee-firm's contention before the Tribunal that both the expenses were permissible deductions under sections 10(2)(ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exigency in hand. It clearly covers the case of the assessee, who is a tenant of the premises. In the present case the assessee firm is a tenant of the premises who had undertaken to incur all expenses of all kinds, that is, expenses of repairs to the machinery breakages of its parts, accessories and machinery of all kinds and electricity charges and rent. Further, the assessee-firm had undertaken to deliver possession of the building, machinery and complete factory in the working order to the original owners. From the language of section 10(2)(v), it is clear that where in the case of an owner of premises, he can claim exemption only in respect of current repairs, but in the case of a lessee, whose case is covered by section 10(2)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a capital expenditure is untenable for the simple reason that the assessee-firm, when it dissolves or when the lease expires, has to give the possession of the factory including the building, machinery and other accessories, to the real owners of the factory. The machinery or any part of the factory cannot be retained by them as their own capital. Thus the expenditure on the repair of the machinery, which machinery ultimately belongs to the owners and not to the assessee, cannot be said to be in the nature of capital expenditure, nor can the same be said to be personal expenditure of the assessee under the terms of the lease. The assessee-firm was bound to get the machinery repaired before it could deliver the possession of the same to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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