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TMI Blog2012 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... construction already damaged. - The other articles bought by the assessee also got damaged and, therefore, in that fact situation, the Tribunal was fully justified in holding that such expenditure which may be pre-operational expenditure for a project can be treated to be a revenue expenditure actually and not a capital expenditure - in favour of assessee. - T.A. No. 3 to 8 of 2000(R) With T.A. No. 9 of 2001 - - - Dated:- 12-9-2012 - MRS. JAYA ROY J. For the Appellant : Mr. Deepak Roshan, Advocate Mr. Amit Kumar, Advocate Miss Rupa Kumari, Advocate For the Respondent : Mr. Biren Poddar, Sr. Advocate M/s. Sachin Kumar, Mahendra Kumar Choudhary, Piyush Poddar, Miss Darshana Poddar Miss Amrita Sinha, Advocates Heard learned counsel for the parties. 2. Following questions have been framed while admitting the appeals :- A. Whether the ITAT on the facts and in the circumstances of the case, was justified in allowing the claim of expenses on lease-rent as revenue expenditure when lease agreement seen in proper perspective pointed to an agreement of hire-purchase rather than an agreement of lease which necessiated the expenditure to be treated as capital expenditure? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Mahindra Ltd. Vs. Commissioner of Income Tax reported in (2003) 128 ITR TAXMAN 394 (BOM.) wherein the same issue was involved and the Bombay High Court has held that in a case where the assessee company has paid certain amount to a educational society which runs the school in which children of the employees of the company study, then in that situation the amount should be allowed as business expenditure because it was incurred predominantly for civil welfare. It is submitted that in this case the said subsidy was paid by the assessee in pursuance of the agreement entered into between the assessee company and the Labour Union, therefore, predominant purpose is for the welfare of the workmen. 6. We considered the submissions of the learned counsel for the parties and perused the reasons given by the Assessing Officer, C.I.T.(Appeals) and the Tribunal. So far as interpretation of the document is concerned, that may involve question of law and in this case the Tribunal has considered the relevant terms and conditions mentioned in the agreement and held that in view of the terms and conditions of the agreement, the Air Conditioners have been leased out with option to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that if the hirer should punctually pay all the monthly instalments, the piano should become his sole and absolute property, and that until such payment the piano should continue to be the sole property of the owner. The HOUSE OF LORDS held that the hirer was under no legal obligation to buy, and that the hirer could either return the piano or exercise his option to purchase the piano. LORD HERSCHELL L.C. observed that he could not concur in the view of the Court of Appeal that upon the true construction of the agreement Brewster had agreed to buy . It was held that there was no obligation on Brewster to buy it. 8. The said passage and the commentary also indicate that there is a lot of difference between the purchase, hire-purchase and lease agreement. In this case, we are of the considered opinion that the terms indicate that the provider of the machines was required to maintain the machines and, therefore, he was entitled to take the rent also as per the terms of the agreement, and the petitioner, in the any relevant year could not have exercised his right to purchase the Air Conditioner, his right to purchase the Air Conditioner could have been exercised after expiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be abortive expenditure. The Assessing Officer rejected the claim of the assessee as misconceived on the ground that it is a case of capital expenditure. The C.I.T.(Appeals) also upheld the said finding but the Tribunal has reversed the finding. 14. In the case of Indo Rama Synthetics (I) Ltd. Vs. Commissioner of Income Tax reported in (2009) 32 DTR 322 (Del) it has been held that if expenditure has been incurred for setting up a new unit which was subsequently abandoned, then the aforesaid expenditure will be treated as revenue in nature as no new industrial asset came in existence. 15. The Tribunal has relied upon the judgement of the Calcutta High Court delivered in the case of C.I.T. Vs. Graphite India Ltd. reported in (1996) 121 ITR 420 and decision of the Hon'ble Supreme Court in the case of Jonnshead and Sons (India) Ltd. Vs. C.I.T. reported in (1997) 224 ITR 342 and Allembic Chemical Works Co. Ltd. Vs. C.I.T. reported in (1989) 177 ITR 377 and held that in view of the ratio of above judgements, if the expenditure is incurred for acquisition of an asset which gives or renders enduring benefit to the assessee, naturally it is to be considered as capital expenditure ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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