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2007 (9) TMI 437 - AT - Income TaxAcquiring a right in the property in the nature of tenancy rights - whether section 32(1)(ii) does have any application on the issue that to treat the premium paid by the assessee as an intangible asset eligible for depreciation? - Expression "licences"- Nature of Expenses "Capital or Revenue" incurred in repairing and maintaining the premises acquired on lease. HELD THAT:- In section 32(1)(ii), the expression "licences" have been provided in the company of expressions like know-how, patents, copyrights, trademarks, franchises which are in the nature of business or commercial rights. The tenancy rights acquired by the assessee cannot be equated with the licence provided u/s 32 so as to qualify it as an intangible asset eligible for depreciation. Therefore, we find that the lower authorities are justified in treating the premium amount not eligible for depreciation. The assessee has paid the premium to the vacating tenants. When the assessee is vacating the premises and giving it to new tenants, the assessee can collect the premium from the new tenants as the assessee had paid premium to the former tenants. That is the way of recovery, if at all necessary for the assessee to get back the amount of premium paid. It cannot be treated as intangible asset for claiming depreciation as provided u/s 32. The first ground is, therefore, decided against the assessee. Expenses incurred in repairing and maintaining the premises acquired on lease - Capital Or Revenue Expenditure - HELD THAT:- The expenses were incurred by the assessee for updating the facilities of water supply, electricity supply and other office arrangements. These expenses are in the nature of repairs and maintenance. Therefore, we find that the lower authorities are not justified in treating the sum as capital expenditure. The assessing authority is directed to treat the amount as revenue expenditure eligible for deduction. But, if any depreciation has been granted on the said amount, the same shall be withdrawn. In the result, the appeal filed by the assessee is partly allowed.
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