TMI Blog1980 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... agents of the assessee to dispose of the assessee's art silk goods and the commission payable to the said M/s. G.G. was 2 annas per bale of Rs. 100 with a minimum commission payable being Rs. 500 per month. The further clauses in the said agreement, inter alia, purported to create a leave and licence in favour of the assessee in respect of the said shop. The purported leave and licence created was for a period of three years. M/s. G.G. were entitled to carry on wholesale business in cotton and woollen goods in the premises, and to keep sample pieces there, but they had no right to keep any stock of goods in the said premises. The assessee was to keep a deposit of Rs. 12,000 with M/s. G.G. and also to keep accounts of the commission payable to M/s. G.G. M/s. G.G. were to pay the rent and electricity charges of the shop premises. One of the clauses in the "agreement then provided that the agreement was not to be construed as an agreement granting a sub-tenancy in favour of the assessee and that the assessee was not to claim any such sub-lease under the said agreement. The said clause also stated that likewise the assessee was not to claim that it was in exclusive possession of the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the said form or forms of transfer of shares and upon the certificate or certificates of such shares being issued in favour of the said M/s. G.G. to hand over all the said such certificates to the assessee. The assessee was to pay for the said shares. It was further provided (this provision is the subject-matter of the controversy before us) that in respect of the claims made by the said M/s. G.G. as plaintiffs in the said suit for commission, compensation and damages, the assessee will pay to the plaintiffs in full and final satisfaction of all their claims, a sum of Rs. 50,000 by five post-dated cheques of Rs. 10,000 each, viz., of July 15, 1964, October 15, 1964, January 15, 1965, April 15, 1965, and July 15, 1965. The assessee thereafter paid the entire said sum of Rs. 50,000 on June 14, 1964, itself and claimed deduction in respect of the same in the assessment year in question. The ITO held that the said payment of Rs. 50,000 had brought the assessee-firm a bundle of rights and, therefore, the expense was of capital nature. He, therefore, disallowed the claim for deduction of the said amount. Against the said decision, the assessee appealed and the AAC held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the description of the said payment as payment for the commission due, was sufficient to dispose of the appeal. However, the Tribunal felt that in view of the controversy raised before it at some length, it should record a finding on the other question also, viz., whether the agreements dated June 30, 1952, and June 23, 1955, entered into between the parties were those of commission agency or of sub-lease, and the nature of the payment of Rs. 50,000 in the context of the said finding. After construing the said agreements of 1952 and 1955, the Tribunal came to the conclusion that the said agreements though purporting to create a selling agency had in fact created sub-tenancy in favour of the assessee in respect of the shop premises and that they were not agreements of commission agency. On this finding, the Tribunal held that there was already a sub-tenancy created in favour of the assessee as far back as June 30, 1952, and, therefore, it could not be said that the payment of Rs. 50,000 which was made under the decree of 1964 was a payment for the acquisition of a sub-tenancy under the said consent decree. In this view of the matter the Tribunal held that the expenditure of Rs. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital expense was a valid and a proper one and the two appellate authorities had erred in holding to the contrary. His third submission was that properly construed the two agreements of 1952 and 1955, under which the assessee was in the premises, were, at best, agreements of leave and licence and no sub-tenancy was created under the said agreements as contended on behalf of the assessee and held by the Tribunal. This being so, it could not be said that the sub-tenancy was created as far back as on June 30, 1952. The sub-tenancy could be said to have been created for the first time under the consent decree of June 15, 1964, and the payment of Rs. 50,000 could properly be related to the creation of the said sub-tenancy and, hence, the expense was of a capital nature. We are afraid that the contentions raised by Shri Kotwal on behalf of the revenue suffer from primary errors. In the first instance, the Tribunal having been invited to construe the two agreements, viz., of June 30, 1952, and June 23, 1955 has recorded a finding of fact with regard to the nature of the said agreements and it has come to the conclusion that the said agreements had in fact created a sub-tenancy in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direct tenancy if necessary from the landlords themselves. On the wording of the consent decree, therefore, it is clear that even according to M/s. G.G. who were the plaintiffs in the said suit, the defendants were the lawful sub-tenants of the suit premises from June 30, 1952. It cannot, therefore, be said that the subtenancy in favour of the assessee was being created for the first time on June 15, 1964, i. e., the date of the consent decree. The said agreement recorded in, the consent decree is not binding on the landlords of the shop premises. Therefore, even if it was agreed between the parties that M/s. G.G. would co-operate with the assessee in securing a direct, tenancy, the landlords were not bound to recognise any such agreement. Hence, it is difficult to understand the argument that it was agreed that such an asset would come into existence by virtue of the consent decree. Lastly, as the facts in the present case show, the assessee had become the lawful sub-tenant of the suit premises by virtue of the statutory intervention in the form of the said Ordinance under the Bombay Rent Act, 1947, which applied to the suit premises, the creation of a sub-tenancy was prohibite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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