TMI Blog1968 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... premises. In its assessment it claimed a deduction in respect of these two items. The first claim was disallowed by the Income-tax Officer on the ground that the tax paid did not fall under section 10(2)(ix) and could not be allowed also in view of the specific provision of section 10(4). As to the second item, he held that what could be allowed out of the sum claimed was what was spent for petty repairs under section 10(2)(v). According to him, a sum of Rs. 8,000 could be estimated as spent for petty repairs and that amount alone could be allowed as a deduction. He, accordingly, allowed a sum of Rs. 8,000 and disallowed the rest. The decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner on both the points. In a further appeal to the Income-tax Appellate Tribunal, it agreed with the view taken by the departmental authorities as far as the first claim was concerned. As to the second claim it held that the assessee would be entitled to a further amount of Rs. 12,000 and accordingly, allowed that amount in addition to what was allowed by the departmental authorities. The assessee made an application under section 66(1) of the Act for a refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------------------------------- A. Less than one 30 B. One and more than one, but less than two 50 C. Two and more than two, but less than three 100 D. Three and more than three, but less than five 150 E. Five and more than five, but less than ten 250 F. Ten and more than ten, but less than twenty 500 G. Twenty and more then twenty 1,000 --------------------------------------------------------------------------------------------------------------------------------------------------- Provided that any company the head or a principal office of which is not in the city and which shows that its gross income received in or from the city in the year immediately preceding the year of taxation--- (a) has not exceeded Rs. 5,000 ... shall pay only 25 rupees per half-year ; (b) has exceeded Rs. 5,000 but has not exceeded Rs. 10,000 ... shall pay only 50 rupees per half-year ; (c) has exceeded Rs. 10,000 but has not exceeded Rs. 20,000 ... shall pay only 100 rupees per half-year ; and (d) has exceeded Rs. 20,000 ... shall pay per half-year 100 rupees together with a sum calculated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits and gains of business and, therefore, could not be permissible as a deduction either under section 10(2)(ix) or under section 10(2)(xv). There is no difficulty in holding that it will not be permissible to allow it as a deduction under section 10(2)(ix), because it is not a sum paid on account of the land revenue, local rate, or municipal tax in respect of the premises used for the purpose of the company's business. As to whether it will be permissible under section 10(2)(xv) will depend upon whether it could be regarded as an expenditure, which is not of a capital nature and laid out or expeneded wholly and exclusively for the purpose of the business. It appears from the orders of the departmental authorities and the Tribunal that the sum paid could be regarded as a revenue expenditure incurred wholly and exclusively for the assessee's business was not disputed. The reason why it was not allowed as an expenditure under section 10(2)(xv) was that it was expressly excluded by the provisions contained in section 10(4). According to the departmental authorities and the Tribunal, the tax was levied at a proportion of or otherwise on the basis of the profits or gains made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me- tax v. Nedungadi Bank Ltd., which was a case of a tax on companies levied under the provisions of section 92 of the Madras District Municipalities Act (V of 1920), corresponding to section 110 of the Madras City Municipal Corporation Act, 1919, under which the tax in the case before us has been levied, the Madras High Court had to consider whether the payment of the said tax could be allowed under the provisions of section 10(2)(ix) of the Act as it then stood. It may be pointed out that the provisions of section 10(2)(ix) at that time were the same as the provisions of section 10(2)(xv) at present. Although a copy of the Madras District Municipalities Act of 1920 as it then stood is not before us, it appears from the judgment that, according to section 92 of the District Municipalities Act, under notification of the chairman, every company transacting business within the municipality for profit was required to pay half-yearly tax known as " tax on companies " on the scale shown in Schedule IV, provided it had transacted business for more than 60 days in the half year. Section 16 of Schedule IV laid down the method of assessment, from which it was clear that the assessment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, that the second part of Mr. Kolah's submission that the paid in the present case is not levied on the profits and gains of the business or assessed at a proportion of or otherwise on the basis of the profits or gains is also well-founded and supported by authorities. In Commissioner of Income-tax v. Gurupada Dutta, the Privy Council had to consider whether the amount paid in respect of a rate imposed under the provisions of the Bengal Village Self-Government Act, 1919, on a person occupying a building within the Union and using the same for the purpose of business, was an allowable deduction in the computation of the profits of the business under section 10 of the Indian Income-tax Act. Under section 37 of the Bengal Village Self-Government Act, 1919, the Union Board was empowered to impose yearly rate on persons who were owners or occupiers of buildings. Under section 38, the rate to be imposed by the Union Board under section 37 was to be an assessment according to the circumstances within the Union and property within the Union, if any, of the persons liable to pay the same ; provided that the amount assessed upon any person in any one year was not than eighty-four rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Mills Ltd. v. Commissioner of Income-tax. In that case an