Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee-company had taken on rent some fiats for providing accommodation to its employees - During accounting year relevant to assessment year 1968-69, assesses incurred certain expenditure on repairs of said flats - Whether said expenditure was incurred by assessee wholly and exclusively for purpose of its business and, thus, was deductible under section 37(1) - Held, yes Facts The assessee-company had taken on rent some flats for the purpose of providing accommodation to its employees. During the accounting year relevant to the assessment year 1968-69, the assessee incurred certain expenditure on repairs of those flats. The assessee claimed said expenditure as deductible under section 37(1). The ITO, however, disallowed the assessee's claim. On appeal, the Tribunal reversed the ITO's order. On reference : Held In the present case, the rented flats were the assets of the business and the assessee, in fact, was the tenant of such flats, although vsed by the employees, so long as the relationship of employer and employee subsisted. The cost of works of recurrent repair maintenance of such an asset in the course of business by the persons carrying on the business must be held to be a revenue expenditure and it constitutes a proper debit item in the profit and loss account of the business. The Tribunal had reached the right conclusion that the expenditure was incurred bona fide and for the interest of business. Thus, the assessee was entitled to deduction under section 37(1). JUDGMENT Sengupta, J.-At the instance of the Commissioner, West Bengal-II, the following question of law has been referred to this Court under section 256(1) for the assessment year 1968-69. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenses on repairs of the premises taken by the assessee on rent were permissible deduction ?" The facts are that the assessee claimed Rs. 24,738 as expenses for repairing of rented flats as permissible deduction. The assessee had made the repairs in the flats which it had taken on rent for the purpose of its…

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