TMI Blog2007 (2) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of rent or for some other business consideration. The land in question is inheritable also as per the terms and conditions of the agreement with MIDC. Therefore, considering the terms of agreement as a whole, we hold that the consideration paid to MIDC as a price for obtaining the leasehold rights for a period of 99 years from MIDC in favour of the assessee. Considering the totality of the facts and circumstances of the case and the terms of the agreement entered into between the assessee-company and MIDC as a whole, we hold that the consideration paid by the assessee-company for obtaining the leasehold rights from MIDC in favour of the assessee for a period of 99 years is capital in nature and therefore, not allowable as deduction to the assessee. The decision of the Hon ble Supreme Court in the case of CIT v. Panbari Tea Co. Ltd. [ 1965 (4) TMI 19 - SUPREME COURT] , Durga Das Khanna v. CIT[ 1969 (1) TMI 1 - SUPREME COURT] , Aditya Minerals (P.) Ltd. v. CIT[ 1999 (9) TMI 2 - SUPREME COURT] and Hon ble jurisdictional High Court in the case of CIT v. Khimline Pumps Ltd. [ 2002 (9) TMI 94 - BOMBAY HIGH COURT] would squarely apply to the facts of the case of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the CIT(A) erred in directing to allow as business expenditure the foreign tour expenses of Rs. 2,11,603." The Ld. CIT (Departmental Representative) submitted that the Assessing Officer has detailed reasons for disallowing foreign tour expenses of Mrs. A.V. Shah in the assessment order. He submitted that the assessee has failed to file any evidence to show that the tour of wife of the Chairman of the assessee-company was for business purposes of the assessee. He relied on series of decision of CIT v. T.S. Hajee Moosa Co. [1985] 153 ITR 422 (Mad.), Sarabhai Technological Development Syndicate (P.) Ltd. v. CIT [2002] 254 ITR 84 (Guj.), Modi Industries Ltd. v. CIT [1977] 110 ITR 855 (All.), Ram Bahadur Thakur Ltd. v. CIT [2002] 257 ITR 289 (Ker.) in support of his argument. The Ld. Counsel for the assessee submitted that the facts of this year are identical with that of the facts in the earlier years in the case of the assessee and the issue has been decided by the Tribunal in favour of the assessee throughout in the preceding years. He submitted that Tribunal has decided in favour of the assessee in assessee s own case for the earlier assessment years 1987-88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 10,000 is only allowable in respect of the assessment year under consideration. The CIT(A) has taken a view that the expenditure of Rs. 10,000 is allowable in respect of each year of assessment for which representative fees is paid by the assessee to its authorized representative. In this case, the authorized representative have rendered service contemplated under section 40A(12) for a number of assessment years and in respect of each year expenditure of Rs. 10,000 is allowable. The Ld. Counsel for the assessee has relied on the decision of the Mumbai Tribunal in assessee s own case in the earlier assessment year 1991-92 and decision of Calcutta Tribunal in the case of Asstt. CIT v. Birla Buildings Ltd. [1992] 43 ITD 586. The Ld. CIT (Departmental Representative) could not controvert the submission of the Ld. Counsel for the assessee. We have considered the rival submissions. The issue of allowability of expenditure of Rs. 10,000 for each year of assessment for which representation fees has been paid to the authorized representative by the assessee, is covered in favour of the assessee with the decision of the Mumbai Tribunal in assessee s own case for the earlier asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1989-90 [IT Appeal No. 8601 (Bom.) of 1992]. We have considered the rival submissions and have perused the details of Project Development expenses. We find that the issue of allowability of project development expenses is covered in favour of the assessee with the decisions of the Mumbai Tribunal relied upon by the Ld. Counsel for the assessee. Accordingly the issue being covered in favour of the assessee, is decided in favour of the assessee and the ground of Appeal No. 6 of the revenue is dismissed. 10. The Ground of Appeal No. 7 of the revenue is as under : "7. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 30,660 made by the Assessing Officer being the payments made to clubs." The Ld. CIT (Departmental Representative) has relied on the order of the Assessing Officer. He submitted that the provisions of section 40A(9) should apply to the facts of the case with regard to disallowance of payments to the clubs. The Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee with the decision of the Mumbai Tribunal in assessee s own case for the assessment years 1985-86, 1990-91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 15 of the assessment order in support of his argument. The Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee with the decision of Mumbai Tribunal in assessee s own case for the earlier assessment year 1991-92. He