TMI Blog1995 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act, 1961, on the ground that the amount would be treated as customary bonus and deductible under section 37(1) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the cost of stamp paper, registration expense and legal expenses totalling Rs. 1,071 incurred by the assessee as per agreement of lease deed in acquiring the sub-lease right from Sri Mohan Lal Goenka in the property at 11, Dover Park, Calcutta, which was subsequently transferred in favour of the Syndicate Bank for a consideration of Rs. 40 lakhs cannot be considered as the cost of acquisition of the sub-lease right ? " The brief facts of this case are that the respondent, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred his residuary leasehold rights to Tinnevelly Tuticorin Tea and Investment Co. Ltd. for a consideration of Rs. 40,000 subject to the leasehold rights of the respondent. On June 22, 1982, Tinnevelly Tuticorin Tea and Investment Co. Ltd., purchased the reversionary rights of Sri Benoy Kr. Paul in the premises for a consideration of Rs. 8 lakhs which transaction did not affect the tenancy or the rights of possession of the respondent. That company by a deed of conveyance again transferred its reversionary rights to the Syndicate Bank for a consideration of Rs. 10 lakhs. Soon after this the said bank and the respondent-company entered into an agreement as a result of which the leasehold/tenancy and the possessory rights of the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the above decision, relied on the principle laid down in the case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) and also held that the decision of the Delhi High Court in the case of Bawa Shiv Charan Singh v. CIT [1984] 149 ITR 29 which followed the above decision of the Supreme Court fully applied to the respondent's case. From the abovestated facts it is clear that the main issue in the present case is whether the sum of Rs. 1,071 which represented the cost of stamp paper, registration expenses and legal expense incurred by a respondent on July 8, 1980, can be construed as the cost of acquisition of the tenancy/leasehold rights which were subsequently transferred by the respondent to the Syndicate Bank. It is to be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-lease right that the respondent acquired in view of the agreement executed in 1980 did not change the essential character of the right of possession that the respondent had in the premises in view of its continuous possession of the premises as a monthly tenant, since 1952. Any expenditure made almost 28 years after it became the monthly tenant in order merely to observe certain formality cannot be construed as the cost of acquisition of the tenancy right. It is worth noticing that although Sri Goenka became the lessee of the property in 1973 he did not consider that the respondent did not have any right to continue to possess the property as the monthly tenant. It was only in 1980, i.e., almost seven years after Sri Goenka acquired th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, for the acquisition and installation of plant and machinery formed a part of the actual cost of the assets and the assessee would be entitled to depreciation allowance on the amount of such interest. In coming to this decision, the Supreme Court relied on the Statement on Auditing Practices issued by the Institute of Chartered Accountants of India and stated that the accepted accountancy rule for determining the cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition and the said rule of accountancy should be adopted for determining the actual cost of the assets in the absence of any statutory definition or other indication to the contrary. The Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood in its common sense that is, it must represent the expenditure incurred in acquiring the asset. In the case of the respondent no expenditure had to be made by it when it became the tenant of the premises in 1952. There was also no understanding that any payment was required to be made in future by the respondent against the acquisition of the said tenancy. That being so certain expenditure made later on cannot take the place of the cost of acquisition of the tenancy, particularly when the cost so incurred did not give any extra right with regard to the tenancy of the respondent. If one is allowed to draw any parallel, reference may be made to section 43A of the Income-tax Act, wherein a special provision had been introduced to redeter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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