T.V. RAJAGOPALA RAO, J.M. This is departmental appeal and it is filed against order of AAC, Vijayawada dt. 19th Oct.,1984 relating to asst. yr. 1982-83 for which previous year is Diwali year ended by 10th Nov., 1981. 2 . assessee is registered firm of 8 partners. Out of them six are majors and two are minors represented by their mother Smt.Yatirajavali Ratna Tayaru. They have taken on lease rice mill and raw boiled rice mill called Sri Sesharatnam Rice Mill, from one Mamidi Nageswara Rao. lease was taken under two lease deeds dt. 21 st Oct., 1980. Under first lease deeds plant and machinery was taken on lease on stipulation to pay rent of Rs. 41,000 per year besides bearing Rs. 500 towards Panchayat and revenue taxes. Under second lease deed building and land were taken on lease for Rs. 1,19,000 rent per year. period of lease under both leases was 5 years ending with 31st Oct., 1985. lessees ran mill under name Lokeswara Trading Corporation which is assessee before us. original of lease deed dt. 21 st Oct.,1980 under which plant and machinery was taken on lease was filed before us on behalf of assessee in paper compilation from pp. 13 to 20. It may be mentioned that both lease deeds were registered lease deeds. Para 4 of lease deed states that if within period of lease any part of machinery requires repairs and expenditure for those repairs does not exceed Rs. 200 said expenditure should be borne by lessees. However, if expenditure incurred for repairs over machinery exceeds Rs. 200, after carrying out lessees are entitled to recover expenditure over repairs from out of lease amount payable to lessor. Cl. 5 of lease deed says that if either for political causes or as act of his major if either machinery in mill or constructions in mill require more repairs lessees should intimate lessors. Thus repairs should be carried out by lessors within 30 days, and after showing particulars of repairs carried out, mill should be handed over to lessees. However, if within 30 days no sort of repairs were carried out then in such event after expiry of 30 days lessees need not pay any rent whatsoever to lessors. Cl. 6 of lease deed states that after expiry of lease deed lessees are obliged to hand over vacant possession of mill to lessors. expiry of lease takes place on 31st Oct., 1985. It is case of assessee that same mill was taken on lease by it as lessee under same terms and conditions even in previous years and for immediately preceding assessment year, viz., 1981-82, assessee claimed amount of Rs. 1,26,388 towards mill repair expenses and they were allowed by ITO while completing assessment without any demur. As per p. 2 of Annexure II of departmental paper compilation following are particulars of mill repairs incurred and allowed by ITO subsequent to assessment year now under consideration: Mill Mill Paddy Assessment majuries repairs Sl.No. worked in year received in incurred in mill year year 1. 2. 3. 4. 5. . . Qtls. Rs. Rs. 1982- 1. 83(year under 88,624 5,74,248 1,58,206 appeal) 2. 1983-84 1,11,819 8,72,468 1,61,549 3. 1984-85 1,41,452 9,37,372 1,33,782 . . . . and . . . . 32,790 4. 1985-86 74,079 7,18,789 1,36,488 5. 1986-87 1,12,417 13,74,756 1,46,080 As can be seen from above for assessment year under consideration assessee claimed Rs. 1,58,206 towards incurring expenditure for repairs and maintenance of mill. Particulars of repairs and maintenance expenses are as follows: . . Rs. P. 1. Timber 7,065.25 2. Tapi workers 7,105.50 3. Neparallu, Cooli 4,910.50 4. Arapoosa 2,060.40 Boiled baskets, brooms, busk 5. 8,153.05 baskets, etc. 6. Current materials and oils 7,915.58 7. Coarse and red soil, etc. 3,062.00 8. Iron Bowls 449.62 9. Shafts 3,373.00 10. Foundry Majuri 4,805.00 11. Huller sheets 1,740.50 Mill Beltings and Paddy Drier 12. 16,347.56 Belts, etc. 13. Sheller, Rubbers, etc. 31,874.93 14. Iron Sheets 8,492.90 15. Bricks, Paints 4,963.00 Bearings, Polish sheets, Pullies, 16. Grease, Bolts and Nuts, Bolt 58,788.29 Buckets,Emery, Cement and Salt . . 1,58,206.57 Out of above without mentioning items ITO considered that amount of Rs. 32,000 would be considered as capital investment. ITO took note of fact that assessee firm took lease of Sri Sesharatnam rice Mill for five years and current year ending with 11th Oct., 1981 would be first year of lease deed. He spread over expenditure of Rs. 30,000 for five years period and deleted Rs. 6,000 from Rs. 30,000 and added Rs. 24,000 in taxable income of assessee firm for asst. yr.1982-83 and completed assessment dt.10th Jan., 1982 on total income of Rs. 97,800 under s. 143(3). 