Tenant repair expenditure deductible where lease and conduct showed an undertaking to bear repairs, with residuary business allowance also available.

Tenant-incurred roof repair expenditure on leased factory premises was treated as deductible where the lease and surrounding evidence showed an undertaking to bear repair costs. On that footing, the amount fell within the specific allowance for repairs undertaken by the tenant. Alternatively, the same expenditure was treated as revenue in nature and incurred for carrying on the business, so it could also qualify under the residuary business deduction provision. The commentary also notes that eligibility under a specific allowance does not automatically exclude consideration under the residuary clause if the specific conditions are not fully satisfied.

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Issues: Whether the expenditure of Rs. 20,807 incurred by a tenant on repairs to the roof of leased factory premises was an allowable deduction under section 10(2)(ii) of the Indian Income-tax Act, 1922, and, in the alternative, under section 10(2)(xv) of that Act.

Analysis: Allowance under section 10(2)(ii) depended on whether the tenant had undertaken to bear the cost of repairs. The lease deed was silent on a general repair obligation, but the surrounding material, including the lessor's letter and the conduct of the parties, showed that the tenant had undertaken to carry out repairs to the sheds and buildings. The expenditure was therefore within section 10(2)(ii). Even apart from that provision, the expenditure was incurred for the carrying on of the business, was not capital in nature, and could fall within the residuary allowance under section 10(2)(xv). The fact that an item may be considered under a specific allowance does not necessarily exclude consideration under the residuary clause where the specific conditions are not met.

Conclusion: The expenditure was a permissible deduction and the answer to the reference was in the affirmative, in favour of the assessee.

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