TMI Blog1999 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to assessment year 1989-90, the assessee had taken from M/s. Moola Mal and Sons (HUF) a premises at D-2, NDSE-II, New Delhi, on monthly rent of Rs. 21,000 with a deposit of Rs. 5 lakhs, w.e.f. 9-8-1988, for starting a new shop. In assessment year 1989-90, deduction for rent for a period of 8 months was claimed at Rs. 1,68,000. The Assessing Officer found that during the relevant period, the premises had not been "put to use" for the existing business or its expansion. He, therefore, disallowed the claim for deduction of Rs. 1,68,000 on account of rent. In the previous years relevant to assessment years 1990-91 1991-92 also, the premises was admittedly not put to use and, therefore, following the order for the assessment year 1989-90, claim for rent of Rs. 2,40,600 and Rs. 2,52,000 in those years was disallowed. 3.2 In appeals before the CIT(A), the submission of the assessee was that the premises were taken for expansion of the existing business and not for setting up of a new business. It was contended that the premises required extensive renovation and furnishing, including the installation of central air-conditioning, lift, fire fighting equipment, electric and water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that year :--- "The facts of the case before me are that the premises was taken on rent on9-8-1988. The premises after being taken on rent required extensive renovation and furnishing including the installation of central air-conditioning, lift and appropriate electric supply and distribution system, fire fighting. equipment etc. for being used as a modern high class shop as admitted by the assessee. The opening ceremony of this show-room took place on7-4-1992, i.e. after 44 months of its being taken on rent. Thus, examining the facts of the case in the light of the ratio of the aforesaid decisions, I have no hesitation in coming to the conclusion that the appellant has no claim for deduction of rent." 3.4 The order for the assessment year 1989-90 was followed by the Ld. CIT(A) in assessment year 1990-91. In this year, the assessee had further placed reliance on the Gujarat High Court decision in the case of CIT v. R. Tolat Co. [1980] 126 ITR 551/[1981] 5 Taxman 56. The Ld. CIT(A) held that in view of the Apex Court decision in the case of Liquidators of Pursa Ltd. and M.P. High Court decision in Noshirwan Co. (P.) Ltd.'s case, followed by him in earlier year, it has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable under section 30 and/or under section 37(1) of the Act and, therefore, the Ld. CIT(A) has erred in law and on facts in upholding the action of the Assessing Officer. 4.3 The Ld. D.R. relied on the orders of the Ld. CIT(A). 5.1 We have given our utmost consideration to the facts and circumstances of the case and the rival submissions. There is no dispute about basic facts, which are already set out in para 3 above and hence those need not be repeated. 5.2 The short question for consideration is whether on the facts and in the circumstances of the case deduction for rent paid in the three years under consideration for the premises at D-2, NDSE-II, New Delhi, was allowable under section 30 of the I.T. Act and, if the answer is in negative, is it allowable under section 37(1) of the Income-tax Act, 1961. A plain reading of Section 30 would show that the expenses enumerated therein are allowable if the premises is "used for the purposes of the business or profession". These very words are used in Section 32 of the Income-tax Act, 1961, corresponding to part of Section 10(2) of the 1922 Act, and their purport and scope has been a subject matter of consideration in a large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, which is evident from the fact that initially itself the assessee had sought a loan of Rs. 75 lakhs from the Bank. Further, a cursory look at the papers placed by the assessee in the Paper Books reveals that after the execution of tenancy/sub-tenancy agreements on 9-8-1988 and sanction of loan of Rs. 75 lakhs on 7-12-1988, even till September, 1989, applications made to various authorities for approval of the construction plan and clearance of the project were under process, as conveyed by the assessee to the Bank vide its letter dated 30-9-1989, copy placed at page 8 of the Paper Book. Vide its letter dated1-11-1989, copy placed at page 11, the assessee had informed the Bank that they were "expecting clearance from the authorities within the next couple of months whereafter the construction work will start." Thereafter, vide its letter dated30-4-1990, copy placed at page 14, the assessee had informed the Bank that some more time will be required for clearance of project from the authorities. As per assessee's letter to the Bank dated22-1-1991, copy placed at page 16, the work was started in September, 1990. It had thus taken more than 2 years from the date of taking over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession, shall be allowed in computing the income chargeable under the head "Profits gains of business or profession". Then there arc provisions such as Sections 37(2)/(2B), (3 ) and (4) (before omission) laying down the circumstances in which certain deductions shall not be granted. In so far as allowance for rent of business premises is concerned, there is no specific prohibition in the relevant provisions. It is evident that Section 30 operates in a limited field where the premises are used for the purposes of business or profession and in that case deduction for rent, local rates or municipal taxes etc. can be granted. It would not cover a case where the premises are not used for the purposes of business but are incidental to the carrying on of the business. In that situation, the expenditure on that count would not be of the nature described in Section 30 and hence Section 37(1) would be applicable. In our considered opinion it will be stultifying Section 37(1) and its residuary nature if a construction is put on it to mean that, whenever an allowance fails under sections 30 to 36, that fact by itself would exclude entertainment of the claim under section 37(1). 6.3 The Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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