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Issues: Interpretation of lease deed provisions regarding tenant's obligation to bear repair costs.
In this case, the Appellate Tribunal ITAT MADRAS-D considered two appeals related to the assessment years 1974-75 and 1975-76 concerning an immovable property leased to a tenant. The primary issue revolved around whether the tenant had undertaken to bear the cost of repairs, impacting the deduction allowed for repairs in computing income from house property. The Income Tax Officer (ITO) initially disallowed 1/6th of the annual value as a deduction for repairs, based on the tenant's obligations outlined in the lease deed. However, the Additional Commissioner of Income Tax (AAC) disagreed with the ITO, holding that the tenant had not explicitly undertaken to bear the repair costs, and directed that 1/6th be allowed for repairs. The departmental appeals were filed challenging this decision. The Tribunal analyzed the relevant clause in the lease deed, which outlined the tenant's responsibilities for maintenance, insurance, and upkeep of the building. The Tribunal concurred with the AAC's interpretation, stating that the clause did not amount to the tenant undertaking the cost of repairs. It emphasized that the tenant's obligations under the lease were in line with the statutory duty provided in the Transfer of Property Act, which requires the tenant to maintain the property in good condition. The Tribunal highlighted that the lease's language focused on maintenance tasks like painting and washing, which are distinct from repairs involving renewal. By using the term 'maintenance' instead of 'repairs' and specifying tasks like painting and washing, the lease indicated that the tenant was not responsible for repairs, as it reiterated existing statutory obligations. The Tribunal clarified that the provision for painting and washing in the lease was to ensure compliance with maintenance duties, not to assign repair responsibilities to the tenant. Additionally, the Tribunal noted that the building, being newly constructed in 1971, was exempt from the Building and Lease Control Act for five years. It highlighted that under such legislation, the landlord would typically be responsible for repairs, irrespective of any contractual terms. Referring to a judgment by the Madras High Court, the Tribunal emphasized that in the absence of a contract to the contrary, the duty to repair would fall on the landlord. Consequently, the Tribunal dismissed the departmental appeals, affirming that the tenant had not undertaken to bear the cost of repairs based on the lease provisions and statutory obligations.
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