TMI Blog2015 (5) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal was dealing with four Appeals and out of which two were filed by the assessee and two were filed by the revenue. They pertain to two assessment years 2003-04 and 2004-05. 3. Mr. Suresh Kumar appearing for the revenue in support of this Appeal submits that the substantial questions of law as proposed and from page 7 of the paper book arise for determination and consideration in the admitted factual backdrop. He would submit that the company is engaged in the business of manufacturing and selling petrochemicals. It filed a return of income on 29th November, 2003 declaring gross total income of Nil and which was revised later declaring a total loss of ₹ 17,56,66,329/-. 4. The Assessing Officer noticed that the assessee company had treated ₹ 38,62,33,200/- as a capital receipt on account of sales tax exemption granted by the Government of Gujarat, for establishing industries in the backward area of the Gandhar. The Assessing Officer did not accept the contention of the assessee company that the sales tax exemption was a capital receipt not chargeable to tax and determined this amount as a revenue receipt. 5. We need not advert to the rival contentions on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. More so, when the factual position is identical to earlier assessment years and has not undergone any change. 10. Then, Mr. Suresh Kumar addressed us on the question no.(C). He submits that the factual position is not in dispute. However what the asssessee company did was to terminate the build, own, operate, transfer contract with M/s. Dodsal Ltd. for its Dahej to Vadodra Pipeline Project by making one time payment of ₹ 102,03,43,311/-, then, the assesse company had purchased a commercial right to operate and maintain the to terminate the build, own, operate, transfer contract with M/s. Dodsal Ltd. for its Dahej to Vadodra Pipeline Project by making one time payment of ₹ 102,03,43,311/-, then, the assesse company had purchased a commercial right to operate and maintain the pipeline. Therefore, such asset was clearly capital in nature. Mr. Suresh Kumar submits that even the question no. (D) is a substantial question of law because the Tribunal erred in allowing the entire expenditure of ₹ 1,07,02,2000/- incurred by the assessee company in respect of registration fees and stamp duty paid on the lease transactions entered by it with ICICI Ltd. This could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has resulted in commercial advantage or benefit of enduring nature to the assessee in the form of operation and maintenance of the pipeline. The Assessing Officer was of the view that after termination of the agreement with M/s. Dodsal Ltd. and making one time payment of ₹ 102,03,43,311/-, the rights which are vital for operation and functioning have been acquired. 13. The matter was, therefore, carried by the assessee and aggrieved by such a view of the Assessing Officer. The assessee was held to be entitled to only benefit of depreciation at half of the eligible rate. The balance sum was added back to the total income of the assessee. The Commissioner of Income Tax (Appeals) confirmed the order of the assessing officer. 14. The aggrieved assessee, therefore, approached the Tribunal and the Tribunal's attention was invited to the judgments of the Hon'ble Supreme Court right from the case of Assam Bengal Cement Co. V/s. CIT (1955) 27 ITR 34 and equally the judgment in the case of Madras Auto Service (supra) where very extensive arguments were canvassed. The Tribunal found that the contract with M/s. Dodsal Ltd. was of December 1995. Pursuant thereto, Dodsal buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under an agreement of lease dated 1-2-1966, the assessee obtained from M/s Hajira Comer and Mrs Rabia Bai Razack a lease of premises Nos 64 and 64/1 situated at Sri Narasimharaja Road, Bangalore for a period of 39 years commencing from 1-1-1966. Under the terms and conditions of the lease, the lessee (that is to say the assessee), had the right to demolish at its own expense the existing premises and appropriate to itself all the material thereof without paying to the lessors any compensation and construct a new building thereon to suit the purpose of their business as per the plan approved by the lessors Under clause 2 of the lease deed, the lessee was required to pay a rent of ₹ 1,000 per month for the first fifteen years, ₹ 1,500 per month for the next ten years, ₹ 1,650 per month for the next ten years and ₹ 2,000 per month for the remaining years. The lease deed further provided that the new construction shall, right from the commencement of the work, be the property of the lessors; and upon completion of the work of construction the lessee will have only the right to be a tenant for a period of 39 years under the existing lease subject to the payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lump sum payment brings in a capital asset, then, that puts the business on another footing altogether. Relying upon the second test enumerated above, learned counsel for the appellant has submitted that the assessee got enduring benefit of a capital nature by spending the amount because the assessee obtained a new building for a period of 39 years. The difficulty, however, in the present case, arises from the fact that this building was never to belong to the assessee. Right from inception, the building was of the ownership of the lessor. Therefore, by spending this money, the assessee did not acquire any capital asset. The only advantage which the assessee derived by spending the money was that it got the lease of a new building at a low rent. From the business point of view, therefore, the assessee got the benefit of reduced rent. The High Court has, therefore, rightly considered this as obtaining a business advantage. The expenditure is, therefore, to be treated as revenue expenditure. All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and, therefore, acquired a new and different advantage and which is of optimum user and expenditure of relocating and to the tune of ₹ 24.87 lakhs was capital in nature. 19. We are unable to agree with Mr. Suresh Kumar. In paras 40 to 45 of the impugned order, the Tribunal found that there is absolutely no change in the position and which it noted in para 45. It held that the reactor which was installed at a new place is the existing one. It was procured by the assessee in the year 1999. The revenue has not disputed the fact that the reactor was located at a place where it was originally installed. But it was not functioning for some time. Hence, the same reactor was relocated within the factory premises for optimum use. This Court had in the case of CIT V/s. Abbott Laboratories (I) Pvt. Ltd. reported in (1993) 202 ITR 818, the judgment which has been relied upon had dealt with such an issue. That when the expenditure is incurred by the assessee for rationalizing, better administration and modernization of its machinery with a view to obtain maximum benefit out of the existing resources, even that expenditure is allowable in nature. It could not be treated to be a capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question is not substantial question of law. 22. In relation to this question, we find that it is the assessee company which raised the issue and of deduction. The deduction was of certain expenses incurred. The assessee submitted before the Tribunal that these are not matters where it could be said to be incurring any expenses but merely reimbursing the staff association. In that regard, what the Tribunal has relied upon is the contribution of ₹ 40,25,388/- to various clubs ran by and meant for the employees at Dodsal and other stations and sums were paid as an employer and which are not allowable. The stand of the assessee was that this expenditure was incurred to facilitate the management of various activities of employees or their family. The Tribunal considered the arguments and particularly that in the earlier assessment years the very issue was considered by it and that the Commissioner merely relied upon this view in allowing the assessee's claim. The Tribunal has not rendered any independent conclusion but followed and applied its earlier view. It held that there is no difference in the facts and circumstances. 23. However, we are of the prima facie view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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