TMI Blog1981 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... le to get the same repaired. " During the assessment year 1970-71, the lessee carried out repairs in those premises worth Rs. 22,301 and claimed it as deduction from its taxable income, being an expenditure of revenue nature. The ITO holding that it was an expenditure incurred on repairs of roofs and overhauling of the premises, for which there was no agreement with the landlord, disallowed the claim of the assessee and charged it as a capital expenditure. On an appeal by the assessee, the AAC set aside the orders of the ITO and allowed the deduction holding that in spite of the absence of any written undertaking for the repairs by the assessee, it could undertake the expenses in this case. In his view, the case was covered by s. 30(a)(i) of the I.T. Act, hereinafter referred to as " the Act ". The AAC observed that, even otherwise, the case was covered by s. 37 of the Act as the expenses were undertaken wholly and exclusively for the purpose of the business. The Revenue went in appeal before the Income-tax Appellate Tribunal, hereinafter referred to as " the Tribunal ", which set aside the order of the AAC and restored that of the ITO holding that it was an expenditure of a capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this account that the Tribunal found against the assessee in the absence of proof, on its part, of any such agreement with the landlord. We do not feel that such an interpretation could be put on cl. (iv) of the lease deed extracted above, which imposed an obligation on the assessee in view of the statutory provisions governing leases under the Transfer of Property Act. Under s. 108(m) of the Transfer of Property Act, " the lessee is bound to keep, and on the termination of the lease to restore; the property in as good a condition as it was in at the time when he was put in possession ". In view of this statutory provision, the lessee (vide cl. (iv) of the agreement) bound himself to keep the building in a " good condition ". This " good condition " is to be seen in relevance to the purpose for which the lessee took the buildings on lease. White-washing is not the only step to keep the building in a good condition. Some other steps are also necessary, according to the condition of the building for its upkeep and maintenance in that condition. The building has to be kept in a worthy condition in which the business, for which it was taken, can be run. The lease commenced on the 1st o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. v. Balderston [1889] 2 TC 485 (C Exch), it was held : " This is not a case where repairs were effected for the purpose of restoring the property to its original condition. It is a case where there was a substantial improvement in the property and a material change was brought about in the property. The manual latrines were replaced by flush latrines and the tiled roofs were replaced by cement roofs. We are unable to hold that the alterations effected by the assessee were made merely to bring about the reinstatement of the property to its original condition." The other case relied upon on behalf of the Revenue is from this court and is Silver Screen Enterprises v. CIT [1972] 85 ITR 578. In this case, the lessee of a cinema, in order to modernise and attract more clientele, replaced the wooden chairs with iron chairs and made other improvements. He claimed exemption for the amount so spent on these things. In that case, on facts, it was held to be an improvement. It was observed (p. 584) " " Undoubtedly, it was an improvement. The wooden chairs were replaced. No evidence has been led that the wooden chairs had become useless and could not be used for seating the cinema-goers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of which the expenditure has been incurred." Each case, therefore, has to be viewed on its own facts, background and the data brought on the record. Help and guidance can always be sought and derived from precedents involving the determination of point, which is close to the one involved in the case to be decided. Kanpur Agencies' case [1968] 70 ITR 337 (All) and Silver Screen case [1972] 85 ITR 578 (P H) were decided on the basis of facts which were peculiar to those. They cannot be stretched for application to the case in hand to determine whether the expenditure incurred was of a capital or a revenue nature. The Tribunal seems to be mainly influenced by the enduring nature of the benefit to return a finding against the assessee. The enduring nature, which does not mean the everlasting nature of the benefit, is not the sole test to scoop the expenditure out of the ambit of a revenue expense. In the Empire lute Company's case [1980] 124 ITR 1, the Supreme Court examined this aspect in particular and observed (p. 10) "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none the less, be on revenue account and the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure is for the purpose of the business in spite of the enduring nature of the benefit. In CIT v. Bharat Cinema [1980] 121 ITR 165 (P H), Rs. 24,000 were spent by the lessee, after a notice was given by the executive engineer to repair the sagging ceiling of a cinema. A Bench of this court held the amount spent on the repair to be a revenue expense. This court again in CIT v. Bhagat Industries Corporation [1980] 126 ITR 645 (P H), allowed an expenditure of Rs. 75,702 on account of the repair to a tenanted premises used by the assessee as a branch office in Darya Ganj, Delhi, as revenue expense holding i " The mere fact that the repairs made are of durable nature, would not make the expenditure under consideration capital 'expenditure'." In the case in hand, the assessee was not the owner of the premises, but was only a lessee for a period of five years. Even if the repairs of the roof be taken as an accretion of an enduring nature, it did not acquire any interest of a permanent nature in it. The AAC found that the roof was leaky. The landlord, for the meagreness or insufficiency of the rate of rent, did not seem to be in favour of investing a sizeable amount of nearly ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
