TMI Blog1980 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... of running the business of a hotel which it had already started in the premises on November 25, 1962. The lease" does not mention anything about the period of the lease but as a supplemental agreement dated March 30, 1963, added a clause to the lease deed whereby the tenants had to give at least six months notice to the landlords in the event of their deciding to determine the lease and in case of default on their part in giving such notice, they should reimburse the landlords by payment of the rent for the said period of six months as liquidated damages. Under the lease deed, the lessors were to maintain the premises in good condition and also to carry out the annual repairs and painting of the premises. The lessee could not make any structural additions or alterations in the tenanted premises without the consent of the lessors and the municipal authorities and, in case the lessors agreed to any additions or alterations, they should be carried out at the expense of the lessee and shall be left to become the property of the lessors on the termination of the lease. By an agreement dated February 19, 1963, the firm entered into an agreement with the American Embassy in Delhi. By th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63-64 is concerned, the AAC upheld the disallowance of the sum of Rs. 3,361 as well as the refusal to allow depreciation in respect thereof for the same reasons as were given by the ITO. So far as the assessment year 1964-65 was concerned, he gave some relief permitting the assessee depreciation in respect of a sum of Rs. 19,000 spent towards furniture and fittings. The assessee preferred appeals in respect of the assessment years 1963-64 and 1964-65, which were heard and disposed of by the Tribunal by a common order on October 10, 1972 The Tribunal pointed out that the disallowance in the first year, i.e., 1963-64, related to the expenditure on the construction of a bath-room and for the second year it was difficult to identify the items, the disallowance of which the AAC had confirmed. The Tribunal was of opinion that the expenditure claimed in the first year was rightly disallowed as capital expenditure. It pointed out that this was more or less the first year of the assessee's business and the expenditure had been incurred by the assessee not to restore the assets in question to the original working condition in which they were but to improve them so as to make them conform t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above amount represented expenditure of capital nature. The Tribunal has given good reasons for coming to this conclusion. As already mentioned, this was the amount incurred by the assessee for putting up an additional bath-room in the premises. In other words, this was an expenditure incurred with the object of bringing into existence an asset of an enduring advantage to the assessee. Mr. Anoop Sharma, learned counsel for the assessee, vehemently contended that the expenditure in question had been wholly and exclusively laid out for the purposes of the business and that the putting up of the additional bath-rooms was rendered obligatory by the terms of the lease deed with the American Embassy. This is correct. But to say that the expenditure is wholly and exclusively laid out for the purposes of the business does not also mean that the expenditure is of revenue nature. On that aspect, Mr. Sharma contended that the expenditure could not be said to be capital in nature because the construction put up did not belong to the assessee but only belonged to the original owners of the premises on the terms and conditions of the lease deed. In support of his contention that the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Embassy left the premises, the construction put up would continue to be enjoyed by the assessee so long as it remained the tenant of the premises and this, as we have mentioned before, was a very indefinite period.Having regard to all these circumstances, it is difficult to agree with the counsel for the assessee that the firm derived no enduring advantage as a result of this expenditure. A brief reference may be made to the several cases cited at the bar, In Laxmiji Sugar Mills Co. P. Ltd. v. CIT [1971] 82 ITR 376, the Supreme Court was concerned with a contribution made by a sugar mill for improving the approach roads to a factory. While holding that the expenditure was not in the nature of capital expenditure, the Supreme Court laid emphasis on the fact that no new roads had been put up for the first time as a, result of the expenditure. The position was similar in CIT v. Hindustan Motors Ltd. [1968] 68 ITR 301 (Cal). The case in CIT v. Belgachi Tea Co. Ltd. [1975] 99 ITR 99 (Cal) related to expenditure for putting up fences to protect the tea garden of the assessee and stands on a clearly different footing. So also in CIT v. Kanodia Cold Storage [1975] 100 ITR 155, the Allaha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en of the facts of the case it was appropriate to hold that the expenditure incurred was for purposes keeping up the business and was, therefore, revenue expenditure. That is not the position in the present case. The construction has been put up on the volition of the assessee and not under the condition imposed by the, terms of the lease, It was intended wholly to rebound to the advantage of the assessee and by putting up these constructions the assessee did get the benefit of the buildings for an indefinite period. It, therefore, resulted in an enduring advantage to the assessee, for the reasons already stated. The second decision which is also of relevance is that of the Madras High Court in CIT v. T. V. Sundaram Iyengar Sons (P.). Ltd [1974] 95 ITR 428. In this case, the assessee-company purchased and in the name of the District Collector for the purposes of constructing houses for the company's workers by the Government under the subsidized industrial housing scheme sponsored by the State Government. The Tribunal upheld the assessee's claim that the purchase price paid for the land in question was allowable as a revenue expenditure and this conclusion was upheld by the Hi ..... 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