Law:

Section:

Section 37(1) of the Income-tax Act, 1961 (Corresponding to section 10(2)(xv) of Indian Income-tax Act, 1922) - Business expenditure - Allowability of - Assessment years 1958-59 and 1960-61 - Assessee had taken on lease certain premises for purpose of its business - Assessee's claim for deduction of amount spent on replacing old roofs of godowns and dye-houses was disallowed by Revenue and Tribunal holding that said expenditure was of a capital nature - Whether since assessee was merely a lessee of business premises for a period of ten years, it could not derive any benefit of permanent or enduring nature by reason of replacement of roofs of godowns and dye houses - Held, yes - Whether, therefore, amount spent on repairs of godowns and dye houses to keep them in usable condition for purpose of business, could be allowed as revenue expenditure - Held, yes FACTS Under the terms of lease agreement, in respect of certain premises taken on lease for the purpose of its business, the lessors were not bound to carry out any repairs of the leased premises, and if any structural or other repairs of a substantial character were required, the lessees would have the right to vacate the leased premises in which case they would not be liable to rent thereafter. During the assessment years 1958-59 and 1960-61, the assessee (i.e. lessee) effected certain repairs to its godowns and its dye-houses. The ITO disallowed these expenses on the ground that they were capital in nature, but he allowed depreciation on these amounts at the prescribed rates. The AAC dismissed the assessee's appeal. On second appeal, the Tribunal also held that the expenditure was of a capital nature. On reference : HELD There is nothing in section 10(2)(v ) of 1922 Act to warrant the conclusion that expenditure incurred in respect of current repairs could be allowed only to an assessee who is the owner of the building, machinery, plant or furniture. The only condition which requires to be satisfied before an allowance can be made, is that such depreciable asset must have been used for the purpose of business during the relevant year and the repairs effected thereto must be in the nature of 'current…

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