TMI Blog1980 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year which ended on December 31, 1960. The assessee has been a registered firm carrying on the business of manufacturing lanterns, stoves, glass lamp holder, radio chassis, etc. The controversy pertains to the amount of Rs. 55,515 which had been shown by the assessee in its balance-sheet as provision made towards interest accrued. This concerned the immovable property consisting of land and building where the assessee was operating its factory. It was held on lease from 1955 from the Faridabad Development Board which was a body working under the Ministry of Rehabilitation. It seems that since the assessee was interested to effect purchase of this entire property, the Settlement Officer by a letter dated December 13, 1960, informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 19,890 only for the present year as simple interest calculated @ 4.5% on the outstanding balance cost of the property. When the assessee took the matter before the AAC against the disallowance of the rent of the interest amount, the ITO, urged before him that even the allowance of Rs. 19,890 was not proper. The AAC then observed that the interest claimed by the Govt. actually formed part of the capital cost to be charged from the assessee as a consideration for transfer of the factory building and the land. The assessee was, therefore, held not entitled to the claim of interest as a revenue expenditure. The assessee, thereafter, feeling aggrieved, moved the Appellate Tribunal in second appeal. The Tribunal, then, in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonged to the Board, and it computed their total value at Rs. 4,58,438. Since, however, the assessee was the lessee under that board of this property from 1955, and had been paying rent to the board and had also effected payments of some instalments towards the cost of the property, the arrangement that was arrived at was that the amounts of rent and instalments which the assessee had paid were to be adjusted against the cost but at the same time the assessee would pay interest @ 4.5 % on the total investment which the board had made in that property. It was as such that the figure of Rs. 4,42,223 was arrived at on the payment of which the assessee was to get the property transferred in its favour. This, however, it appears, it did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make provision in the present year. There could therefore, be no escape from the conclusion that this interest amount being part of the sale consideration for which the property was made available for transfer had to be treated as capital in character. No interference, therefore, is called for in the conclusion arrived at by the Tribunal. The assessee had by the purported transfer of the property in its favour, attempted to acquire a benefit of enduring nature in the form of acquisition of immovable property. No borrowings were effected by it for meeting the cost. Rather the cost was sought to be related to the year 1955 and an adjustment against the price of the rent which the assessee had already paid, was being obtained. It was, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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