TMI Blog1992 (11) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer to allow extra shift depreciation under section 32(1)(ii) on capitalised technical documentation fees ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the sum of Rs. 12,09,200 representing lease premium should be allowed as business expenditure ?" The assessee is a company in the public sector engaged in the manufacture of machine tools, watches, etc. For the assessment year 1981-82, the assessee claimed extra shift allowance under section 32(1)(ii) on capitalised technical documentation fees. This claim having been rejected by the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals), the assessee brought the matter in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said payment should be considered as a revenue or business expenditure. Both the Inspecting Assistant Commissioner and the Commissioner (Appeals) held that this was a capital expenditure. In second a peal, the Tribunal held that the expenditure was for the sole purpose of the assessee's business and, as such, eligible for deduction. However, according to the Revenue, the said payment was a capital expenditure. As such, the question that has arisen for consideration is whether the Tribunal was justified in law in holding that the said amount of Rs. 12,09,200 should be allowed as a business expenditure. In order to appreciate the respective contentions, we have to look into the nature of the transaction as evidenced by the agreement da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry conclusion and, as pointed out by Lord Radcliffe in Commr. of Taxes v. Nchanga Consolidated Copper Mines Ltd. [1965] 58 ITR 241 (PC), it would be misleading to suppose that in all cases, securing a benefit for the business would be, prima facie, capital expenditure 'so long as the benefit is not so transitory as to have no endurance at all'. There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other purpose. In CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422 (SC), this aspect of the matter has been explained (at page 425) : "Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 740 (Mad), the assessee-Company therein had taken on lease land and building in Bangalore for housing its branch in that city. The building was in a good business locality, but rather old. Under an agreement between the assessee and the landlord, the building was demolished and a new building constructed in its place and, as a consideration for this, the landlord agreed to take a very low rent of Rs. 1,000 per mensem initially and Rs. 2,000 for the last four years of the lease which was extended to 39 years. The prevailing rent in the area would have worked out to Rs. 12,000 per month. The amount spent by the assessee for the construction of the new building was claimed as deductible business expenditure. It was held that no tangible or int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immunity from liability to pay municipal rates or taxes for a period of 15 years if these liabilities had to be paid, the payments would have been on revenue account, and, therefore, the advantage secured was in the field of revenue and not capital. Sri Raghavendra Rao, learned counsel for the Revenue, contended that having regard to the terms of the lease including the long tenure thereof and the payment of a nominal rent, the assessee can be said to have secured an enduring benefit which is traceable to the payment of the lump sum amount as premium. As such, this expenditure incurred by the assessee can be said to be in the field of capital investment. In support of this contention, reliance is placed upon CIT v. Project Auto mobiles [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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