relied on the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802, Hon ble Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 and Hon ble Bombay High Court in the case of Premier Automobiles Ltd. v. CIT [1971] 80 ITR 415. We have considered the rival submissions. We find that the assessee-company has debited the amount of Rs. 1.31 crores towards discount and finance charges. The assessee-company has taken short term loan from Allahabad Bank by issuing commercial papers. The issue of allowability of discount charges on issue of commercial papers for raising short term loan is covered in favour of the assessee with the decision of Mumbai Tribunal in assessee s own case for the earlier assessment year 1991-92. The issue being covered with the decision of the Co-ordinate Bench of the Tribunal in favour of the assessee, is decided in its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer referred to the decision of the Hon ble Karnataka High Court in the case of CIT v. H.M.T. Ltd. [1993] 203 ITR 820 , relied upon by the assessee and observed that the decision of Hon ble Karnataka High Court has not been accepted by the revenue and the matter is pending before the Hon ble Supreme Court. The assessee went in appeal against the order of the Assessing Officer and the CIT(A) concluded that the payment of Rs. 2.04 crores was an advance rent paid by the assessee for the land to the MIDC for the reason that the entire amount of Rs. 2.04 crores cannot be treated as capital expenditure as the assessee did not acquire any ownership of the property. The assessee is a lessee and the said lease is transferable and renewable at the option of the lessor. The CIT(A) agreed with the decision of the Hon ble Karnataka High Court in the case of HMT Ltd. ( supra ) that it was rent paid in advance. The CIT(A) held that since it was an expenditure relatable to 99 years, it should be allowed on proportionate basis. The CIT(A) disagreed with the assessee that once expenditure is held as revenue, it has to be allowed in one year. He relied on the decision of Hon ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Asstt. CIT [IT Appeal No. 1769 (Pune) of 1990] has considered this very issue and also the decision of the Hon ble Karnataka High Court in CIT v. HMT Ltd. [1993] 203 ITR 820 . In the case of Devi Construction Co. ( supra ) the assessee has claimed expenditure of Rs. 1,25,000 being a premium paid to MIDC for premium on lease hold land. The assessee claimed the lease premium as in the nature of advance rent. The period of lease in this case was for 99 years and the lease was also from MIDC as in the case of the assessee. Pune Tribunal held that the expenditure claimed by the assessee-company was capital in nature. Pune Tribunal has recorded that the decision of the Karnataka High Court in the case of HMT Ltd. ( supra ) is distinguishable in the sense that the High Court has proceeded on the finding of fact recorded by the Tribunal that the payment of MIDC was the future rent of the land. The Ld. CIT (Departmental Representative) submitted that the ratio of the decision of the Pune Tribunal in the case of Devi Construction Co. ( supra ) is applicable to the case of the assessee since the facts of the case of assessee are identical with that of the case of Devi Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the payment for acquisition of leasehold rights. He referred to various clauses of terms and conditions of the agreement dated 5-3-1992 entered into between the assessee-company and the MIDC, copy of which is filed in the compilation before the Tribunal. He submitted that the decision of Hon ble Karnataka High Court in the case of HMT Ltd. ( supra ) is applicable to the facts of the case of the assessee. He relied on the decision of Hon ble Madras High Court in the case of CIT v. Gemini Arts (P.) Ltd. [2002] 254 ITR 201 . He submitted that the assessee is only a licensee as per the terms and conditions of agreement dated 5-3-1992 and no lease agreement has been entered into with MIDC till date. He submitted that in fact the rent of Re. 1 per annum is not an economic rent and hence amount of Rs. 2.04 crores is substitution of rent for longer period. He relied on the decision of Hon ble Supreme Court in the case of CIT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468 . He submitted that the terms and conditions of the agreement dated 5-3-1992 shows that the vacant possession of the land has to be handed over to MIDC after the expiry of lease period of 99 years. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine all the facts and circumstances of the respective case. In case it is found that as a matter of fact the amount paid for acquisition of leasehold rights of the premises was in the nature of advance payment of rent for future years and is revenue in nature, then the same has to be allowed on proportionate basis in respect of amortization of payment for acquisition of leasehold rights. In case it is found as a matter of fact that the amount for acquisition of leasehold rights were paid as "premium" or "Salami", the same shall be capital in nature and shall not be deductible. 