Business expenditure for employee quarters held allowable where the housing served the manufacturing business and was incidental to operations.

Repair and maintenance expenditure on residential quarters provided to employees was treated as allowable business expenditure because the quarters formed part of the industrial undertaking's business arrangements and were maintained to facilitate the manufacturing business. Employee occupation of the quarters was incidental and subservient to the main business, not an independent house-property activity, so assessment under section 9 was inapplicable to the claim. The expenditure was therefore regarded as laid out wholly and exclusively for business purposes under section 10(2)(xv), and the assessee succeeded.

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Issues: Whether the expenditure incurred for repair and maintenance of residential quarters provided to employees was deductible as business expenditure under section 10(2)(xv) of the Indian Income-tax Act, or whether the receipts from occupation of the quarters were assessable under section 9.

Analysis: The quarters were found to be part of the business arrangements for the assessee's industrial undertaking and were maintained to facilitate the carrying on of the manufacturing business. The occupation of the quarters by employees was not an independent house-property activity but was incidental and subservient to the main business. The expenditure was therefore of the kind laid out wholly and exclusively for the purposes of the business, and the rule applicable to assessment under section 9 did not govern the claim.

Conclusion: The repair and maintenance expenditure was allowable as business expenditure under section 10(2)(xv), and the assessee succeeded.

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