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TMI Blog2000 (7) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... mewhere in Howrah. The Assessing Officer has strongly relied on the deposition given during the course of the survey operations, by Sri Sushil Kumar Agarwal, karta of S. K. Agarwal (HUF), which was a partner of the assessee-firm during all these years. Sri Agarwal had stated that the godown in question had never been used for the business purpose of the assessee although the same had been taken for business purpose. Sri Agarwal furthermore claimed that rent had been paid to the party through cheques after deduction of the tax deducted at source. The payment of rent was also as per the agreement between the assessee and its landlord. It was tried to be represented on behalf of the assessee that Sri Agarwal had stated that the godown was not being used for the business purpose of the assessee simply because it was lying vacant at the time of the survey operation. The Assessing Officer however, did not accept the contention of the assessee. He was of the opinion that inasmuch as the godown had never been used for the purpose of business of the assessee, the rent paid on the godown was not allowable as business expenditure. He furthermore states in this connection that even the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Act, we are of the opinion that the Assessing Officer had the jurisdiction to reopen the proceedings under section 147. In that way, we uphold the action of the Commissioner of Income-tax (Appeals) in considering the reopening proceedings to be valid. So far as the merits are concerned, the Commissioner of Income-tax (Appeals) has been of the opinion that there is no evidence on record to show that the godown under consideration had actually been used by the assessee for the purpose of its business. By relying on various decisions and especially that of the Madhya Pradesh High Court in the case of Noshirwan and Co. Pvt. Ltd. v. CIT [1970] 77 ITR 822, the Commissioner of Income-tax (Appeals) has come to the conclusion that when the building was not used for the business purpose of the assessee, the rent paid was not allowable and also that since the payment of rent is allowable as deduction under section 30, the same cannot be allowed separately under section 37. As such, the learned Commissioner of Income-tax (Appeals) upheld the disallowance for all the years including the assessment year 1996-97. At this stage of hearing of the appeals before us, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the assessee itself. The building which had actually been taken on rent in that case was also still under construction. That is why the Tribunal had disallowed the claim of the assessee on the ground that it cannot be said that the building was used for the assessee s business during the accounting year. So far as, however, the present case is concerned, learned counsel for the assessee places strong reliance on a judgment of the Gujarat High Court in the case of CIT v. R. Tolat and Co. [1980] 126 ITR 551. In this particular case, that assessee-firm, which carried on the business of giving on hire loud speakers, film projectors, stage lighting etc., took on lease a piece of land on April 1, 1970, and started construction of a store-room and office building on the leased land. The construction was completed in March, 1973. The issue before the Tribunal related to the allowability of rent paid for the assessment years 1971-72 and 1972-73, by the assessee. The Departmental view was that the assessee had not put the land to use for the purposes of the business in the relevant previous years but it merely started construction on the land for a show-room and office with a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sham, bogus or a collusive arrangement. The Department also does not contend that the money expended by the assessee by way of rent came back to it in some way or other. The undisputed facts are, therefore, that the assessee had taken the godown on rent and had paid for the rent also. Whether the assessee kept any goods therein or not does not exactly constitute the element of user of the godown. The facts of the case on record clearly show that the assessee was in the expectation of getting its business boosted in a very large way by acquiring various commission agencies from different parties. Copies of correspondence entered into by the assessee for this purpose have been placed on our records. At the time, therefore, when the godown was taken on rent, the necessity for doing so could not disputed. A businessman is required to have a long vision and should take into consideration the future possibilities of improvement into business and act accordingly. Hence, the action of the assessee in taking the godown on rent must be considered to be in the business interest of the assessee, as at that time and not only that, the same should be considered to be a rather prudent action on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e omnibus provisions of section 37(1) would, therefore, clearly apply to such a case. This is so because the Legislature has used the expression described in sections 30 to 36 and not covered by sections 30 to 36 , in section 37(1). Vide Chenab Forest Co. v. CIT [1974] 96 ITR 568 (J K), at pages 575 and 576. The Supreme Court has also held in the case of CIT v. Kalyanji Mavji and Co. [1980] 122 ITR 49, at page 53, that since on current repairs should only describe in sections 30 and 31, allowability of other types of repairs would be guided by the omnibus provisions of section 37(1). So far as the applicability of the provisions of section 37(1) to the present case is concerned, the expenses incurred by the assessee will have to be allowed under this section only if it is incurred wholly and exclusively for the purpose of the business. User of the premises is no pre-condition for allowance under this broad section. There cannot be any doubt about the fact that the godown was taken on rent wholly and exclusively for the purpose of the business of the assessee which originally required storage space in godowns and warehouse. Hence, the expenses should clearly be allowed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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