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Sandeep NaraIn Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1982)1ITD941(All.)
AppellantSandeep Narain
Respondentincome-tax Officer
Excerpt:
.....lyengar's law of income-tax, 7th edition : allowance where both owner and tenant undertake to bear cost of repairs: the grant of deduction for repairs in respect of tenanted property is treated by the statute on the footing that : (i) either the owner has undertaken to bear the cost of the repairs, or (ii) the tenant has undertaken to bear such cost. the act misses the situation where in respect of tenanted property both the owner and the tenant could undertake the cost of repairs. clause (m) of section 108 of the transfer of property act throws the obligation impliedly on the tenant to effect the repair in respect of the demised property. this is an obligation which can, of course, be contracted against, since the provisions of section 108 of the transfer of property act regulating the.....
Judgment:
1. The only point involved in this appeal pertains to the assessee's claim for deduction for repairs as contemplated under Section 24(1)(i) of the Income-tax Act, 1961 ("the Act").

2. The assessee is an individual and owns certain properties at Faizabad and Lucknow. The assessment year is 1977-78 and the relevant previous year is the financial year ended 31-3-1977.

3. In the present appeal, we are concerned with the Lucknow property situated at Shah Nazaf Road. The assessee has let out this property to three tenants, namely, Larsen Tubro, Balmer Lawrie and Western Electronics. In this appeal, we are concerned with the portion of the property let out to Balmer Lawrie and Western Electronics. In the lease agreement entered into between the assessee and the said two tenants, the parties have agreed to the following condition regarding the repairs to be carried out by them, respectively.

(f) To carry out repairs of the nature of maintenance such as white washing and oil painting, etc., as and when the lessee desires and thinks fit provided however that the lessor shall be responsible for all major or structural repairs to the demised premises.

(f) To carry out repairs of the nature of maintenance such as whitewashing and oil Painting. etc., as and when the lessee desired and thinks fit provided however that the lessor shall be responsible for all major or structural repairs to the demised premises.

4. In order to better appreciate the rival contentions of the parties, we tabulate below the computation as per the assessee and as per the ITO :Balmer Lawrie 38,460 38,460 -------- --------Western Electronics 21,744 21,744 60,204 60,204Less: Municipal Taxes 5,826 58,26 -------- --------Less :1/6 for repairs 9,063 45,315 54,378Less : Ground rent 210 210 -------- -------- 5. In its return of income as well as at the time of assessment proceedings, the assessee claimed that it would be entitled to deduction of one-sixth of the rent received by him from the aforesaid two tenants by virtue of the provisions of Sub-clause (a) of Clause (i) of Sub-section (1) of Section 24. The ITO, however, did not recede to the assessee's claim for deduction with the remarks "as per agreement, repairs is to be done by the tenants". In appeal, the AAC upheld the action of the ITO. In doing so, she has also observed that in the immediately preceding year, namely, the assessment year 1976-77, similar disallowance were made by the ITO and the assessee did not prefer any appeal either to the AAC or there after to the Tribunal.

6. Being aggrieved by the order of the AAC, the assessee has come up in appeal before us. The learned counsel for the assessee vehemently argued that the income-tax authorities ought to have allowed the assessee's claim for deduction on account of repairs as provided under Section 24(1)(r)(o). In this connection, he referred to the aforesaid clauses in the agreements and submitted that since the assessee had undertaken to carry out major and substantial repairs, the assessee would be entitled to claim deduction as contemplated under Section 24(1)(ii)(a)- In support of his submissions, the learned counsel for the assessee relied on the following observations appearing at pages 1041-42 of Sampath lyengar's Law of Income-tax, 7th edition : Allowance where both owner and tenant undertake to bear cost of repairs: The grant of deduction for repairs in respect of tenanted property is treated by the statute on the footing that : (i) either the owner has undertaken to bear the cost of the repairs, or (ii) the tenant has undertaken to bear such cost. The Act misses the situation where in respect of tenanted property both the owner and the tenant could undertake the cost of repairs. Clause (m) of Section 108 of the Transfer of Property Act throws the obligation impliedly on the tenant to effect the repair in respect of the demised property. This is an obligation which can, of course, be contracted against, since the provisions of Section 108 of the Transfer of Property Act regulating the rights and liabilities of the lessor and the lessee apply only 'in the absence of a contract to the contrary.' In the absence of such a contract, the tenant should be deemed to have undertaken the burden of the cost of the repairs. Concurrently, Clause (f) of Section 108 of the Transfer of Property Act envisages a situation where the lessor (the owner) may also be bound to bear the cost of the repairs though the tenant (or the lessee), should for this purpose, have to txpressly stipulate for such a covenant. It is not uncommon that in a lease a tenant is found undertaking the responsibility of repairs to the interior of a building such as the floor, interior walls and the fitments and appliances and the lessor or the owner undertaking to bear the cost of the repairs of the roof and the ceiling and also the exterior of a building. The tenant may undertake to maintain the interior decorations, the colour paintings of the interior walls, the marble floors, etc., while the lessor (the owner) might undertake to maintain the ceiling in stable condition free of leaks, etc., and to paint or colour wash the exterior of the building and to maintain the same wind the water tight. The question would arise under those circumstances as to whether in computing the net annual value, the deductions under both the Clauses (i)(a) and (i)(b) should be permitted. In the absence of any guidance in the Act and having regard to the fact that these deductions are granted on an arbitrary and rule of thumb basis and that the various other deductions in Clauses (ii) to (x) are cumulative, the answer would seem to be in the affirmative.

