1991 (6) TMI 110 - AT - Income Tax

Summary

Issues:
Computation of rental income deduction for repairs.

Analysis:
The appeal was filed by the assessee for the assessment year 1984-85, claiming deduction for repairs in the computation of rental income from a property let out to a tenant. The Income Tax Officer (ITO) initially disallowed the deduction, citing that the tenant was responsible for repairs as per the tenancy agreement. The Deputy Commissioner (Appeals) upheld the ITO's decision, stating that the tenant had indeed accepted responsibility for repairs. However, the assessee contended that the ultimate responsibility for repairs lay with the property owner, not the tenant. The assessee argued that there was no formal agreement specifying the tenant's obligation for repairs and presented correspondence indicating that the owner was responsible for maintenance costs. The Wealth Tax assessment also allowed deductions for repairs based on the property value. The Departmental Representative supported the lower authorities' decisions, asserting that the documents submitted by the assessee confirmed the tenant's liability for repairs.

Upon reviewing the submissions and evidence, the Tribunal noted that no formal lease deed was executed between the parties. The correspondence between the assessee and the tenant indicated that the tenant was responsible for maintaining the property in good condition but did not explicitly mention bearing repair costs for normal wear and tear. The Tribunal highlighted that the tenant's obligation was limited to compensating for damages caused by neglect, excluding repairs due to natural wear and tear. Referring to the Rajasthan Premises Act, which imposes a statutory duty on property owners to maintain premises unless the tenant agrees otherwise, the Tribunal concluded that the cost of repairs was the responsibility of the property owner. Therefore, the Tribunal allowed the appeal, holding that the assessee was entitled to a deduction equal to 1/6th of the annual letting value for repairs under section 24(1)(a) of the Income Tax Act.

In light of the above analysis, the Tribunal allowed the appeal in favor of the assessee, granting the deduction for repairs in the computation of rental income.