TMI Blog1987 (1) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ther paid Rs. 12,500 to Cox Cooks for securing the lease of Nilhat House. In its assessment to income-tax for the said assessment year, the assessee claimed deduction of all the aforesaid expenditure aggregating to Rs. 15,082 as a business expenditure. The assessment was made by the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner ascertained, inter alia, that the said Rs. 12,500 had been paid to Cox Cooks for securing the lease of Nilhat House. He found further that the lease of Nilhat House was for a period of 20 years on terms that the rent payable would be subject to an enhancement to the extent of any increase in the occupier's share of the municipal tax, such rent in any event was liable to be increased after 10 years and that the lease of the premises at Delhi was for a period of 15 years. The Inspecting Assistant Commissioner rejected the contention of the assessee that securing of the two leases could not be considered to be an acquisition of capital assets. He held that the two leases resulted in an enduring benefit to the assessee. The said Rs. 15,082 was found to be expenses incurred by the assessee for the purpose of retaining such endur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquisition of the leaseholds. It had not been found as a fact that the object of the assessee in incurring the said expenditure was to obtain an enduring benefit. The authority below, it was contended, had proceeded on the basis that the assessee had ultimately obtained an enduring benefit as a result of the acquisition of the said two leaseholds. Learned advocate for the assessee also submitted that the benefit which the assessee had obtained by acquisition of the said two leaseholds could not, in any event, be said to be an enduring benefit so that it could be concluded that the said expenditure was capital in nature. It was submitted that the decision of this court in Gobind Sugar Mills Ltd.'s case [1979] 117 ITR 747 could be distinguished on facts from the instant case. The assessee in that case was running a sugar mill and a new lease of another sugar mill acquired by the assessee was not for the purpose of the existing business of the assessee. In the instant case, the assessee did not acquire a new business but had incurred the expenditure for the purpose of its existing business. Learned advocate for the Revenue contended to the contrary He submitted that it had been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid annually during the period of a lease and a further protection fee payable annually for five years were capital expenditure and were not deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922. In this case, the Supreme Court quoted with approval the following observations of Mahajan J., as his Lordship then was, sitting in the Full Bench of the Lahore High Court (p. 44): " Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment; ......... Expenditure may be treated as properly attributable to capital when it is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade ..........." The Supreme Court further observed as follows (p. 45): " A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question however arises for consideration where expenditure is incurred white the business is going o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made 'with a view ' to bring a capital asset or an advantage into existence and it is not necessary that it should in fact have that result. The cases seem to have decided that a sum spent in trying to get an agency agreement or a licence would nevertheless be capital-expenditure, notwithstanding the fact that the intended agency or licence was not ultimately secured." The court relied on the observation of Viscount Cave L.C. in Atherton's case [1925] 10 TC 155 (HL) and further observed as follows (p. 86): " This classic observation started a whole train of cases on this branch of the law and the famous expression 'with a view to ' in the above passage made the courts and judges think that so long as the 'view' was there, it was enough and it really did not matter whether the view ultimately materialised or not. Once a 'view ' was there to secure a capital, no matter whether the capital in fact was acquired or not, the view or idea will stamp it as capital expenditure." (e) India Cements Ltd.'s case [1966] 60 ITR 52 (SC). In this case, the question before the Supreme Court was whether an expenditure incurred by the assessee in obtaining a loan was allowable as a deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of running the assessee's business and was, therefore, deductible. (g) CIT v. Belgachi Tea Co. Ltd. [1975] 99 ITR 99 (Cal): In this case, the question before a Division Bench of this court was whether an amount spent by the assessee for repairs to the fencing of tea gardens was allowable as a revenue expenditure. It was held that the incurring of such expenditure was primarily in connection with the carrying on of the business by the assessee as the tea plants could not be protected unless there was proper fencing. It was noted that by incurring this expenditure, the assessee had acquired certain advantages which related to its property but in spite thereof it was held that the predominant and the main purpose of incurring the expenditure being the carrying on of their business, an incidental advantage to the property resulting therefrom could not change the character of the expenditure which was revenue in nature. (h) CIT v. Hoechst Pharmaceuticals Ltd. [1978] 113 ITR 877 (Bom): In this case, the question before the Bombay High Court was whether the expenditure incurred in payment of brokerage and stamp duty in connection with acquiring of office premises at Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for the following observations (p. 10): " 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 sense and it is only where the advantage is 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. " (k) Robinson v. Scott Bader Co. Ltd. (Simon's Tax Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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