Repairs to leased business premises can qualify as revenue expenditure when they keep the premises fit for business use.

Expenditure incurred by a lessee on substantial repairs to leased business premises was treated as deductible revenue expenditure, not capital expenditure. Reading the lease obligation to keep the building in good condition with the lessee's duty under section 108(m) of the Transfer of Property Act, the repairs to stop leakage and maintain usability for business were held to fall within repair expenditure. The absence of a separate written undertaking did not defeat the claim. Applying the section 37 test, the expenditure was laid out wholly and exclusively for business and did not bring into existence any capital asset or advantage in the capital field, so the enduring benefit test was not conclusive on these facts.

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Issues: Whether the expenditure incurred by the assessee on repairs to leased premises was deductible as repair expenditure under section 30(a)(i) of the Income-tax Act, 1961, or as business expenditure under section 37 of that Act, or whether it was capital expenditure.

Analysis: The assessee was a lessee and the lease required the building to be kept in good condition. Reading that obligation with the lessee's statutory duty under section 108(m) of the Transfer of Property Act, the expenditure on substantial repairs to stop leakage and maintain the premises for the business was treated as expenditure on repairs to leased premises. The absence of a separate written undertaking did not defeat the claim. On section 37, the governing test was whether the expenditure was laid out wholly and exclusively for the business and whether it was capital in character. The Court held that the facts showed only repair and upkeep of a leased premises for the efficient carrying on of the business, not acquisition of any permanent capital asset. The enduring benefit test was not conclusive, and on the facts the expenditure remained on revenue account.

Conclusion: The expenditure was allowable and was not capital expenditure; the answer was in favour of the assessee.

Final Conclusion: Repairs to leased business premises, incurred to maintain the premises in usable condition for the assessee's trade, may constitute deductible revenue expenditure even if the benefit endures for some time.

Ratio Decidendi: Expenditure on repairs to leased premises is deductible as revenue expenditure where it is incurred to keep the premises fit for the business and does not bring into existence a capital asset or an advantage in the capital field.

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