Madras H.C : Whether, on the facts and in the circumstances of the case and having regard to the provisions of Expln. (ii) to the second proviso to s. 37(4) of the IT Act, the Tribunal is right in law in holding that lease rent paid for guest-house cannot be disallowed under s. 37(4) of the IT Act, 1961 ?

High Court Of Madras

CIT vs. South Inida Vicose Ltd.

Sections 30 & 37(4)(I)

Asst. Year 1984-85

R. Jayasima Babu & K. Raviraja Pandian, JJ.

TC No. 298 of 1997

18th September, 2002

Counsel Appeared

T. Ravikumar, for the Commissioner : P.P.S. Janardhana Raja, for the Assessee

JUDGMENT

R. JAYASIMHA BABU, J. :

The question referred to us, at the instance of the Revenue, for our consideration is as follows :

“Whether, on the facts and in the circumstances of the case and having regard to the provisions of Expln. (ii) to the second proviso to s. 37(4) of the IT Act, the Tribunal is right in law in holding that lease rent paid for guest-house cannot be disallowed under s. 37(4) of the IT Act, 1961 ?”

The assessment year is 1984-85. The rent paid by the assessee for the guest-house maintained by it having been allowed by the Tribunal, although it had been disallowed by the CIT and the AO, this reference has been made. Sec. 30 of the Act deals with rent, rates, taxes, repairs and insurance for buildings used for the purpose of business or profession. That the guest-house is used for the purpose of the business is not in dispute. Sec. 37 under the heading “General”, in sub-s. (4), as it stood during the relevant assessment year, in cl. (i) thereunder, provides that no allowance is to be made in respect of expenditure incurred by the assessee after 28th Feb., 1970, on the maintenance of any residential accommodation in the nature of a guest-house. “Maintenance” is not defined in that provision. The term “maintenance” normally refers to keeping a thing in the condition that it was and keeping it in a condition that enables the thing to be used in the way in which it was intended to be used. The rent paid for the guest-house, in the absence of any other indication in s. 37(4)(i), cannot be regarded as part of the maintenance, especially when rent is specifically dealt within another section—s. 30—which expressly provides for deduction of such rental.

Our answer to the question, therefore, is in favour of the assessee and against the Revenue.

[Citation : 259 ITR 107]

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