2007 (2) TMI 358 - ITAT MUMBAI

Deduction of 1/99th of the sum being proportionate rent in respect of amortization of payment for acquisition of leasehold rights - Lease for period of 99 years - HELD THAT:-We are aware that mere use of the word "premium" in the agreement shall not make the character of the amount paid to MIDC as "premium", if the combine reading of the agreement leads to some other conclusion. In this case, not only the word "premium" has been used in all relevant terms of the agreement with Government concern MIDC, but also considering the terms of the agreement as a whole it is clear that the amount paid as "premium" for acquisition of leasehold rights in the premises.

There is no clause in this agreement to show that the amount 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 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, 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 Bench by the President, Income-tax Appellate Tribunal is answered in the negative and in favour of the Revenue.

In the result, the appeal is dismissed.