21. In the case before us the lease is for a period of 99 years, which is as good as a perpetual lease in favour of the assessee. There is no material on record to suggest that the amount of Rs. 2.04 crores paid to the Government concern MIDC was an advance payment of rent for the period of lease paid in lump sum by the assessee-company. The terms of agreement dated 5-3-1992 entered into between assessee-company and the Government body M/s. MIDC clearly mentions that a sum of Rs. 2.04 crores is the amount of deposit to be adjusted towards "Premium" payable by the licensee for the allotment of 50 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the same cannot be considered as advance payment of rent. There is no clause in this agreement to show that the amount of Rs. 2.04 crores was paid by the assessee as advance rent for all future years and the lump sum payment of future year s rent has been paid to avail some concession for advance payment of rent or for some other business consideration. The land in question is inheritable also as per the terms and conditions of the agreement with MIDC. Therefore, considering the terms of agreement dated 5-3-1992 as a whole, we hold that the consideration of Rs. 2.04 crores was paid to MIDC as a price for obtaining the leasehold rights for a period of 99 years from MIDC in favour of the assessee. 22. The decision of Hon ble Karnataka High Court in the case of CIT v. HMT Ltd. [1993] 203 ITR 820 relied upon by the assessee, is distinguishable since the Hon ble Karnataka High Court has proceeded on the finding of fact recorded by the Tribunal that the payment to MIDC was the future rent of the land. In the case of Devi Construction Co. v. Asstt. CIT [IT Appeal No. 1769 (Pune) of 1990] the Pune Tribunal has decided the issue in similar facts in favour of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement as a whole, the expenses incurred by the assessee for obtaining the leasehold rights were capital in nature and therefore not allowable as deduction. The facts of the case of Sudershan Chemicals Ltd. ( supra ) are similar to the facts of the case of the assessee before us. In the case of Sudershan Chemicals Ltd. ( supra ), the lump sum payment was made by the assessee-company to MIDC for acquisition of leasehold rights for the land for 99 years. In the case of Pancham Acquaculture Farms Ltd. v. ITO [IT Appeal No. 3742 (Mum.) of 2004 (SMC)] allowing amortization of leasehold premium paid for acquiring leasehold rights for a period of 21 years. We find that the Ld. Single Member of the Tribunal has followed the decision of Hon ble Madras High Court in the case of CIT v. Gemini Arts (P.) Ltd. [2002] 254 ITR 201. We have already discussed the decision of Hon ble Madras High Court in the case of Gemini Arts (P.) Ltd. ( supra ) and is distinguishable since the Hon ble Madras High Court has proceeded on the fact that the payment of rent was made in lump sum for the entire duration of the lease period. Another case relied on by the Ld. Counsel for the assessee is of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m paid to obtain land on lease can be claimed as revenue expenditure. The assessee in this case had taken a plot of land for a period of 30 years on lease and a premium of Rs. 62,500 was payable in 12 equal monthly instalments. The Hon ble Madhya Pradesh High Court held that it is apparent that the assessee obtained a right of enduring nature in the plot in question and in order to obtain this right it had to pay sum of Rs. 62,500 as premium and therefore, could not on the facts of the case be treated as advance rent. The payment of Rs. 62,500 was apparently in nature of salami payment in order to obtain the right of an enduring nature in the plot in question and was obviously in the nature of capital expenditure. 24. In the case of CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422 (SC), the facts were that the assessee-company has leased out two estates in consideration of premium and certain amount of annual rent. The premium was claimed by the assessee-company as capital receipt. The Assessing Officer held the same as revenue receipt. The Hon ble High Court held the receipt as capital receipt. On further appeal, the Hon ble Supreme Court examined the law pertaining to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor". In the case of Aditya Minerals (P.) Ltd. v. CIT [1999] 239 ITR 817 (SC), the facts were that the assessee obtained a lease for a period of 15 years at a monthly rent of Rs. 35 per acre. Clause-II of the lease deed stated that the lessee shall deposit with the lessor by way of guarantee for due performance of this lease deed for 15 years, the amount equal to rent of lease of land for the full period of lease and it will be adjustable against the rent of every month. This entire guarantee deposit shall not carry any interest payable to the lessee by the lessor. The lease deed granted to the assessee a liberty to use the land for excavation purpose and subsidiary purpose. The assessee claimed the rent amount worked out for the relevant assessment year as revenue expenditure. