9911796707
TMI Blog1987 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1981-82. Accordingly, the assessment has been made in respect of the previous year being the period from 1-3-1980 to 31-3-1981 for the present asst. year 1981-82. 4. The property known as Gemini Studios being the land measuring 89 grounds and 1042 sq. ft. with buildings thereon at 121, Mount Road, Madras was leased by T. S. Srinivasa Iyer as the Karta of his HUF to M/s. Gemini Pictures Circuit (P.) Ltd. for 2 years from 1-4-1966 to 31-3-1968 under a lease deed dated 26-3-1966. However, this property was allotted to the share of T. S. Srinivasa Iyer under a partition deed dt. 30-8-1967. Thereupon he executed a fresh lease deed dated 3-10-1967 granting the lease of the property for a period of 30 years at a rent of Rs. 8,000 per month for the first ten years, Rs. 8,500 for the next ten years and Rs. 9000 per month for the balance of 10 years. The lease deed also granted the option to the lessee to renew the lease for a further period of 30 years by giving a notice in writing at least 12 months before the expiration of the lease. On 8-7-1968 Sri T. S. Srinivasa Iyer settled the properties in favour of Vasan Charitable Trust subject to the lease granted to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction on the ground that the payment has been made once for all for bringing into existence of an asset of an enduring benefit. After making other disallowances he converted the loss shown into a profit of Rs. 3,83-522. But after deducting the depreciation and investment allowance the net result was a total loss of Rs. 42,585 and the assessment was declared as not assessable. 6. On appeal, the C. I. T. (Appeals) also agreed with the ITO that the assessee had brought an advantage which would last for 47 years and hence the assessee derived enduring advantage and the assessee escaped the inflation of future rent liability. He, therefore, confirmed the disallowance treating the expenditure as capital expenditure. 7. In the further appeal before us it was contended on behalf of the assessee that the rent payable under the original lease was a revenue expenditure and therefore the commuted amount paid under the subsequent agreement continued to be a revenue expenditure and had to be allowed as a deduction. On the other hand, it was contended on behalf of the revenue that the assessee had derived and enduring benefit over a long period of years and hence the expenditure should be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital." The Supreme Court then pointed out that, "Viscount Cave acknowledged that in certain cases an expenditure for obtaining an enduring advantage need not be capital expenditure for he inserted the words 'in the absence of special circumstances leading to an opposite conclusion' within brackets." Therefore, the mere fact that the assessee was entitled to remain in possession for a long number of years under the lease deed does not make the expenditure a capital expenditure especially when that right was not acquired by the payment of this particular expenditure and had already been acquired under the earlier lease deed. 10. This takes us to the consideration of the actual nature of the expenditure under the deed dated 18-2-1980. The assessee was already obliged to pay the rent of Rs. 17,500 per year for a period of 48 years which would come to Rs. 8,40,000. But under the deed with which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where while finding that a sum of Rs. 89,870 was revenue expenditure, the Tribunal classified it as "deferred revenue expenditure" and spread it over a period of twenty years on the ground that the expenditure was a heavy character, the benefits of which were likely to extend beyond the year in question up to that anticipated period. This led to the reference of the following question : "Whether in view of the finding that the expenditure of Rs. 89,870 is of a revenue nature and was incurred not to start any new business but to facilitate the carrying on of an existing business there was any legal justification for treating the amount as a deferred expenditure and for spreading it over a period of 20 years and allowing only 1/20th of that amount during the year in question ?" The High Court answered this question thus, "Coming now to the three questions mentioned above, we may take up the first question that arose the assessee's application for reference, that is, whether the sum of Rs. 89,870 could be spread over a period of twenty years and allowance made at the rate of 1/20th each year. The learned counsel for the Commissioner has frankly admitted that he can find no Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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