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ACIT, Circle-2 (1) Panaji Goa Versus Hotel La Paz Gardens (P) Ltd.

Cancellation of the lease and the payments of the consideration - revenue v/s capital expenditure - Held that:- A perusal of the resolution passed by the Board of Directors of the assessee company in respect of authorization for cancellation of the lease, also talks as compensation and for loss of business. A perusal of the agreement entered into by the assessee shows the relinquishment of the lessees lease rights and interest in the leased premises. It is clearly a capital asset has come into e .....

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tal expenditure, the Assessing Officer is directed to grant the assessee depreciation, on the same, as applicable. - Decided in favour of revenue - ITA No. 55/PAN/2015 - Dated:- 12-5-2016 - Shri N. S. Saini, Hon ble Accountant Member And Shri George Mathan, Hon ble Judicial Member For the Assessee : Shri R. Muralidhar - Adv For the Department : Shri R.N. Siddappaji - DR ORDER Per George Mathan, Judicial Member This is an appeal filed by the Revenue against the order of the Commissioner of Income .....

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as revenue expenditure as against the action of the Assessing Officer in holding the same as capital expenditure. It was the submission that in 1975 or thereabouts, one Shri Chan Chin Shing and M/s. Sirsat Jewellers had taken on lease shops admeasuring 119 sq.mts. on the ground floor of a building on Odlem Culagor in respect of Shri Chan Chin Shing and 19 sq.mts. on the ground floor of the said building by M/s. Sirsat Jewellers. Subsequently, the said land and building was purchased by M/s. V.M. .....

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ad been partly leased to Shri Chan Chin Shing and M/s. Sirsat Jewellers. In October, 2006 and March, 2007, the assessee-HLPG entered into an agreement for surrender of lease with both, Shri Chan Chin Shing and M/s. Sirsat Jewellers and had paid ₹ 35 Lac to Shri Chan Chin Shing and ₹ 5,50,000/- to M/s. Sirsat Jewellers. The assessee had claimed consideration paid for surrender of the lease, as revenue expenditure. The Assessing Officer, in the course of assessment, held the same to be .....

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urt in the case of Airport Authority of India reported in (2012) 340 ITR 407 (Delhi)(FB). It was the submission that the assessee having acquired the land and building, through amalgamation, and the assessee being the owner of the property, had no business reason to make the payment for surrender of lease of such property, especially when the assessee could have very well have evicted the tenants through due process of law. It was the submission that there were other tenants also, who had been v .....

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ly a payment out of capital. It was the submission that the order of the Commissioner of Income Tax (Appeals) was liable to be reversed. 4. In reply, the Assessing Officer submitted that since the lease commenced in the year 1975 and continued without break till 2006, there was a possibility of indirect claim for perpetual lease and the tenants could create legal problems and it required the property for its own use, which was very essential. It was the submission that the assessee was running a .....

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ission that that the assessee was getting a rent of about ₹ 3,000/- p.m. from the said leases, and if the assessee had to take on lease the similar area, the market rent would be much higher. It was the submission that on this count, the assessee had requested the tenants to vacate. It was the submission that the said two tenants being Shri Chan Chin Shing who was running a restaurant under the name and style of Nanking Restaurant and M/s.Sirsat Jewellers was running a jewellery shop. The .....

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TR 328 to submit that the amounts paid as compensation to the tenants for vacating the premises, was liable to be allowed as revenue expenditure. He also placed reliance upon the decision of the Hon ble Calcutta High Court in the case of Auto Distributors Ltd. reported in 210 ITR 222, as also the decision of the Hon ble Kerala High Court in the case of Bombay Burmah Trading Corporation Ltd. reported in 131 ITR 154 (Ker.) to support his contention that the compensation paid for eviction of tenant .....

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assessee s case, there was no defect in the title, the property in its physical form was available with the assessee and in the possession of the assessee by evicting the said two persons by payment of the compensation. The assessee did not gain any capital asset insofar as the physical size of the structure did not improve. It was the submission that the order of the Commissioner of Income Tax (Appeals) was liable to the confirmed. 5. We have considered the rival submissions. A perusal of the d .....

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ws that the decision that was a case of unauthorized tenant more in the nature of his squatter. In respect of the decision of the Hon ble Kerala High Court in the case of Bombay Burmah Trading Corporation Ltd. (supra), it was a case of expenditure incurred for protection of land from being encroached upon by strangers and the expenditure incurred for eviction of tenant from building, within estate for the purpose of protecting the estate and peaceful collection from the estate. None of the said .....

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t has also taken into consideration the very primary decision of the Hon ble Supreme Court in the case of Assam Bengal Cement Co. Ltd. reported in (1995) 25 ITR 34, wherein the basic criteria for the purpose of deciding the issue whether an expenditure is in the revenue field or in the capital field, has been elaborated as follows:- "if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable .....

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he payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure." When these principles are applied to the facts of the assessee s case, the following emerge:- 1) The lease agreement clearly shows that they are liable for termination after a period of 03 months notice and the lease agreement have not been regularly renewed, though the lessee cont .....

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the assessee had granted the lease rights to the tenants. This is on account of pre-amalgamation tenancy. What the assessee after the amalgamation has done is in effect purchased back the tenancy rights which had been given by the predecessors. The assessee has also substantially benefited from the said transaction insofar as it has been able to cut off a competition in the form of the restaurant running under the name & style of Nanking Restaurant, which was, in effect a competition for th .....

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