TMI Blog1995 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case, the Tribunal was right in rejecting the assessee's contention that the assessment order was not valid in law ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee's claim for deduction of foreign exchange difference amounting to Rs. 30,619 was not allowable ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 8 lakhs agreed to be paid to the Maharashtra Industrial Development Corporation for relocation of villagers at Kukshet village was of capital nature ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that proportio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MIDC informed the assessee that without financial assistance from the assessee, removal of the villagers from the portion of the land occupied by them would take a long time. As the continued presence of the villagers on the plot would have caused a grave safety hazard to the chemical factory proposed to be set up on the said plot, the assessee agreed to make a further payment of Rs. 8 lakhs to the MIDC to enable them to evict the occupants from the said plot and to relocate them expeditiously. This amount was paid by the assessee to the MIDC in the previous year relevant to the assessment year 1975-76. The assessee claimed deduction of the above amount in its assessment for the assessment year 1975-76 as a revenue expenditure for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal ("the Tribunal"). The Tribunal took note of the fact that occupants for the eviction of whom the amount of Rs. 8 lakhs was paid by the assessee to the MIDC were residing on the plot even before the same was taken on the 99 year-lease by the assessee from the MIDC. They had not come to reside on the said plot after the lease was obtained. They were in adverse possession of the land. They had to be evicted for enabling the assessee to have uninterrupted enjoyment of the land. The Tribunal rejected the contention of the assessee that in this process the assessee had not acquired any additional right in the land and the expenditure of Rs. 8 lakhs was merely for facilitating the enjoyment of rights over an asset which the assessee had alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght reference of the question of law arising out of the above decision of the Tribunal. The Tribunal has referred the same as question No. 3. Mr. R. Murlidhar, learned counsel for the assessee, submits that the sum of Rs. 8 lakhs paid by the assessee to the MIDC for eviction of the unauthorised occupants is a revenue expenditure because it was incurred for facilitating the carrying on of the assessee's business on the plot of land obtained by it on lease from the MIDC. We have carefully considered the above submission. We, however, find it difficult to accept the same. The plot of land was obtained by the assessee from the MIDC for establishment of a factory on payment of a sum of Rs. 17,93,800. In terms of the agreement, the MIDC was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession thereof. Such expenditure cannot be treated as revenue expenditure. The land was required for setting up a chemical factory. Without vacant possession of the land, it was not possible for the assessee to set up the same. The amount spent for getting vacant possession of the said land, therefore, cannot be regarded as an expenditure for the purpose of carrying on the business. It was incurred for putting up the factory. It is, therefore, a capital expenditure. We are supported in our above conclusion by the ratio of the decision of the Supreme Court in Sitalpur Sugar Works Ltd. v. CIT [1963] 49 ITR 160 (SC), where expenditure incurred by the assessee on shifting the factory from one place to another to improve its business was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of depreciation allowance and development rebate. We have perused the order of the Tribunal. In our opinion, the Tribunal was right in holding that the premium paid for procuring the leasehold rights on the land on which the plant and machinery was installed, cannot form part of the actual cost of the plant and machinery. It is well-settled by now that depreciation under section 32 of the Act is not allowable on the cost of the land on which building is erected or plant or machinery is set up. Depreciation is available only on the cost of plant and machinery and the cost of the building which does not include the site. (See CIT v. Alps Theatre [1967] 65 ITR 377 (SC)). The capital expenditure incurred by the assessee for obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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