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TMI Blog2012 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... posal by consent. 3. The assessee in the present case was a tenant in a building by the name of Shriniketan at Worli and was in the occupation of an area admeasuring 5,000 sq. ft. The building was declared by the Municipal Corporation to be unsafe for occupation and an eviction notice was served on the occupants. A suit was instituted on the Original Side of this Court in a partition dispute between the owners of the property. On 13 February 1978 the Court Receiver was appointed as Receiver and the assessee being a tenant in the building continued to pay rent to the Receiver. On 12 March 1999 Consent Terms were arrived at in the suit. A developer came to be impleaded as a party Respondent and was a party to the Consent Terms. Under the Consent Terms the developer agreed to repair and reconstruct the building at his costs. The developer agreed to handover a certain area in the newly constructed and renovated building to the coowners. Under Clause 8 of the Consent Terms the developer assumed the obligation of negotiating and settling with the tenants and occupants of the building and to either offer them alternate accommodation or to relocate them in the repaired building. The Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1.50 Crores otherwise than to secure an asset of an enduring nature; (ii) The assessee would be entitled to become a member of the cooperative housing society to whom the title would be transferred by the erstwhile coowner. 6. On the other hand, counsel appearing on behalf of the assessee submitted that in the present case (i) The ownership of the structure or any part thereof does not stand transferred to the assessee and the assessee continues to be the tenant of the premises on the same monthly rent of Rs. 11,300/for an area admeasuring 5,000 sq. ft. as before; (ii) The assessee by making a contribution of Rs.1.50 Crores for the cost of renovation obtained a commercial revenue advantage of a right to continue in premises of an equivalent area on the same rent of Rs.11,300/per month which would work out to approximately to Rs.2.26 per sq. ft.; (ii) Under the agreement which was arrived at between the assessee and the developer the assessee does not acquire title to the premises, but continues to remain a tenant in the new structure. The case of the assessee would be governed by the decision of the Supreme Court in Madras Auto. 7. The issue as to whether expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 8. In Madras Auto the assessee had in fact incurred the entire cost of construction of a new building but obtained no title to the new construction. The benefit which the assessee obtained was a long lease of thirty nine years on low rent. The Supreme Court held that the asset which was created belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of a capital nature incurred by the assessee for the purposes stipulated therein including inter alia for the construction of any structure or the work of renovation, extension or improvement can form the basis of a claim for depreciation as if the structure or work is a building owned by the assessee. But for the Explanation, an assessee would not be entitled to the benefit of depreciation even if the expenditure which was incurred was of a capital nature and the effect of the Explanation is to entitle the assessee to the benefit of the provisions of Section 32, if the stipulations and conditions set out in the Explanation are fulfilled. The deeming fiction is for the purposes of the statutory provision in question. But the point to be emphasised is that the explanation operates in a situation where capital expenditure is incurred by the assessee. Unless the expenditure is of a capital nature, there would be no occasion to apply the deeming fiction that is carved out by Explanation I. In the present case, for the reasons that we have already indicated and following the judgment of the Supreme Court in Madras Auto, we have arrived at the conclusion that the assessee had not incu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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