Ask what existed before the work and what exists after. Sections 30 and 31 allow repairs, but s.30(a)(ii) and s.31(i) allow only 'current repairs', and both sections carry an Explanation saying the amount does not include expenditure in the nature of capital expenditure. Current repairs means spending whose purpose is preserving or maintaining an asset that already exists, not renewal or restoration. If the work produces a substantially new asset, the deduction fails and the fall-back is depreciation.
There are three different doors, and which one you are at depends on the asset and on your relationship to it.
Section 30 deals with premises. It allows, in respect of rent, rates, taxes, repairs and insurance for premises used for the business: '(a) where the premises are occupied by the assessee— (i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the premises'. Read the two sub-clauses against each other. A tenant who has undertaken to bear the cost of repairs gets 'the cost of repairs' — the word 'current' is absent. An owner-occupier gets only 'current repairs'. The distinction is deliberate and it is the first thing to establish in a s.30 dispute.
Section 31 deals with machinery, plant and furniture used for the business, and allows 'the amount paid on account of current repairs thereto' and the insurance premium against risk of damage or destruction. There is no wider limb here — even a lessee of plant is confined to current repairs.
Both sections carry an Explanation in the same terms. The Explanation to s.30 declares that the amount paid on account of the cost of repairs in sub-clause (i), and the amount paid on account of current repairs in sub-clause (ii), 'shall not include any expenditure in the nature of capital expenditure'. Section 31 has an equivalent. So the tenant's wider limb is not a way of deducting a capital rebuild; it widens the kind of repair, not the character of the spend.
The leading authority on what 'current repairs' means is Ballimal Naval Kishore v. CIT. The Supreme Court began from the statutory language — the expression used is 'current repairs', not merely 'repairs' — and approved the test that current repairs means expenditure on buildings, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving or maintaining an already existing asset. On the facts, a cinema whose machinery, furniture, sanitary fittings and wiring were all replaced with new ones, along with extensive structural work, while it stood closed, had been totally renovated rather than maintained, and the outgo was capital. Note what made it capital: every item replaced something already there, so it was the scale of the work and the fact that the theatre was substantially remade, not the introduction of anything the cinema had never had.
That gives you two practical tests to run in order. Did the asset exist in working condition immediately before the work? If it was dysfunctional or dilapidated and the work made it usable, the spend looks like the creation of an asset rather than its preservation. And is the purpose renewal or restoration, or preservation and maintenance? Repairs attended to as and when the need arises answer the second test; a single planned overhaul across several heads usually does not.
When the claim fails under s.30 or s.31, do not abandon it. Two fall-backs remain. Where the spend is revenue in character but does not answer 'current repairs' — for instance recurring replacement of soft furnishing in a hotel — s.37(1) is available on its own terms, because s.37(1) applies to expenditure not being of a capital nature and not described in ss.30 to 36. Where the spend is capital, it goes into the block of assets and earns depreciation under s.32. What is not available is treating a capital rebuild as a deduction because the invoice says 'repairs'.
Under the Income-tax Act 2025, published mapping tables place old ss.30 and 31 in new s.28, old s.32 at new s.33 and old s.37(1) at new s.34. The further suggestion that old s.38 also goes into new s.28 was found on a single commentary index and carries less weight than the rest. All of it is commentary rather than a departmental notification, so check the bare Act before citing a new section number.
Repairs disallowances are among the most common adjustments in a scrutiny assessment and they are usually made on a single consolidated figure. Splitting the bill by asset and by purpose before the return is filed converts one large disallowance into a set of smaller arguments, several of which you will win. It also decides whether you are arguing for a deduction or for a depreciation rate, which is a very different negotiation.
I paid a foreign firm a lump sum for technical know-how that raised the yield of a product I was already making. The Assessing Officer says section 37(1) is shut because I bought an asset of enduring benefit. Is the payment capital?
Can a pharmaceutical company deduct the cost of gifts given to doctors?
I pay an annual fee to keep competitors out of my area. It recurs every year, so is it revenue expenditure?
My employee embezzled money from the business bank account. Can I write that off for tax?
I spent heavily doing up my premises and plant. Is that 'current repairs', or has the AO rightly called it capital?
My liability is certain but I cannot put a final figure on it yet and I will not pay it for years. Can I still deduct the provision?
I paid to have a railway station moved off my own mining lease so I could work the ground under it. Is that capital expenditure?
I bought the assets of my business and left part of the price outstanding on interest. Is that interest deductible as interest on borrowed capital?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