amount of Rs. 2,000 paid as District Board tax was claimed by the assessee as a deduction permissible under section 10(2)(xv). It was contended that the payment was not an expenditure coming within the provisions of section 10(2)(xv), and, even if it was, it was excluded by the provisions of section 10(4). It was held that the business running the sugar factory was a trade and consequently, in order to carry on that trade, the assessee had to pay the taxes which became payable under the District Boards Act. This was, therefore, an amount which was expended for the purpose of enabling the assessee to carry on business of the sugar factory within the jurisdiction of the District Board of Meerut and such an expenditure was an expenditure laid out or expended wholly and exclusively for the purpose of the business. On the second question raised it was held that the income on which tax was payable under the District Boards Act was income arrived at by pure guesswork without applying any principles for determining that estimated income. Such income cannot be said to be at all in the nature of profits and gains of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, even if Re. 1 is earned by the company, it will still be liable to pay the minimum tax, which is Rs. 25, because the provision is that for all incomes which do not exceed Rs. 5,000, a certain minimum payment has to be made. The imposition of the tax, therefore, is on the basis of the company being allowed to carry on business and not on profits having been earned by the company, although the quantum of the tax will be determined on the basis of the income earned. In our opinion, therefore, the assessee's claim for deduction of the sum of Rs. 1,100 which it has paid to the Madras City Municipal Corporation as the companies tax must be upheld. Coming now to the second question, the assessee's case was that in the year of account, it has paid a sum of Rs. 40,788.75 nP. for repairs to the rented house in which its Calcutta office was located. It had supplied a list giving the particulars of the expenditure and the said particulars show that the amount was paid on repairs, renovations and replacements. The Income-tax Officer consider the claim of the assessee for deduction solely under section 10(2)(ii), which permitted deduction of the amount spent on repairs, where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he top flat of the said eastern block. According to the Tribunal, therefore, the assessee was entitled to be allowed the expenses which it had incurred not only for the petty repairs but also for keeping the interior of the demised premises in good and tenantable condition. Having perused the details supplied by the assessee, it held that a further amount of Rs. 12,000, would be permissible to the assessee by way of deduction. It may be pointed out that just as the Income-tax Officer had fixed the amount of Rs. 8,000 for petty repairs without actually determining which items from the list supplied by the assessee qualified as petty repairs, the Tribunal also did not specify which of the other items it considered as falling under the obligation undertaken by the assessee to keep the interior of the demised premises in good and tenantable condition. The alternative claim of the assessee that the rest of expenses, if they did not fall within the category of repairs, would be permissible as expenses, wholly and exclusively laid out for the purpose of the business or trade of the assessee, does not appear to have been considered by the Tribunal. Mr. Kolah's grievances are : firstly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure expended in the course of its business. The only question was whether the expenditure was allowable under section 10(2)(xv) or 10(2)(ii). The claim of the assessee, therefore, under section 10(2)(xv) had to be considered but neither the departmental authorities nor the Tribunal have considered the same. There is no doubt whatsoever that a part of the assessee's claim is alllowable under section 10(2)(ii) and under the Tribunal's order the said claim has been allowed to the extent of Rs. 20,000. If the Tribunal's order could have supplied the information as to the particular items in respect of which the said claim has been allowed, it would have been easier to consider as to whether any other items except those which have been allowed by the Tribunal were capable of falling under section 10(2)(ii). Unfortunately, however, the Tribunal's order does not supply the said information. Counsel on either side have, however, agreed that all the items given in the statement excepting the item of Rs. 15,209 pertaining to the alleged repairs to the second floor and the item relating to the repairs to the club-room could go under section 10(2)(ii) and could be regarded as having been allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt kind, it may not be a matter of repairs but an item of renovation or replacement. On the other hand, if the existing plaster had come off and was crumbling and had to be taken off and replaced by new plaster, it would be an item of repairs. Similarly, the painting of walls and ceiling including the verandah, which is the next part in this item, would again be a matter of ordinary repairs or of renovation. Washing and painting of doors, windows may appear to be a matter of ordinary repairs and washing and polishing of the red floor may constitute an item falling under section 10(2)(ii) because, under clause (4) of the lease, the assessee had undertaken to keep in good and tenantable condition the red patent stone flooring on portions of the top flat of the eastern block. If the polishing is made of this red floor, that would be an item undertaken to be executed by the assessee under its lease and would qualify for deduction under section 10(2)(ii). As to the repairs of enclosures with Tenesta Board and C. P. Teakwood, that prima facie appears to be an item of renovation. It will thus be seen that the description given of this item is not by itself sufficient to come to the conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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