Where, however, the lease deed is silent as to the responsibility for repairs, deduction should be granted under Clause (i)(b) on the footing that the tenant has undertaken to bear the cost agreeably to Clause (m) of Section 108 of the Transfer of Property Act. A view has been expressed that the phrase 'cost of repairs' should be understood as meaning 'cost of substantial repairs' (not a minor repair or a repair of petty and trivial nature). The deduction under Clause (i)(a) or Clause (i)(b) will depend upon the question as to who has undertaken to do the substantial repairs, the lessor or the lessee. If, on the construction of the lease deed and an examination of the facts, it is found that the lessor has undertaken to do the substantial repairs, then Clause (i)(a) will apply. If, on the other hand, on such examination of the deed and the facts, it is found that the tenant has undertaken to do substantial repairs, then Clause (i)(b) will apply. There is no warrant for granting a cumulative deduction under Clause (i)(a) coupled with Clause (i)(b).

7. The learned representative for the department, on the other hand, strongly relied on the orders of the income-tax authorities and justified their action. In this connection he further submitted that since both the assessee and the tenants had undertaken to carry on repairs of the house property in question, the assessee was not entitled to claim deduction under Section 24(i)(b). As regards commentary of Shri Sampath Iyengar, the learned representative for the department submitted that since it was a mere opinion of the author, the same was not binding on us.

8. We have carefully considered the rival submissions of the parties and we do not find any merit in the submissions made on behalf of the assessee. The relevant portion of Section 24(1) reads as under : 24(1) Income chargeable under the head Income from house property' shall, subject to the provisions of Sub-section (2), be computed after making the following deduction, namely :- (a) where the property is in the occupation of the owner, or where the property is let to a tenant and the owner has undertaken to bear the cost of repairs, a sum equal to one-sixth of the annual value ; (b) where the property is in the occupation of tenant who has undertaken to bear the cost of repairs,- (i) the excess of the annual value over the amount of rent payable for a year by the tenant ; or (ii) a sum equal to one-sixth of the annual value whichever is less ; Since the tenants have also undertaken to bear the cost of repairs, Sub-clause (a) of the aforesaid section would not be applicable in the assessee's case. Again, since the assessee has also undertaken to bear the cost of repairs, Sub-clause (b) of the section would not again help the assessee. In fact, it would appear from the aforesaid extract of the section that the Legislature had not contemplated a case in which both the landlord and the tenant would be required to bear the cost of repairs of p house property. This is a clear case of an omission in the section and it is a trite law that it is not for the Court to supply causus omissus-Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC) and CIT v. National Taj Traders [1980] 121 ITR 535 (SC), The principle relating to causus omissus could be gathered from Maxwell on The Interpretation of Statutes, 12th eddition, at page 33, which reads as under : Omissions not to be inferred. It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the Legislature intended something which it omitted to express.

Lord Mersey said : 'It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do'. 'We are not entitled, said Lord Loreburn I.C., 'to read words into an Act of Parliament unless clear reason for it is to be found within the four comers of the Act itself. A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omission appears in consequence to have been unintentional.

In view of the aforesaid principle of construction of statutes, with great respect, we are not able to subscribe to the opinion expressed by the editors of Sampath lyengar's Law of Income-tax, 7th edition, reproduced above.

9. As noted above, in the instant case, both the assessee and his tenants have undertaken to carry on repairs in the house property in question and since the assessee's case neither falls in Sub-clause (a) or Sub-clause (b) of Clause (f) of Sub-section (1) of Section 24, the income-tax authorities were fully justified in disallowing the assessee's claim for deduction of one-sixth of the annual value by way of repairs. In this connection, it is pertinent to note that the computation of income from house property is made on notional and hypothetical basis and not on actual basis. Therefore, the deductions contemplated in Section 24 are to be read in the context in which they are given and cannot be extended beyond what is stipulated in various sub-clauses contained in Section 24. It is pertinent to note that in the computation of the income from profits and gains of business or profession, Section 37(1) of the Act is a section under which the assessee-company claimed deduction which do not fall in any of the sections preceding that section, namely, Sections 30 to 36 of the Act.

In a recent decision in a case of CIT v. Kalyanji Mavji & Co. [1980] 122 ITR 49 the Hon'ble Supreme Court had an occasion to consider the assessee's claim for deduction of repairs, which were accumulated over many years. In that case, the Hon'ble Supreme Court has held that merely because such repairs would not fall under Section 30(a), that fact by itself would not prevent the assessee to claim deduction on account of accumulated repairs under Section 37(1). Since similar provisions are not available in computing the income from house property, we are of the view that the assessee would not be entitled to claim deduction on account of repairs and the income-tax authorities have, therefore, rightly rejected its claim.


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