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TMI Blog1974 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ANSARI J.-M/s. Rama Krishna Steel Rolling Mills (hereinafter referred to as "the assessee ") is a firm carrying on the business of re-rolling steel. It took on lease the factory premises from one Ravinder Nath under a lease deed dated April 2, 1956. The lease was for a period of five years commencing from 1st April, 1956. The rent payable for the premises was Rs. 500 per month. The lease deed did not contain any term giving the option to the assessee to renew the lease for a further period. On the other hand, the lease was terminable before the expiry of the lease period at the instance of the assessee by giving one month's notice. The lease was also terminable at the instance of the lessor on the breach of any of the conditions of the lease. The lease deed did not contain any specific term with regard to the liability of the lessor or the lessee in respect of the repairs to the factory premises. But clause 10 of the lease provided that during the period of the lease, the lessee shall not without the consent of the lessor make any structural or other alterations in the buildings provided that the lessee may at any time remove the steel rolling plant and machinery belonging to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oportional part only of such amount shall be allowed." From a reading of clause (ii), it is clear, firstly, that the assessee is entitled to the allowance of the cost of the repairs only if he has undertaken to bear the cost thereof and, secondly, such repairs need not necessarily be undertaken for the purpose of carrying on the business of the assessee. In other words, if the assessee has undertaken to effect the repairs of the premises of which he is the tenant, he is entitled to an allowance of the cost of the repairs even if the repairs be of the nature of capital expenditure or even if the repairs have no connection with the business of the assessee. Whether the repairs were in the nature of capital expenditure or whether they were necessary for the purpose of carrying on the assessee's business will be relevant for consideration only if the cost of the repairs was claimed under section 10(2)(xv) of the Act and they are not relevant for the purpose of determining the assessee's claim under section 10(2)(ii) of the Act. As already stated, the lease deed itself does not contain any specific term in respect of the liability either of the lessor or of the lessee for affecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent lend support to the view taken by the Tribunal that even at the time of the lease deed the assessee had undertaken to carry out the repairs of the factory premises. The Tribunal has also sought support for its view from the provisions of section 108 of the Transfer of Property Act. We do not consider it necessary to express our opinion whether the provisions of section 108 of the Transfer of Property Act cast a legal obligation on the assessee to carry out these repairs. It would be sufficient to decide the assessee's claim on the basis of the letter dated April 16, 1962, and the conduct of the parties referred to above, and on the basis of the said material, we hold that the assessee's claim is allowable under section 10(2)(ii) of the Act. Although the assessee's claim is allowable under section 10(2)(ii) of the Act, we shall proceed to consider whether the assessee's claim is allowable in the alternative under section 10(2)(xv) of the Act as the assessee had claimed allowance of the cost of the repairs also under section 10(2)(xv) of the Act and as, by implication, the Tribunal has rejected the assessee's claim under section 10(2)(xv) of the Act. Sub-clause (xv) reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to well-established canons of construction when a statute deals with a special case it is not permissible to contend that the special case would also fall under the general provision in the statute. Section 10(2)(xv) deals with all those cases of expenditure laid out or expended wholly or exclusively for the purpose of business which do not fall under any other clause of section 10(2). When an expenditure falls under section 10(2)(x) in the sense that it is an expenditure in the nature of bonus or commission paid to an employee for services rendered , then its validity can only be determined by the test laid down in section 10(2)(x) and not the test laid down in section 10(2)(xv)." In the next case relied upon by the learned counsel for the revenue, namely, N. M. Rayaloo Iyer and Sons v. Commissioner of Income-tax, which is also a case of a claim of bonus paid by the assessee to some of its employees, the claim for allowance of the bonus was made alternatively under section 10(2)(x) and section 10(2)(xv) of the Act and rule 12 of the First Schedule of the Excess Profits Tax Act. The Madras High Court, following the rule laid down by the Bombay High Court in the case of