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Issues:
1. Determination of whether expenditure on rented premises is revenue or capital in nature. Analysis: The appeal before the Appellate Tribunal ITAT Madras-A involved a dispute regarding the nature of expenditure incurred by the assessee on rented premises for a match factory business. The original assessment disallowed a portion of the expenses related to travelling and building repairs. However, upon reopening the assessment, the Assessing Officer held the entire sum spent on rented godown as capital expenditure. The dispute centered around whether the expenditure should be treated as revenue or capital in nature. The CIT (Appeals) allowed the expenditure as revenue, while the Assessing Officer considered it capital expenditure, leading to the appeal by the Revenue. The Appellate Tribunal analyzed the rental agreement dated 30-6-1954 between the landlord and the tenant, outlining the terms and conditions regarding the construction, repair, and restoration of the premises. The Tribunal noted that the agreement specified the tenant's obligation to construct new buildings for the match factory business and restore them to the landlord at the end of the agreement period. Based on this specific stipulation in the rental agreement, the Tribunal concluded that the expenditure incurred by the assessee was capital in nature. The Tribunal applied the principle that expenditure on obtaining a new asset or enduring advantage is considered capital expenditure, as laid down in relevant case laws, including the decision of the Rajasthan High Court in S. Zoraster & Co. The Tribunal held that the expenditure did not qualify as revenue under section 37(1) of the IT Act, 1961, and upheld the Assessing Officer's treatment of the expenditure as capital, subject to depreciation at 10%. Ultimately, the Appellate Tribunal allowed the appeal, setting aside the decision of the CIT (Appeals) and affirming the order of the Assessing Officer regarding the treatment of the expenditure as capital in nature. The Tribunal's decision was based on the specific terms of the rental agreement and the principles established in relevant case laws, emphasizing the enduring benefit derived from the expenditure on construction and repairs for the match factory business.
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