TaxTMI 
TaxTMI 
2010 (8) TMI 307
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....the expenditure incurred was in the revenue field and it being an admitted position that the Appellant was occupying a major part of the commercial premises in the building, for the purpose of his business was the Tribunal justified in not allowing the reduction claimed in its entirety." 3 The facts leading to the filing of the above Appeal can be stated thus: The building in question in respect of which the Assessee i.e the Appellant above name has carried out the repairs to the roof and in respect of the expenditure of the repairs of which the Appellant is claiming deduction is 3 Income tax Appeal No.513 of 2005 owned by a Trust pursuant to an Indenture of Trust dated 6th October 1937. The building consist of ground plus three floors with a terrace floor above it, which floor is occupied by the beneficiaries which include the Appellant in their capacity as beneficiaries. The first, second and third floor is tenanted to outsiders. From the point of view of the issue in the Appeal, it is relevant to note that the ground floor comprises an area of 30,000 sq.ft. Of which the Appellant is a tenant approximately 3700 sq.ft. and is used by the Appellant for the purpose of his busines....
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.... that of out the total expenditure of Rs. 17,63,280/, the Appellant was entitled to a deduction only of Rs.3.26 lacs and even the said expenditure was not allowable as a deduction in view of the fact that it was in the capital field. The Assessing Officer accordingly directed the allowance of the deduction by way of depreciation in respect of the said amount of Rs.3.26 lacs. Being aggrieved by the said order dated 31st January 2000 passed by the Assessing Officer, the Appellant had preferred an Appeal to the Commissioner of Income Tax (Appeals). The principal ground of challenge was on the ground that the Assessing officer has disallowed the claim for expenditure incurred on repairs and maintenance of the building. The Commissioner of Income Tax (Appeals) had disposed of the said Appeal by his order dated 1st March 2001. The Commissioner of Income Tax (Appeals) inter alia held that the expenditure that was incurred was clearly in the nature of capital expenditure and, therefore, rejected the Appellant's contention for deduction of expenditure. However, notwithstanding, what he had held, directed the Assessing officer to grant the depreciation in respect of the entire expenditure wi....
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....and further the Tribunal was of the view that the Appellant was entitled to deduction only on prorata basis. The Tribunal proceeded on the basis that in fact the repair work was also carried out by the Landlord trust but the expenditure was debited in the books of account of the Appellant. The Tribunal was of the view that the tenant incurring the expenditure for the entire building cannot be treated as expenditure wholly and exclusively for the purpose of the tenants business. The Tribunal, therefore, has by its said Judgment and order dated 15th June 2005 upheld the action of the Assessing officer in allowing the deduction only on a prorata basis, but in so far as treating the said expenditure as on account of revenue, disagreed with the Assessing Officer who treated the same as capital expenditure. 7 We have heard the Learned Senior Counsel Mr. Soli Dastur for the Appellant and Mr. Sahadevan the Learned Counsel appearing for the Respondents. On behalf of the Appellant, it was contended by the Learned Senior Counsel that the Appellant was a franchisee of M/s. Grasim and had a show room and retail outlet on the ground floor of the building in question and was occupying 3700 sq.....
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....or the purpose of the instant Appeal. 9 The Learned Senior Counsel for the Appellant has further relied upon the Judgment of the Apex Court in Commissioner of IncomeTax, Bombay v/s. Walchand and Co. Private Ltd., reported in 9167 I.T.R. (SC) 381 wherein the Apex Court has held that in applying the test of commercial expediency of determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the revenue. The nature of the jurisdiction predicates that the Tribunal will approach and decide the case in a judicial spirit and for that purpose it must indicate the disputed questions before it with evidence pro and con and record its reasons in support of the decision. The practice of recording a decision without reasons in support cannot but be severely deprecated." 10 In so far as the claim of the Appellant for the deduction of the entire expenditure is concerned, the Learned Senior Counsel relied upon the Judgment of the Division Bench of this Court in Tata Sons Vs. Commissioner of Income Tax, Bombay City and the Judgment of the A....
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....work of the roof and thereby the assessee alone was constrained to shoulder the entire expenditure. Other tenants also, if at all so warranted, had a duty to share the expenditure. It is the basic duty of the landlord to undertake the repair work. Here in this present case, even though the expenditure has been claimed by the assessee as an individual business man, the trust which owned the building had to repair it. Therefore, it is also possible, not erroneously, to hold that in fact the debited in the books of account of the assessee. Even without going to this unpleasant extent (in fact the assessing officer and CIT(A) has not steered the case in this direction), it is to be seen that the assessee was not bound to bear the entire expenditure. We have also found that the theory of helplessness propounded by the assessee is not convincing for the mere fact that the assessee was the tenant as well as the de facto landlord. Even in the case of a stranger tenant, the incurring expenditure for the entire building of which he is holding only a small portion cannot be treated as an expenditure incurred entirely for the purpose of carrying on his business. In that way, there cannot ....
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....of the business or profession, the deductions under subclause (ii) of clause (a) and clause (c) of section 30 clauses (i) and (ii) of section 31 and (clause (ii) of sub section (1)) of section 32 shall be restricted to a fair proportionate part thereof which the (Assessing) Officer may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession." It is required to be mentioned that the Appellant is occupying the 4th floor flat below the terrace for his residence and as mentioned herein above, the Appellant is the beneficiary of the trust. The Appellant, therefore, is in his dual capacity as tenant as well as the beneficiary of the trust, if that be so, considering Section 38 of the Income Tax Act, the deduction shall be restricted to a fair proportionate part thereof with the Assessing Officer may determine having regard to the user of such building for the purpose of the business or profession. The Assessing Officer, in our view, therefore, though having recorded the factual finding as regards the tenanted premises occupied by the Appellant being used for the business purpose had thereafter, restricted th....