TaxTMI 
TaxTMI 
1974 (2) TMI 1
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....sor or the lessee in respect of the repairs to the factory premises. But clause 10 of the lease provided that during the period of the lease, the lessee shall not without the consent of the lessor make any structural or other alterations in the buildings provided that the lessee may at any time remove the steel rolling plant and machinery belonging to it from the premises and for that purpose, to dig out any portion of the floor, walls or other structure. But, at the same time, the lessee was bound to do all that was reasonably necessary and requisite for restoring the floor, wall and other structure to their original condition after removing the plant and machinery. During the previous year ending on March 31, 1958, which was relevant to the assessment year 1958-59, the assessee carried out repairs to the roof of the factory premises at a cost of Rs. 20,807 and claimed allowance for this amount under clauses (ii), (v) or (xv) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act "). The assessee's claim was rejected by the Income-tax Officer as well as by the Appellate Assistant Commissioner on the ground that there was no leg....
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....sideration only if the cost of the repairs was claimed under section 10(2)(xv) of the Act and they are not relevant for the purpose of determining the assessee's claim under section 10(2)(ii) of the Act. As already stated, the lease deed itself does not contain any specific term in respect of the liability either of the lessor or of the lessee for affecting repairs to the factory premises. In our view, clause 10 of the lease deed cannot be construed as casting any liability on the assessee to affect any repairs to the factory premises except for the purpose of restoring it to its original condition after the assessee removed the plant or the machinery from the premises. It is not the assessee's case that the repairs in question were effected for the purpose of restoring the premises to their original condition after removing the plant or the machinery. On the other hand, it is the assessee's case that these repairs were necessary for protecting its plant and machinery from rain and wind, as the roof of the factory premises was in a state of disrepair. The Tribunal has, however, relied upon the letter dated April 16, 1962, which forms part of the record of the case. This is a let....
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....ct, we shall proceed to consider whether the assessee's claim is allowable in the alternative under section 10(2)(xv) of the Act as the assessee had claimed allowance of the cost of the repairs also under section 10(2)(xv) of the Act and as, by implication, the Tribunal has rejected the assessee's claim under section 10(2)(xv) of the Act. Sub-clause (xv) reads as under : " Any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " Clause (xv) is a residuary clause which provides for the allowance of an expenditure which does not fall within the scope of clauses (i) to (xiv). Shri Dhebar, learned counsel for the revenue, contends that clause (xv) is in the nature of a general provision, whereas clause (ii) is in the nature of a special provision and that the special provision excludes the operation of the general provision. According to the learned counsel, a claim for allowance of repairs effected by an assessee who is a tenant can be a....
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....ax, which is also a case of a claim of bonus paid by the assessee to some of its employees, the claim for allowance of the bonus was made alternatively under section 10(2)(x) and section 10(2)(xv) of the Act and rule 12 of the First Schedule of the Excess Profits Tax Act. The Madras High Court, following the rule laid down by the Bombay High Court in the case of Subodh chandra Popatlal, held that as there was a specific provision in the Act circumscribing the limits under which a commission or bonus paid to an employee was to be allowed as a deduction, that specific provision must prevail and resort could not in those circumstances be had to section 10(2)(xv) of the Act. In Birla Gwalior Private Ltd. v. Commissioner of Income-tax, the Madhya Pradesh High Court following the rule laid down in Subodhchandra Popatlal's case and in the case of N. M. Rayaloo Iyer and Sons, held that it is well-settled that if an allowance is specifically dealt with by any one of the clauses (i) to (xiv) of section 10(2), then clause (xv) which is the residuary clause cannot be resorted to. The views expressed by the Bombay, Madras and Madhya Pradesh High Courts in the decisions cited above are at var....
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....ly with the view that whereas section 10(2)(x) dealt with a special case, section 10(2)(xv) was a general provision. One may agree that section 10(2)(x) was specific to this extent that it dealt with bonus or commission alone and section 10(2)(xv) dealt with all classes of business expenditure including bonus or commission which are also business expenditure. If the matter had rested there it would have been possible to say that section 10(2)(x), the specific provision, excluded the operation of section 10(2)(xv), the general provision. What seems to have been overlooked in the Bombay decision is the fact that the two provisions lay down different tests and by reason of those tests the two provisions might very well constitute different categories and not merely the one a special category and the other a general category. This may be explained by pointing out that if an amount of commission paid to an employee does not satisfy the tests laid down under section 10(2)(x) it might still fall for consideration under section 10(2)(xv) and may be allowable if it satisfied the test of having been laid out or expended wholly and exclusively for the purpose of the assessee's business. It ma....
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....te Assistant Commissioner and disallowed the assessee's claim on the ground that the amount spent by the assessee was in the nature of capital expenditure. The Punjab High Court disagreed with the finding of the Tribunal and allowed the assessee's claim in full holding that it was a revenue expenditure which was deductible under section 10(2)(xv) of the Act. Although the Punjab High Court was not called upon to consider whether the assessee's claim in that case could be allowed under section 10(2)(xv) of the Act when the claim had to be considered strictly under section 10(2)(ii) of the Act, still the fact remains that the claim of the assessee in that case was in respect of the repairs to the premises which the assessee had taken on lease. The assessee's claim was allowed by the High Court notwithstanding the fact that under the terms of the lease deed it was the lessor who had to carry out the repairs to the building. In Commissioner of Income-tax v. Jagat Cinema a Division Bench of this court was called upon to consider an assessee's claim under section 10(2)(ii) as well as under section 10(2)(xv) of the Act. In that case, the assessee took on lease a cinema hall for a period....
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....dified to the effect that the balance shall be paid by the assessee-company and until it was paid in full the assessee-company shall pay simple interest at 6 per cent. per annum on so much of the balance as remained due. The balance was also to be secured by hypothecation of all the movable properties of the assessee-company. During the relevant accounting years the assessee paid interest on the balance outstanding and claimed allowance of the same either under section 10(2)(iii) or section 10(2)(xv) of the Act. The Supreme Court held that the assessee's claim was not allowable under section 10(2)(iii) of the Act inasmuch as the expression " capital " used in section 10(2)(iii), in the context in which it occurred, meant money and not any other asset and that there was in truth no capital borrowed by the assessee in this case. The Supreme Court, however, held that the assessee's claim was allowable under section 10(2)(xv) of the Act on the ground that the transaction of acquisition of the assets was closely related to the commencement and carrying on of the business and the interest paid on the amount remaining due must in the normal course be regarded as expended for the purpose o....
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....e allowed on the ground that it did not satisfy the conditions prescribed therein, could not at all be considered under the general clause (xv). In fact the Supreme Court has also held in the case of Badridas Daga v. Commissioner of Income-tax that when a claim is made for a deduction for which there is no specific provision under section 10(2), the deduction may be allowed in computing the profits or gains of a business under section 10(1) of the Act. The Supreme Court observed as follows : "While section 10(1) of the Indian Income-tax Act, 1922, imposes a charge on the profits or gains of a business, it does not provide how these profits are to be computed. Section 10(2) enumerates various items which are admissible as deductions but they are not exhaustive of all allowances which could be made in ascertaining the profits of a business taxable under section 10(1). Profits and gains which are liable to be taxed under section 10(1) are what are understood to be such under ordinary commercial principles.... When a claim is made for a deduction for which there is no specific provision under section 10(2), whether it is admissible or not will depend on whether, having regard to acc....