TMI Blog1971 (9) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... MENT The judgment of the court was delivered by PATHAK J.- The Income-tax Tribunal has referred the following question for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 7,200 has been rightly, considered as capital expenditure ? " The assessee is a partnership firm. It owns a cinema, known as the Neel Kamal Talkies at Bijnore. There is another cinema house at Bijnore known as the Virendra Talkies. It was run by M/s. Prakash Talkies Distributors, Delhi. The assessee entered into an agreement with M/s. Prakash Talkies Distributors under which it was agreed that in consideration of the assessee's paying a sum of Rs. 600 per month for a period of 5 years to M/s. Prakash Talkies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Co. Ltd. v. Commissioner of Income-tax, the Supreme Court observed : " The question however (whether expenditure is capital or revenue) arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment ...... 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 to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of those routes were acquired for the unexpired period on payment of compensation under the Orissa Motor Vehicles (Regulation of Stage Carriage and public Services) Act, 1947. The Stage carriage permits, it may be noted, are usually issued for a period of 3 years. The assessee claimed a deduction in the assessment proceedings under the Income-tax Act on account of the amount paid as compensation. The Orissa High Court affirmed the rejection of the claim by the income-tax authorities holding that the expenditure was in the nature of capital expenditure. By acquiring the unexpired permits, it pointed out, the assessee got rid of competition from private operators who were in the field prior to the acquisition. On behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have Bancroft out of production for a period of 12 months. The Privy Council held that the payment was in the nature of revenue expenditure. The Privy Council observed : " While, no doubt, money paid to acquire a business or to shut a business down for good or to acquire some contractual right to last for years may well be capital expenditure, but it seems a contradiction in terms to speak of what Nchanga thus acquired, which exhausted itself and was created to exhaust itself within the 12 months' period within which profits are ascertained, as constituting an enduring benefit or as an accretion to the capital or income earning structure of the business." Clearly the opinion turned on the consideration that no advantage of an end ..... X X X X Extracts X X X X X X X X Extracts X X X X
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