TMI Blog2012 (4) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the consideration of amount paid by the assessee for obtaining the leasehold rights from the MIDC in its favour for a period of 99 years was capital in nature and, therefore, not allowable as deduction to the assesse In assessee s own case for AY 2003-04 , the decision of Special Bench in the case of Mukund Ltd was never cited even though it was available at that time. In such circumstances, we are of the view that now we have alternative except to follow the ratio laid down by Special Bench of this Tribunal in the case of Mukund Ltd. Respectfully following Special Bench in the case of Mukund Ltd we reverse the order of CIT(A) and restore that of the A.O - Decision against Assessee - I.T.A No. 1481/Kol/2011 Assessment Year: 2008-09 - - - Dated:- 30-4-2012 - Shri Pramod Kumar, AM And Shri Mahavir Singh, JM For the Appellant: Shri D. Naskar For the Respondent: Shri Sanjay Bhattacharya ORDER Mahavir Singh, This appeal by revenue is arising out of order of CIT(A)-VI, Kolkata in Appeal No.82/CIT(A)-VI/Cir-5/10-11/Kol dated 25.08.2011. Assessment was framed by Addl. CIT, Range-5, Kolkata u/s. 143(3) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Assessment Year 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 and amount paid was held as capital expenditure by the Assessing Officer. Even in assessment year 2003-04, Tribunal in ITA No.348/K/2007, dated 11.04.2008 allowed the claim of assessee as revenue expenditure by holding as under: 22. After considering the submissions of the Ld. Counsel and the DR and on perusal of the copies of the lease deed with MIDC, we find that the facts of the appellant s case are identical to the case of Madras Industrial (supra) decided by he Hon ble Supreme Court and also identical to the decision of the Karnataka High Court in the case of CIT Vs. HMT Ltd. (203 ITR 803), wherein the Court considered similar lease of an industrial plot granted by MIDC, for setting up of an industrial undertaking against payment of token lease rent and further payment of premium. The Hon ble High Court held that the amount proportionately written off, was an allowable business expenditure. Following the said decision of the Hon ble Supreme Court in Madras Industrial and the decision of the Hon ble Karnataka High Court, the amount of ₹ 31,34,320/- towards proportionate amount of advance r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DC was an advance payment of rent for the period of lease paid in lump sum by the assessee. The terms of agreement dated 5-31992 entered into between assessee-company and the MIDC clearly mentioned that a sum of ₹ 2.04 crore was the amount of deposit to be adjusted towards premium payable by the licensee for the allotment of 50 acres of land in K Industrial area. The plea of the assessee that the lease agreement was not entered into till date and, hence, the status of the assessee was that of a licensee only made no difference, since in the agreement dated 5-3-1992 it was specifically mentioned that the licensee shall be deemed to be bare licensee only of the premises at the same rent and subject to same terms as if the lease had been actually executed. A reading of the agreement date4 5-31992 clearly showed that the amount of ₹ 2.04 crore was paid by the assessee to the MIDC as premium or salami for the acquisition of the premises on lease for a period of 99 years. In reply to a specific query from the Bench, the assessee submitted that the cost of boundary walls on this 50 acres of land was capitalized in the account books of the assessee and depreciation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. In the instant case, all the essential ingredients of treating the amount of ₹ 2.04 crore paid by the assessee, for acquisition of leasehold rights for 99 years in the land, as capital in nature were present. The benefit conferred on the assessee of leasehold rights for 99 years against the lump sum payment of ₹ 2.04 crore was of an enduring nature. There was no material on record to suggest that the sum of ₹ 2.04 crore had been paid by way of advance rent nor was there any provision for its adjustment towards rent or for its repayment to the assessee. It was found that in case the assessee terminated the lease agreement and handed over the vacant position of the land to the MIDC (Lessor) prior to the expiry of lease period of 99 years, the assessee would not be entitled to any refund out of the amount of ₹ 2.04 crore paid by it. There was also no material on record to show that the assessee had made the advance payment of rent for future years to secure any reduction in the rent payable for the future years or for any other business consideration. Hence, the consideration of ₹ 2.04 crore paid by the assessee for obtaining the leasehold rights fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the monthly rent nor refundable at the end of lease tenure. On termination or expiry of the lease, the assessee company is obliged to deliver to MIDC /CTDCO the demised premises and all erections and buildings thereon, and there exists a clear distinction of the merit of the case of Pingle Industries Ltd. and that of the merit in the instant case of the assessee. He relies on the decision of Hon ble Karnataka High Court in the case of CIT -vs- HMT Ltd. 203 ITR 820 (Kar.), which is squarely applicable to the merit of the instant case of the assessee. In that case, the assessee company engaged in the manufacture of machines tools entered into a lease agreement with MIDC for granting a lease of a plot of land at Aurangabad for a period of 95 years upon payment of rent of Rs. l/- p.a. in addition to further payment of ₹ 12,09,200/- as premium for acquiring such lease of land. The said agreement envisages surrender of factory, building etc. on the expiry of lease period subject to the condition that the assessee company is at the liberty to remove all buildings, erections and structures from the said land. It was held by the Hon ble Court that this is evident from the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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