The legal position that emerges from a number of cases decided by the Delhi High Court alone is that

in case of a tenant-
assessee, even a substantial restructuring or reconstruction would constitute "repairs" within the meaning of section 30(a)(i) of
the Act. Thus, in the case of Instalment Supply P. Ltd. vs. CIT (1984) 40 CTR (Del) 313 : (1984) 149 ITR 52 (Del), the
assessee, a private company, engaged in the business of agents for sale and hire purchase of motor vehicles and trucks, had
taken on lease certain premises which it had occupied for over 25 years. The assessee spent a sum of Rs. 47,186 for
redesigning, marble flooring, better fittings and wood-work. The redesigning consisted of converting a large number of small
rooms into one big hall more suitable for office purposes. On the question of allowability of claim made by the assessee on
account of repairs, the Assessing Officer as well as the Tribunal held that since it was a case of complete change of structure,
therefore, the amount spent on redesigning could not be regarded as expenditure on account of repairs. Similarly, the amount
spent on marble flooring was held to be a capital expenditure for bringing into existence an asset of enduring nature.

However, when the controversy came up before a Division Bench of the Delhi High Court in the instant case, the Court, holding
the Tribunal's finding as quite erroneous, allowed the entire claim of the assessee under section 30(a)(i) of the Act. The
question of the repairs, emphatically pointed out by the Court, had to be considered in the larger context of business necessity
or expediency. The structural changes made by the assessee by converting small rooms into one big hall could not be in the
nature of creation of a capital asset. The assessee had obtained an advantage in a commercial sense, conceded the Court, by
redesigning the premises and providing better fittings, better material and marble flooring. An expenditure incurred by a tenant
towards repairs, even though it might be in the nature of capital expenditure, would be in the nature of allowable expenditure
under section 30(a)(i) if it was in relation to the commercial activity of the assessee, emphatically concluded the Delhi High
Court.

It seems that in arriving at its finding, the Court in Instalment Supply P. Ltd.'s case referred with approval to its earlier decision
in the case of CIT vs. Jagat Cinema (Bareilly) (1971) 81 ITR 488 (Del) where the amount spent by a tenant of cinema-hall
towards the reconstruction of the lintel and widening of the stage and the screen was held to be deductible under section 30(a)
(i). The two factors which influenced the Court in formulating its opinion were that the repair works were done in the last year of
the period of lease and that there was nothing to show that the tenant-assessee was entitled to remain in possession of the
cinema hall on the expiry of the period of lease or that the assessee was entitled to any compensation from the lessor for the
amount spent on repairs.

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