3. assessee firm appealed to AAC, Vijayawada. It was contended before him that for immediately preceding asst. yr. 1981-82 appellant took on lease same rice mill and sum of Rs. 1,26,388 was claimed and allowed on account of maintenance and repairs of mill. agreement of lease for earlier assessment years and clauses in agreement for present lease are similar, contended assessee. There was no disallowance ordered by ITO in earlier years. AAC from records stated to have gathered that expenditure mentioned in Annexure 14 of income-tax return filed on 23rd June, 1982 appeared to ITO capital in nature and therefore he made disallowance under consideration. He found five items in said annexure: . . Rs. 1. Timber 7,015 2. Tapi workers 7,105 3. Neparallu, Coolie 4,910 4. Iron Sheets 8,492 5. Bricks, Paints 4,963 AAC held that though some of items would last for more than 1year that does not mean that expenditure on those items is of capital nature. In fact, entire amount of Rs. 1,58,207 was claimed on account of repairs of mill. When ITO had accepted fact that appellant firm was required to spend for repairs, there is no good reason for segregating some of items as capital expenditure. There is no provision in IT Act through which ITO can allow 1/5th of such allowance and defer allowance of same for future years. AAC felt either amount claimed has to be allowed in full or to be disallowed. He further held from fact that assessee was required to run rice mill throughout year for which repairs were necessary and while repairing rice mill there will be expenditure on some items like iron sheets, bricks, timber etc., it is not correct to treat such expenditure as expenditure of capital nature. Therefore, AAC directed ITO to allow sum of Rs. 1,58,206 in full. 4 . As against said decision of AAC Department came up in appeal before Tribunal. In ground raised by Revenue it is stated that whole of expenditure of Rs. 1,58,206 should have been disallowed by AAC. On merits it took stand by another ground that as per records available ITO ought to have disallowed whole expenditure inasmuch as per terms of lease agreement only expenditure upto 200 rupees should be borne by assessee and exceeding that limit, expenditure towards repairs though borne in first instance by assessee should be debited to lease account and should be adjusted towards lease amount. 5. We have heard Shri N. Santhanam, ld. departmental representative and Shri K.R. Krishnamurthy, ld. representative for assessee. At time of hearing, assessee filed preliminary objection stating that inasmuch as relief granted to it by AAC was Rs. 24,000, only that could form subject- matter of appeal before Tribunal.But ground dealing with disallowance of entire expenditure, viz., Rs. 1,58,907 should not be entertained by Tribunal as it is new ground neither processed nor considered by any of lower authorities. On other hand, ld. departmental representative sought to contend that he is entitled to dispute allowance of entire amount of Rs. 1,58,207 in second appeal before us. 6. After hearing both sides it appears to us that assessee's counsel is perfectly justified in raising this preliminary objection. Before answering preliminary objection either way we have to identify what is amount of subject-matter of appeal before us. ITO disallowed only Rs. 24,000 from out of Rs. 1,58,207. assessee went in appeal and got relief even with regard to disallowance of Rs. 24,000. Now second appeal is filed before this Tribunal against said decision. Therefore, it is clear that it is only Rs. 24,000 Tribunal against said decision. Therefore, it is clear that it is only Rs. 24,000 disallowance which forms subject-matter of appeal. We fully agree with Shri Krishnamurthy when he contended that question of total disallowance of Rs. 1,58,207 does not therefore arise from either of orders of lower authorities because it was not considered by any of them. In Chaturvedi and Pithisaria's Income-tax Law, 3rd Edn., 5th volume, p.4347, ld. authors stated as follows: "It would not be permissible for Tribunal to adjudicate or give finding on question which was not agitated or in regard to which no relief was claimed before lower authorities or which was not in dispute and which does not form subject-matter of appeal. It is thus clear that Tribunal has no jurisdiction to found its decision on question which was not subject of dispute at any stage of proceedings and is not subject-matter of appeal." In CIT vs. Krishna Mining Co. (1977) 107 ITR 702 at 707-708 (AP) facts are that ITO made addition of Rs. 99,984 on account of under valuation o f closing stock. first appeal there against was substantially rejected. On further appeal Tribunal adopting method of revaluation concluded that sum of Rs. 10,644 alone is to be added. Thereafter assessee filed rectification petition. In disposing of rectification petition Tribunal observed that according to method adopted by it computation would result in deduction of profit of Rs. 83,169 instead of addition. But relief granted to assessee was restricted only to addition of Rs. 99,984 as it was not competent to go further into matter and give greater relief to assessee that it had asked for. Ultimately Tribunal's order was upheld by High Court. 