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights and therefore capital in nature. Alternatively, the Assessing Officer observed that at the highest, proportionate rent attributable to the assessee would be allowed. The Assessing Officer finally disallowed Rs. 45 lakhs as capital expenditure in the hands of the assessee. The Tribunal was of the view that since benefits of these expenditure of Rs. 45 lakhs would be exhausted in 71 years, the proportionate amount relatable to each year amounting to Rs. 63,380 per annum may be allowed as deduction on account of payment of rent for that year for 71 years. The matter went to the Hon ble Bombay High Court at the instance of Revenue which upheld the order of the Assessing Officer and held as under : "( i )allowing the appeal of the Department, that, having come to the conclusion that Rs. 45 lakhs was a capital expenditure, the Appellate Tribunal could not have directed the department to apportion the amount over a period of 71 years. ( ii )Rejecting the cross-objection of the assessee, that, on the facts, the Tribunal was right in coming to the conclusion that the sum of Rs. 45 lakhs constituted capital expenditure. The assessee was not the original lessee; the original lessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made the advance payment of rent for future years to secure any reduction in the rent payable for the future years or for any other business consideration. Considering the totality of the facts and circumstances of the case and the terms of the agreement dated 5-3-1992 entered into between the assessee-company and MIDC as a whole, we hold that the consideration of Rs. 2.04 crores paid by the assessee-company for obtaining the leasehold rights from MIDC in favour of the assessee for a period of 99 years is capital in nature and therefore, not allowable as deduction to the assessee. The decision of the Hon ble Supreme Court in the case of CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422, Durga Das Khanna v. CIT [1969] 72 ITR 796 (SC), Aditya Minerals (P.) Ltd. v. CIT [1999] 239 ITR 817 (SC) and Hon ble jurisdictional High Court in the case of CIT v. Khimline Pumps Ltd. [2002] 258 ITR 459 (Bom.) would squarely apply to the facts of the case of the assessee, and being binding in nature, we decide the issue in ground of Appeal No. 10 of the Revenue in favour of the Revenue and the ground of Appeal No. 10 of the Revenue is allowed and the issue referred to the Special Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai Tribunal in assessee s own case for the assessment year 1990-91, is decided in its favour and the addition made is deleted and the ground No. 2 of C.O. of the assessee is allowed. 30. The Ground No. 3 of C.O. of the assessee is as under : " Premium on leasehold land : Rs. 2,04,00,000 3.1 On the facts and in the circumstances of the case and in law, the CIT(A) erred in rejecting the claim made by the respondent for deduction of the sum of Rs. 2,04,00,000 being the lease premium paid to MIDC. 3.2 In rejecting the said claim the CIT(A) erred in not appreciating the fact that since the lease rent was only Re. 1 per annum, it was obvious that the sum of Rs. 2,04,00,000 stated as lease premium actually represented advance rent and was allowable as a deduction in the said year. 3.3 The CIT(A) further erred in not appreciating that as the facts in the instant case were identical to the facts before the Karnataka High Court in the case of CIT v. H.M.T. Ltd. 203 ITR 820 the ratio of the said judgment squarely applied and hence the entire premium paid amounting to Rs. 2,04,00,000 ought to have been allowed instead of allowing deduction proportionately over the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95-96. The Ld. CIT (Departmental Representative) submitted that the subsequent assessment years 1993-94 and 1994-95 are not pending before the Tribunal and therefore, no direction can be given for the allowability of the debts written off against the provision in the subsequent assessment years 1993-94 and 1994-95. 35. We have considered the rival submissions. The issue of direction for allowing the debts written off against the provision in the subsequent assessment years is covered in favour of the assessee with the decision of Mumbai Tribunal in assessee s own case for the assessment years 1990-91, 1991-92 and 1995-96. The issue of deduction for provisions for doubtful debts has been decided in favour of the Revenue due to retrospective amendment to the provision of section 36(1)( vii ) of the Act and the ground of Appeal No. 1 for the assessment year 1992-93 in the revenue s appeal has been allowed in favour of the Revenue. Accordingly the debts written off against the provision in the subsequent years has to be allowed in those years and accordingly we direct the Assessing Officer to consider the assessee s claim for deduction in subsequent years in respect of debts which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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