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TMI Blog1987 (2) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the lease under both the leases was 5 years ending with 31-10-1985. The lesses ran the mill under the name Lokeshwara Trading Corporation which is the assessee before us. The original of the lease deed dated 21-10-1980 under which plant and machinery was taken on lease was filed before us on behalf of the assessee in the paper compilation from pages 13 to 20. It may be mentioned that both the lease deeds were registered lease deeds. Para 4 of the lease deed states that if within the periods of lease any part of the machinery requires repairs and the expenditure for those repairs does not exceed Rs. 200 the said expenditure should be borne by the lessees. However, if the expenditure incurred for repairs over the machinery exceeds Rs. 200, after carrying out the repairs the lessees are entitled to recover the expenditure over the repairs from out of the lease amount payable to the lessor. Clause 5 of the lease deed says that if either for political causes or as an act of his major if either the machinery in the mill or constructions in the mill require more repairs, the lessees should intimate the lessors. Thus repairs should be carried out by the lessors within 30 days, and aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claimed Rs. 1,58,206 towards incurring expenditure for repairs and maintenance of the mill. Particulars of the repairs and maintenance expenses are as follows: Rs. P. 1. Timber 7,065.25 2. Tapi workers 7,105.50 3. Neparallu, Cooli 4,910.00 4. Arapoosa 2,060.40 5. Boiled baskets, brooms, busk baskets, etc. 8,153.05 6. Current materials and oils 7,915.58 7. Coarse and red soil, etc. 3,062.00 8. Iron Bowls 449.62 9. Shafts 3,373.00 10. Foundry Majuri 4,805.00 11. Huller sheets 1,740.50 12. Mill Beltings and Paddy Drier Belts, etc. 16,347.56 13. Sheller, Rubbrs, etc. 31,874.93 14. Iron Sheets 8,492.90 15. Bricks, Paints 4,963.00 16. Bearings, Polish sheets, Pullies, Grease, Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same for future years. The Appellate Assistant Commissioner felt either the amount claimed has to be allowed in full or to be disallowed. He further held from the fact that the assessee was required to run the rice mill throughout the year for which repairs were necessary and while repairing the rice mill there will be expenditure on some items like iron sheets, bricks, timber, etc., it is not correct to treat such expenditure as expenditure of capital nature. Therefore, the Appellate Assistant Commissioner directed the Income-tax Officer to allow the sum of Rs. 1,58,206 in full. 4. As against the said decision of the Appellate Assistant Commissioner the department came up in appeal before this Tribunal. In a ground raised by the revenue it is stated that the whole of the expenditure of Rs. 1,58,206 should have been disallowed by the Appellate Assistant Commissioner. On merits it took the stand by another ground that as per records available the Income-tax Officer ought to have disallowed the whole expenditure inasmuch as per the terms of the lease agreement only expenditure up to 200 rupees should be borne by the assessee and exceeding that limit expenditure towards repai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 702 (AP), at pp. 707-708 the facts are that the Income-tax Officer made an addition of Rs. 99,984 on account of under-valuation of closing stock. The first appeal thereagainst was substantially rejected. On further appeal the Tribunal adopting a method of revaluation concluded that a sum of Rs. 10,644 alone is to be added. Thereafter the assessee filed a rectification petition. In disposing of the rectification petition the Tribunal observed that according to the method adopted by it the computation would result in a deduction of profit of Rs. 83,169 instead of an addition. But the relief granted to the assessee was restricted only to the addition of Rs. 99,984 as it was not competent to go further into the matter and give a greater relief to the assessee than it had asked for. Ultimately the Tribunal's order was upheld by the High Court. 7. We uphold the objection and hold that the subject-matter of the appeal is confined only to consider whether there was justification for disallowance of Rs. 24,000 towards mill repairs. The learned departmental representative promptly brought to our notice clause 4 and clause 5 of the lease deeds which we have translated and extracted in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 4 of the lease agreement in the absence of the Income-tax Officer mentioning the particulars of the items representing Rs. 24,000 it is difficult to arrive at a finding whether those Rs. 24,000 really represent repair expenditure or expenditure incurred for bringing an asset into existence which is very essential for the conduct of the business of the assessee and in which case it must be considered as revenue expenditure in his hands. The Appellate Assistant Commissioner held that the following five items might have been considered by the Income-tax Officer while disallowing Rs. 24,000. Rs. 1. Timber 7,065 2. Tapi workers 7,105 3. Neparallu, Cooli 4,910 4. Iron sheets 8,492 5. Bricks, paints 4,963 In whatever way either the timber, iron sheets, or Napa slabs and bricks and paints were used. It cannot be said that they were intended only for repairs. We are of the opinion that much is to be read into the facts as to why the Income-tax Officer did not elaborate his reasons for disallowance of expenditure worth Rs. 24,000 even after obtaining the particulars from the assessee for the expenditure of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 10(2)(ii) of the I.T. Act. 9. It is contended before us that in fact the expenditure was incurred for repairs of some of the machinery as well as the building. The repairs were carried out in order to put the mill in working condition and hence the expenditure incurred should be allowed to the assessee as revenue in nature. Shri Krishnamurthy also cited the decision of the Madras High Court in CIT v. Dasaprakash [1978] 114 ITR 210. In that case the assessee was doing hotel business and expenses were incurred in putting decorated mirrors on the walls, plastermoulded roof, plywood panels, etc., in reception-cum-dining halls with the object to keep the place fit and attract customers. It was held that the expenditure was only revenue in nature and allowable as deduction. He also cited and relied upon the Allahabad High Court decision in Girdhari Dass Sons v. CIT [1976] 105 ITR 339. In that case the assessee was carrying on business in the rented building and he carried out repairs to the building with the consent of the landlord. The cost of repairs amounted to Rs. 10,000 and odd in the assessment year 1964-65, Rs. 9,000 in assessment year 1965-66 and Rs. 1,000 in 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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