Income-tax Reference No. 348 of 1981. Case: Commissioner of Income Tax Vs Dewar's Garage (India) Pvt. Ltd.. High Court of Calcutta (India)
| Case Number | Income-tax Reference No. 348 of 1981 |
| Counsel | For Appellant: A.C. Moitra and S.K. Chakraborty, Advs. and For Respondents: M.L. Bhattacharya, Adv. |
| Judges | A.K. Sen Gupta and K.M. Yusuf, JJ. |
| Issue | Income Tax Act, 1961 - Sections 30, 37, 256(1); Calcutta Municipal Act - Sections 495, 495(1), 495(3) |
| Citation | 1993 (204) ITR 763 (Cal) |
| Judgement Date | July 23, 1992 |
| Court | High Court of Calcutta (India) |
Judgment:
Ajit K. Sengupta, J.
-
In this reference under Section 256(1) of the Income Tax Act, 1961, the following question of law has been referred to this court:
Whether, on the fact and in the circumstances of the case, the expenditure of Rs. 2,12,266 incurred for repairing the premises No. 4, Council House Street, Calcutta, was an allowable expenditure in computing the income of the assessee from business?
-
Shortly staged, the facts are that the assessee is a company and the (reference relates tq the assessment year 1975-76, for which the previous year ended on June 30, 1974. The assessee-company claimed deduction of Rs. 2,12,266 as expenses for repairing of the business premises at No. 4, Council House Street, Calcutta. The Income Tax Officer disallowed this claim of the assessee as he was of the opinion that the assessee having been a tenant of the premises had no obligation to make extensive repairs to the rented building. According to the Income Tax Officer, the extensive repair and renovation of the existing building had resulted in a new advantage of enduring benefit and so it was a capital expenditure.
-
The assessee appealed to the Commissioner of Income Tax (Appeals) and contended that the building was in a dilapidated condition and, in 1963, the Calcutta Corporation served a notice for its demolition on Sri B.N. Jhunjhunwala, one of the partners of the assessee-firm. The assessee, on receipt of the demolition notice, took time from the Corporation authorities and undertook repairing works and for that it engaged an architect for the repairing work. The said architect submitted a report on April 11, 1973, to the effect that the premises have been thoroughly repaired, that the cracks on most of the walls have been rectified, that the floors have been made secure, that the weak beams are changed and reinforced, that all corrosions of steel works have been removed and that the old parapets have been demolished and rebuilt. It was pointed out that, on the basis of the said report of the architect, the city civil court held that the insecurity of the building has been removed and so it dismissed the suit brought by the Calcutta Corporation for demolition of the assessee's business premises. It was, therefore, claimed that the amount of Rs. 2,12,266 was business expenses inasmuch as the amount had been spent for repairing the said premises.
-
The Commissioner of Income Tax (Appeals) found that the assessee had been paying yearly rent of Rs. 46,200 for the entire premises and that it was deriving rental income of Rs. 1,17,922 yearly by way of sub-letting a portion of the aforesaid premises. He found that the assessee was in occupation of the premises in question since 1963, and that it incurred huge expenditure for renovation of the premises. From the details of the expenses, the Commissioner of Income Tax (Appeals) found that the materials like cement and sand were required for replacement of the old beams by new beams. He, therefore, took the view that though the asses-see was not the owner of the premises, yet became the owner of the improvements made to the premises by incurring huge expenditure. He observed that the assessee carried out thorough repairing works for its own benefit as otherwise its source of income from sub-letting would have been extinguished. The Commissioner (Appeals) relied on the decision of the Allahabad High Court in the case of CIT v. Chandra Agro P. Ltd. [1979]117ITR251(All), and held that the expenditure incurred by the assessee was a capital expenditure and so he confirmed the action of the Income Tax Officer.
-
The assessee preferred a second appeal before the Tribunal and it was contended on behalf of the assessee that thorough repairing was necessary to preserve and maintain the already existing income-earning asset and, by expending this amount, the assessee had not acquired any new asset. It was pointed out that the decision of the Allahabad High Court, as relied on by the Commissioner of Income Tax (Appeals), was different on facts inasmuch as, in that case, the assessee was a lessee-tenant whereas, in the present case, the assessee was a monthly tenant. It was urged that the relevant factor for consideration was the nature of the repairs and not the expenditure incurred. Reliance was placed on the decision in the case of CIT v. Kalyanji Mavji and Co. [1980]122ITR49(SC), and it was urged that, under similar circumstances, the Supreme Court held that the expenditure was revenue in nature. It was further urged that the expenditure in question was allowable under Section 37, if not under Section 50 of the Income Tax Act, 1961.
-
On behalf of the Revenue, it was contended that the assessee was occupying the premises in terms of a lease for 15 years, and, therefore, the decision in the case of Chandra Agro P. Ltd [1979]117ITR251(All), was clearly applicable in this case. Reference was made to the report of the architect and it pointed out that the expenditure was mainly incurred for replacement of beams and parapets and so it was capital expenditure in view of the decision in the case of Humayun Properties Ltd. v. CIT: [1962]44ITR73(Cal) and Addl CIT v. Lawlys Enterprises (P.) Ltd. [1975]100ITR369(Patna). The Tribunal, in its original order, held that...
To continue reading
Request your trial