TMI Blog1963 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharat Exchange Ltd., which carries on commission business by managing forward business in commodities and also runs a hotel. The dispute relates to the assessment years 1954-55, 1955-56 and 1956-57, the accounting years ending on the 31st of December, 1953, the 31st of December, 1954, and the 31st of December, 1955, respectively. On the 8th of October, 1952, the assessee-company took on lease the first and second floors of the building known as Coronation Hotel, Chandni Chowk, Delhi, for the purpose of carrying on its business. The building vested in the Custodian of Evacuee Property and the first and second floors were at that time in the occupation of a partnership firm styled S.L. Kapur Co., the partners of which were Maharaj Sahu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and subject to any bye-laws or rules in force for the time being) a tin or wooden shade over the open space on the portion reserved for the exchange (but not over the portion reserved for the hotel purpose) as well as wooden partitions inside only the bigger-sized rooms (and not in the smaller rooms) on the side of the building earmarked for the exchange (but not in the rooms in the portion reserved for the hotel). Such shade, partition or other structures shall be deemed to be an accretion to the building and shall not be liable to be removed by the lessee either on the expiration of the stipulated period of the lease or the sooner termination thereof or at any other time. Under this part of the lease agreement the assessee spent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for two years with the option of renewal, but that the nature of the expenditure was changed by the fact that the lease was in the first instance for only a period of two years. It was contended that since under the terms of the lease agreement the structures created as the result of this expenditure were to be treated as accretions to the building and to go to the landlord on the termination of the tenancy, no enduring capital asset had been created by the expenditure. It was further argued that in the circumstances the sums thus expended amounted to no more than an addition to the rent and should be treated as such. However, the learned counsel for the assessee was unable to cite any authority to support these contentions on any set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same way by a Full Bench of five learned judges. In that case the assessee, a manufacturer of bricks, obtained on lease lands for the purpose of digging out earth for use in the manufacture of bricks and under the terms of his agreements he had the right to dig earth up to 3' or 3?' deep after which he ceased to have any interest left in the lands, the periods of the leases varying from six months to three years. The income-tax authorities held that the money spent on these leases was a capital expenditure, but the learned judges held that the main object of the agreements was the procuring of earth for manufacturing bricks and not the acquisition of an advantage of a permanent nature or of an enduring character and that the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enriksen (H.M. Inspector of Taxes) v. Grafton Hotel Ltd. [1942] 1 All E.R. 678; [1943] 11 I.T.R. (Suppl.) 10, 16. In that case, in arriving at their income-tax assessments, the appellants claimed to deduct instalments of monopoly value paid in respect of licensed premises of which they were the tenants. The lease provided that the appellants should pay all such charges and they contended that the monopoly value payments were therefore payments made under a contractual liability and in the course of and for the purpose of their trade. The licence had on three occasions been granted for a period of three years and on each occasion monopoly value had been assessed as a lump sum payable by instalments. It was held that the monopoly value, thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the same result in a business sense can be secured by two different legal transactions, one of which may attract tax and the other not. This is no justification for saying that a taxpayer who has adopted the method which attracts tax is to be treated as though he had chosen the method which does not, or vice versa. The reported cases show difficulties encountered in deciding what is and what is not capital expenditure and these difficulties have been recognised by the legislature in not attempting a definition of the term. In the words of Lord Macnaghten in Dovey v. Cory [1901] A.C. 477, cited with approval in the judgment of the Supreme Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax [1955] 27 I.T.R. 34, 38; [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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