Business deduction for employee accommodation repairs allowed where rented flats formed part of business assets and served commercial expediency.

Expenses on current repairs and maintenance of rented flats provided to employees were treated as allowable business expenditure because the accommodation was connected with the conduct of business and formed part of business assets. Where spending is incurred on grounds of commercial expediency to facilitate business operations, it may qualify as wholly and exclusively for business purposes. The repair cost was therefore regarded as revenue in nature and deductible in computing business income.

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Issues: Whether the expenses incurred on repairs and maintenance of rented flats taken for employees were admissible as a business deduction.

Analysis: The rented flats were treated as assets used in the assessee's business, since providing accommodation to employees was connected with the conduct of business and not extraneous to it. Expenditure incurred voluntarily on grounds of commercial expediency, if laid out to facilitate business operations, could qualify as expenditure incurred wholly and exclusively for business purposes. The cost of current repairs and maintenance of such business assets was held to be revenue in nature and allowable in computing business income.

Conclusion: The repair expenditure was a permissible deduction and the reference was answered in favour of the assessee.

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