7. We uphold objection and hold that subject-matter of appeal is confined only to consider whether there was justification for disallowance of Rs. 24,000 towards mill repairs. ld. Departmental representative promptly brought to our notice cl. 4 and cl. 5 of lease deeds which we have translated and extracted in above paras. In view of those two terms of lease deed it was argued that repairs required to machinery over and above Rs. 200 should be borne by lessors and when such is condition in lease deed assessee who is only lessee of mill cannot claim deduction of Rs. 24,000. On other hand, Sri Krishnamurthy brought to our notice affidavit dt.16th March, 1985 filed by lessors as well as lessees. It was affirmed that cl.4 of lease deed is ill drafted. real understanding between parties is that mill must be handed over to owners at end of lease period in same working condition and order as it was taken on lease by lessees. In view of this position, cl.4 was never adhered to and remained as dead letter. It is also stated that if said clause was followed literally it would have given rise to anomalous situation where-under owners of mill might have to pay substantial amounts to lessee firm every year far exceeding annual rental of Rs. 41,000. It is also reiterated that cl.4 is hollow and casual reproduction of similar clauses in lease deeds normally written by scribe since long past without proper understanding of real intention of partners concerned. He also brought to our notice that ITO who raised objection for allowing mere Rs. 24,000 for asst. yr.1982-83 allowed much more sums towards repairs expenses incurred in subsequent assessment years as already shown in table furnished in above paras. Therefore, it is sought to be contended that cl.4 of lease deed was never acted upon or intended to be acted upon and it was provided in routine manner by scribe without gathering intention of parties or without himself knowing implications thereof and so it should be ignored. 8 . Having heard both sides we cannot accept arguments that recitals in registered lease deed can be ignored at mere asking or simply because affidavit of parties to deed was filed before ITO. lease deed evidences agreed terms at time of lease. Men may lie but circumstances would not. Therefore, we have to give greater importance to documents rather than to oral versions sought to be adopted for purpose on hand. However, even if we give effect to cl.4 of lease agreement in absence of ITO mentioning particulars of items representing Rs. 24,000 it is difficult to arrive at finding whether those Rs. 24,000 really represent repair expenditure or expenditure incurred for bringing asset into existence which is very essential for conduct of business of assessee and in which case it must be considered as revenue expenditure in his hands. AAC held that following five items might have been considered by ITO while disallowing Rs. 24,000: . . Rs. 1. Timber 7,065 2. Tapi workers 7,105 3. Neparallu, Coolie 4,910 4. Iron sheets 8,492 5. Bricks, paints 4,963 In whatever way either timber, iron sheets, or Napa slabs and bricks and paints were used, it cannot be said that they were intended only for repairs. We are of opinion that much is to be read into facts as to why ITO did not elaborate his reasons for disallowance of expenditure worth Rs. 24,000 even after obtaining particulars from assessee for expenditure of Rs. 1,33,781.65. Page 3 of paper compilation filed by assessee would show that ITO sought particulars constituted by total of mill repair account by letter dt. 16th Jan., 1985. Extension of Kallam may asst. yr. strictly come under repairs of existing Kallam. But, however, as assessee is only lessee we have yet to consider whether such extension even if it secures advantage for some years is revenue expenditure or capital expenditure. InCIT vs. Kirkend Coal Co. (1970) 77 ITR 530((SC))the question was whether company which carried on business of coal mining and which incurred expenditure on stowing operations was entitled to for its deduction