Expenditure incurred on resurfacing the approach roads to a hotel is current repairs and allowable as a deduction under section 12(4) read with section 10(2) (v) of the Indian Income-tax Act.

FALSHAW, J.

1. This reference has arisen out of the assessment of Sardar Bahadur Ranjit Singh for the assessment year 1946-47, account year possessing other sources of income the assessee is the owner of the premises in New Delhi known as the Imperial Hotel which he leased out complete with furnishings and fittings to the company known as the Associated Hotels of India Limited in August 1939 for a period of 20 years at an annual rent of Rs. 50,000. In the account year in question the approach roads or drives had fallen into such a bad state that it was found necessary to repair them, and the repairs took the form of resurfacing with concrete the whole of the roadways, totalling more than one furlong in length. This resurfacing cost Rs. 24,904 and in his return the assessee sought to deduct the whole of this amount, under the heading of his income from the Imperial Hotel, on account of repairs. The Income-tax Officer held that the whole expenditure could not be allowed in one year and that it should be spread over to 10 years and allowed a deduction of Rs. 2,472 on this account.

2. The assessee appealed to the Appellate Assistant Commissioner regarding a number of points in the assessment order including this item, regarding which, in his grounds of appeal, he simply raised the objection that the Income-tax Officer had erred in spreading the repair charges of Imperial Hotel amounting to Rs. 24,904 over 10 years. After considering the matter the Appellate Assistant Commissioner added back even the sum of Rs. 2,472 allowed by the Income-tax Officer, and held that the whole of the outlay on re-laying the roads was a capital expenditure.

3. This matter was again raised by the assessee in his appeal to the Tribunal, which held that the case fell within section 12(4) read with section 10(2) (v) of the Act and that the expenditure on the roads must be allowed in full. On this the Commissioner of Income-tax preferred an application under section 66 (1) and the Tribunal has framed the following question for our consideration :-

"Whether in the circumstances of the case the cost of re-laying the cement approach road to the Imperial Hotel of New Delhi in the year of account 1945-46 was incurred in respect of current repairs to the hotel premises and is allowable as a deduction under section 12(4) read with section 10(2) (v) of the Indian Income-tax Act ?"

4. Section 12 deals with income from other sources, i.e., sources other than salaries dealt with in section 7, interest on securities in section 8, income from property in section 9, profits and gains of business in section 10, and capital gains in section 12B. Sub-section (2) of section 10 in respect of such buildings.

"Sub-section (2) of section 10 deals with allowances to be deducted from profits or gains of business, profession or vocation and clause (iv) reads - "in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation, the amount of any premium paid;" and clause (v) reads -"in respect of current repairs to such buildings, machinery, plant or furniture, the amount paid on account thereof."

5. The finding of the Tribunal in favour of the assessee is based first of all on the applicability of section 12(4) which was held to cover the case of a lease of property like the Imperial Hotel, which was in fact constructed as a hotel and, after being run by the assessee himself for some time, was leased as a going concern with furniture, fittings crockery etc., to the present lessee. Having found this item of the assessees income to fall under section 12(4), the Tribunal held that the resurfacing of the roadways appurtenant to the hotel buildings amounted to current repairs within the meaning of section 10(2) (v), since the repairs had become necessary in the ordinary course of the user of the premises and the premises were still in use. The argument put forw