08/01/2019
Expenses expressly allowed as deduction :-
1. Deduction in respect ol the following has been expressly allowed against profits and gains of business or profession
2. Rent, rates, taxes, repairs and insurance for building[Sec. 30]: In respect of premises taken on rent the actual rent paid by the assessee and, if he has undertaken to bear cost of repairs, the expenditure on repairs (not being capital expenditure from the assessment year 2004-05) are permissible deductions. In respect of premises owned by the assessee, no deduction is allowable on account of notional rent; amount spent on current repairs (not being capital expenditure from the assessment year 2004-05) is, however, allowed as deduction. Besides, the amount paid on account of land revenue, local rates and insurance premium against the risk of damage or destruction of the business premises are also allowable as business deduction under this section.
3. Repairs and insurance of machinery, plant and furniture [Sea 31]: The expenditure incurred on current repairs (not being capital expenditure from the assessment year 2004-05), in respect of the plant. machinery and furniturc used f or business purposes is allowable as deduction under this section. If, however, expenditure is incurred to bring into existence an advantage of an enduring nature or a new capital asset, it cannot be regarded as an expenditure on current repairs. Similarly, the premium paid in respect of insurance against risk of damage or destruction of such assets is an allowable deduction.
The Supreme Court in CITv. Sri Mangayarkarasi Mills (P.) Ltd. [2009] 182 Taxman 141 held that integrated process of manufacture of yarn in textile mill or for that matter inter-connection among the various machines does not take away the independent identity and distinct function of each machine. It held that each machine in a textile mill should be treated independently as such and not as mere part of an entire composite machinery of the spinning mill. On expenditure on replacement of one of the machines, the Apex Court ruled out deduction either as current repairs or under the residuary head as it termed it as a capital expenditure.
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