as business expenditure. Tribunal found it as fact that stowing is operation carried out in process of extraction of coal and unless it is carried out extraction of coal is not possible, irrespective of whether depillaring had been done or not. Supreme Court held that expenditure incurred by assessee in stowing operations is revenue expenditure allowable as deduction. InCIT vs. Rama Krishna Steel Rolling Mills (1974)95 ITR 97(Del)a lease was taken for period of five years, without option for extension. There was no provision in first instance in lease deed regarding liability of assessee for repairs. However, there was subsequent letter to effect that repairs were assessee's responsibility(lessee's). There was heavy expenditure on repairs to roof of premises in second year. question is whether expenditure is allowable as repairs and as business expenditure. Delhi High Court held on facts that recitals in lessor's letter did not in any way vary or contradict terms of lease deed but only expressed agreement of parties on point on which lease deed itself was silent and taking into account fact that assessee without requiring lessor in first instance to carry out repairs had expended disproportionately high amount of expenditure on repairs during second year of lease, lease itself being for five years, along with letter, Tribunal could have come to conclusion that even at time of lease deed assessee had undertaken to carry out repairs of factory premises and that, therefore, assessee's claim was allowable under s. 10(2)(ii) of IT Act. 9 . It is contended before us that in fact expenditure was incurred for repairs of some of machinery as well as building. repairs were carried out in order to put mill in working condition and hence expenditure incurred should be allowed to assessee as revenue in nature. Shri Krishnamurthy also cited decision of Madras High Court in CIT vs. Dasaprakash (1978) 114 ITR 21(Mad). In that case assessee was doing hotel business and expenses were incurred in putting decorated mirrors on walls, plaster-moulded roof, plywood panels, etc., in reception-cum-dining halls with object to keep place fit and attract customers. It was held that expenditure was only revenue in nature and allowable as deduction. He also cited and relied upon Allahabad High Court decision in Girdhari Dass and Sons vs. CIT 1975 CTR(All)156:(1976) 105 ITR 339(All). In that case assessee was carrying on business in rented building and he carried out repairs to building with consent of landlord. cost of repairs amounted to Rs. 10,000 and odd in asst. yr. 1964-65, Rs. 9,000 in asst. yr. 1965-66 and Rs. 1,000 in 1966-67. Tribunal recorded finding that assessee must have made some structural changes in shop and held that expenditure was allowable neither as and expenditure on current repairs under s.37 as it was expenditure of capital nature. Allahabad High Court held that expenditure incurred by assessee on renovating, furnishing or remodelling of business premises can be allowed as deduction under s. 37 if expenditure is not capital expenditure. When owner incurs expenditure on addition or alteration in building it enhances its value and expenditure can be of capital nature. But if tenant incurs expenditure on rental building on its renovation and alteration he does not acquire any capital asset, because building does not belong to him. Ordinarily, such expenditure would be of revenue nature. 10. On other hand, ld. departmental representative contended that we are not concerned in this case whether expenditure is capital or revenue but we are concerned as to whether cl.4 of lease agreement executed between parties which governs treatment of expenditure, whether it should be allowed in hands of assessee who is lessee or lessors, when assessee is entitled to get reimbursement from lessors where is t h e question of allowing it as revenue expenditure ld. departmental representative asks. 11. After considering arguments on both sides we are of view that case law cited by Shri Krishnamurthy is besides point and does not govern real point in issue. In this case we cannot ignore cl.4 of lease deed. Admittedly expenditure was incurred towards mill repairs. If so, assessee is entitled to get reimbursement of expenditure from lessors. In such event same expenditure cannot be allowed as revenue expenditure in hands of assessee. We, therefore, set aside order of AAC and hold that Rs. 24,000 should be disallowed in hands of assessee and it should be added to total income of assessee for asst. yr.1982-83. In result, appeal is allowed. *** INCOME TAX OFFICER v. LOKESWARA TRADING CORPORATION