TMI Blog2000 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner was not an owner but holds leasehold rights in respect thereof ? 2. Alternatively, and without prejudice to the foregoing, the Tribunal was right in holding that the aggregate cost by way of payments made to the landlords, stamp and registration costs, i.e., Rs. 26,82,462 in all was not admissible as a deduction, that it was not in the nature of advance rent paid, but rent paid in advance only by way of security so that the lessor may adjust out of the said deposit monthly rent payable at the rate mentioned in the document ?" In respect of the first question it was found by the Tribunal that the assessee's case is not one where the liability to pay the entire rent for the whole of ninety-nine years arose on the date of the lease and that the rent was paid in advance only by way of security so that the lessor may adjust out of the said deposit monthly rent payable by the tenant at the rate mentioned in the document itself. The Tribunal considered it to be a finding of fact and referred the second question as reproduced above. The facts of the case are that the assessee is a public sector undertaking. The assessment for the assessment year 1984-85 was completed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flats. It was in these circumstances that the Assessing Officer allowed the depreciation to the assessee but the order of the assessing authority was set aside by the Commissioner in the proceedings under section 263 on the ground that there was no registration so as to confer title on the ground that there was no legal ownership of the flat with the assessee. The Tribunal further found that the assessee is entitled to deduction of the rent payable in respect of the three flats in Calcutta for the year of account. The Tribunal also directed the Assessing Officer to calculate the aggregate of the rent payable to the three landlords at rates mentioned in the documents of lease and allow deduction accordingly. The Tribunal held that the assessee is not entitled for depreciation as it holds leasehold rights and no relief on alternate plea can be given as the entire amount paid is premium which is of capital expenditure in nature following the decision in Member for the Board a Agrl. I. T. v. Sindhurani Chaudhurani [1957] 32 ITR 169 (SC); CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422 (SC) ; Maharaja Chintamani Saran Nath Sah Deo v. CIT [1971] 82 ITR 464 (SC). However, the rent of one ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by using clever phraseology and, therefore, it is not the form but the circumstance (see CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422 (SC)). In Parthas Trust v. CIT [1988] 169 ITR 334 (Ker) [FB], reference was made to the observations of Lord justice Fox in the case reported in Stokes v. Costain Property Investments Ltd. [1984] 1 All ER 849 (CA), page 855 as under : "The purpose of the statutory provisions is evidently to encourage investment in machinery and plant." Sections 41 and 44 of the Finance Act, 1971, dealt with allowances, the first year allowance and written down allowance subject to the condition that the machinery or plant belonged to the assessee. The Court of Appeal had occasion to consider the scope and amplitude of the term "belonging to" in that context. Commenting on the expression "belonging to" in the 1878 Act, Fox L.J. observed : "The requirement of 'belonging' first appears in the legislation on this subject in section 12 of the 1878 Act. In that section, it is difficult to suppose that the word 'belonging' can have been intended to mean anything other than absolute ownership." and later : "I agree that 'belong' and 'belonging' are not terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated the decision of the majority in Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747. On the effect of section 47 of the Registration Act that the sale in that case was complete only when registration of the sale deed was completed as contemplated by section 61 of the Registration Act and, therefore, the Talab-i-mowasibat made before the date of completion of registration was premature and a suit based on such a demand of the right of pre-emption was premature and must therefore, fail. Reference was also made to Radhakishan Laxminarayanan Toshniwal v. Shridhar Ramchandra Alshi, AIR 1960 SC 1368, to state that the right of pre-emption accrues only when transfer of property takes place and such transfer is not complete except through a registered deed and transfer became effective through a registered deed. Ultimately, the Supreme Court held that it cannot be argued that once registration is effected, the title relates back to the date of execution of the sale deed so as not to render the application under the Bihar Act 1962 (12 of 1962), presented prior to completion of registration as premature. In Amarchand J. Agarwal V. Union of India [1983] 142 ITR 402 (Bom), the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth-tax. In other words, the liability to wealth-tax arises because of the belonging of the asset, and not otherwise. Mere possession, or joint possession, unaccompanied by the right to be in possession or ownership of property, would, therefore, not bring the property within the definition of 'net wealth' for it would not then be an asset 'belonging' to the assessee. The first limb of the definition indicated, in the Oxford Dictionary may not be applicable to these properties in the instant appeal because these lands were not legally the properties of the vendees and the assessee was the lawful owner of these properties. The vendees were, however, in rightful possession of the properties as against the vendor in view of the provisions of section 53A of the Transfer of Property Act, 1882. The scheme of the Act has to be borne in mind. It has also to be borne in mind that unlike the provisions of the Income-tax Act, section 2(m) of the Wealth-tax Act uses, the expression 'belonging to' and as such indicates something over which a person has dominion and lawful dominion and he should be the person assessable to wealth-tax for this purpose." In CWT v. Trustees of H. E. H. Nizam's F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case..." It is further held that what is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using the modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." The arguments of both learned counsel for the parties heard. It is not in dispute that the sale deed was not executed but the manner in which the payment has been made and the balance which is to be received giving it a colour of lease is nothing but conferring ownership right on the assessee. The assessee was entitled to exercise all the rights in respect of the three flats as the owner and, therefore, the Tribunal was not justified in upholding the order of the Commissioner which was passed under section 263. Before us the question which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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