BRITANNIA INDUSTRIES LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The question which has been raised in this civil appeal appears to have been considered by different High Courts which have expressed divergent views in the matter. The said question has come up before this court for consideration to resolve the anomalous situation.

(2.) The dispute in the instant case is with regard to disallowance of a sum of rs. 31,38,017/- for the assessment year 1994-1995, which sum was claimed by the assessee as expenses towards rent, repairs, depreciation and maintenance of a guest house which was purportedly used in connection with the business of the company.

(3.) Chapter IV of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') , deals with computation of total income and is divided into several parts. Part 'd', beginning with Section 28, deals with profits and gains of business or profession. Sections 30 to 36 relate to certain deductions which are allowed inter alia, on account of rent, rates, taxes, repairs and insurance in respect of premises and buildings used for the purposes of business or profession and includes a) where the premises are occupied by the assessee- (i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the premises; (b) any sums paid on account of rent, rates, local rates, municipal taxes-; (c) the amount of any premises paid in respect of insurance against risk of damage destruction of the premises paid in respect of insurance against risk of damage destruction of the premises. In the explanation to Section 30, it has been indicated that the amounts paid on account of the items indicated above shall not include any expenditure in the nature of capital expenditure.