Subo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, the Allahabad High Court expressed its dissent with the rule laid down by the Bombay High Court in Subodhchandra Popatlal's case. The dissent was expressed in the following words : "In that decision it was laid down that section 10(2)(x) dealt with a special case and section 10(2)(xv) (prior to its amendment) was a general provision and according to well-established canons of construction when a statute dealt with a special case it was not permissible to contend that the special case would also fall in the general provision in the statute. Accordingly, it was held that when an expenditure fell under section 10(2)(x), then its validity could be determined only by the tests laid down under section 10(2)(x) and not by the tests laid down in section 10(2)(xv). With great respect it is not possible to agree entirely with the view that whereas section 10(2)(x) dealt with a special case, section 10(2)(xv) was a general provision. One may agree that section 10(2)(x) was specific to this extent that it dealt with bonus or commission alone and section 10(2)(xv) dealt with all classes of business expenditure including bonus or commission which are also business expenditure. If the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lease deed the lessee could not make any additions or alterations and it was the lessor who had to carry out annual white-washing and colour washing and repairs to the building. In order to cover up cracks and ugly spots on the walls, the assessee spent a sum of Rs. 16,323 for panelling, i.e., fixing a thin layer of teak plywood to the walls, in the lounge, the staircase and in the restaurant. The wooden panels on removal were not of much value and could not be re-installed in the same condition elsewhere. The assessee claimed allowance of this amount under section 10(2)(xv) of the Act. The assessee's claim was disallowed by the Income-tax Officer, but was allowed by the Appellate Assistant Commissioner. The revenue preferred a second appeal before the Tribunal and the latter reversed the decision of the Appellate Assistant Commissioner and disallowed the assessee's claim on the ground that the amount spent by the assessee was in the nature of capital expenditure. The Punjab High Court disagreed with the finding of the Tribunal and allowed the assessee's claim in full holding that it was a revenue expenditure which was deductible under section 10(2)(xv) of the Act. Although the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est either under section 10(2)(iii) or section 10(2)(xv) of the Act. The facts of that case were that pursuant to a scheme of amalgamation between two shipping companies, the assessee-company was incorporated on August 10, 1953, to take over certain passenger and ferry services carried on by one of the former. On August 12, 1953, the assessee-company took over assets, which were finally valued at Rs. 81,55,000 and agreed that the price was to be satisfied partly by allotment of 29,990 fully paid up shares of Rs. 100 each and the balance was to be treated as a loan and secured by a promissory note and hypothecation of all movable properties of the assessee-company. The balance remaining unpaid from time to time was to carry simple interest at 6 per cent. By a supplemental agreement the original agreement was modified to the effect that the balance shall be paid by the assessee-company and until it was paid in full the assessee-company shall pay simple interest at 6 per cent. per annum on so much of the balance as remained due. The balance was also to be secured by hypothecation of all the movable properties of the assessee-company. During the relevant accounting years the assessee p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmissible as development rebate under section 10(2)(vib), it was admissible as current repairs under section 10(2)(xv) of the Act. This view of the Tribunal was upheld both by the High Court as well as by the Supreme Court. The decisions of the Punjab and Delhi High Courts and of the Supreme Court, referred to above, indicate that even after the amendment of clause (xv) if an expenditure cannot be allowed under any of the specific clauses of sub-section (2) of section 10 of the Act on the ground that the conditions prescribed in these specific provisions have not been satisfied, still the expenditure may be allowed under the general clause (xv) of sub-section (2) of section 10 of the Act and that there is no general rule that a claim which may be considered under the specific provisions but which cannot be allowed on the ground that it did not satisfy the conditions prescribed therein, could not at all be considered under the general clause (xv). In fact the Supreme Court has also held in the case of Badridas Daga v. Commissioner of Income-tax that when a claim is made for a deduction for which there is no specific provision under section 10(2), the deduction may be allowed in co ..... 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