| 21/11/2008 |
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| Board of Special Commissioners - Cases |
| Case No. 39/58 |
Decided: 20 December, 1958 |
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Deductibility of expenses in respect of ordinary and extraordinary repairs of leased property
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Appellant, as landlord, had entered into a lease agreement in terms of which the tenants were to effect all outside and inside repairs, while all improvements to the buildings were to remain for the benefit of the owners.
Revenue argued that the deduction allowed in terms of the Maintenance and Repair Rules was due to whoever met the expenditure and not to the landlord. Besides, the deduction could only be allowed if the expenditure was actually incurred: the 5% allowance claimed by appellant was therefore refused.
The Board rejected the Commissioner's decision stating that the income, on which standard rates in respect of maintenance and repairs were applied, was clearly the rental income accruing to the landlord. The Board also rejected the Revenue's assertion that the standard deductions were only due in those years in which expenses had effectively been incurred. Standard allowances were held to be deductible year after year, irrespective of the actual expenditure incurred in any particular year.
The Board further stated that in terms of the lease contract, no ordinary repairs could be incurred by the landlord. It was true that extraordinary repairs were not mentioned in the contract, but extraordinary repairs were capital in character and hence not deductible, even if the landlord eventually had to incur such expenses.
Since the landlord could not be liable to meet ordinary repairs, and since extraordinary repairs were not deductible, the Board refused to allow the standard rate deductions to appellant.
An appeal was entered before the Court from this decision (see case no. 30).
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