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TMI Blog2012 (11) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... ced during the hearing by the assessee, clause 3(m) enjoins the lessee not to transfer either directly or indirectly, sell or encumber the lease benefits to any other party, the same stipulation enables transfer with "previous consent in writing of the Chief Executive Officer". Also that the conditions embodied in such lease deed are part of the general policies consciously adopted by the municipal and statutory authorities who manage and lease out such assets - no infirmity with the reasoning of the Tribunal no infirmity with the reasoning of the Tribunal - against assessee. - IT APPEAL Nos.956 & 957 OF 2011 - - - Dated:- 5-11-2012 - S. RAVINDRA BHAT AND R.V. EASWAR, JJ. JUDGMENT S. Ravindra Bhat, J. - The assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were for a long period ranging between 60-95 years. The various clauses in the lease agreements in question permitted the appellant to construct buildings upon the lease hands which were to ultimately vest with the landlord upon expiry of term of the lease. These leases were granted on payment of heavy premia upfront and down payment basis. Lease agreements also contained stipulation reserving nominal rent ranging between Rs. 1 to Rs. 100/- P.A. and in some cases worked out to 2.5% of the premium paid. It is urged that the appellant had claimed deduction of Rs. 30,94,464/- towards amortizing of such premia paid for use of land on long term lease. The assessee had contended that the premium paid on lumpsum basis indicated the captalised val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and was, therefore, allowable as revenue expense. In that case, the Court had considered a lease obtained from the Maharashtra Industrial Development Corporation for a period of 95 years on a payment of annual rent of Rs.1 per annum. After the expiry of the lease period, the land along with the building constructed by the assessee, was required to be surrendered to the MIDC. On the facts of the case, the Court held that there was no annual lease rental being paid by the assessee and the premium paid at the time of entering into the agreement was nothing but rent paid in advance, and was hence allowable as revenue expense. In the present case the appellant has furnished a lease agreement in respect of one such land at Usar in Maharashtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve mentioned decision. However, in case of an agreement in which an annual payment of rent, other than a nominal rent, is required, the amount of lease premium cannot be said to be payment of rent in advance and in such cases the premium will be in the nature of capital expenditure incurred for obtaining lease hold rights and no amortization will be allowable." 4. In respect of the succeeding assessment year the CIT (Appeals) followed his reasoning for the previous year, for the rejection of a similar claim by the assessee. The ITAT by its common order dismissed the appellant's claim stating as follows : "9. Next grievance of the assessee relates to disallowance on account of amortizing the cost of land, by holding the same as capital e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as capital expenditure but Court by application of the Supreme Court's rulings in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 CIT v. Associated Cement Co. Ltd. [1988] 172 ITR 257 (SC), proceed to hold that the expenditure did not fall in the capital field. 6. This Court has considered these submissions and the issue which was sought to be urged has been re-visited on a number of occasions by various Courts. There is no doubt that in Madras Auto Services case (supra), the Court had observed that there is no single decisive test to ascertain whether an expenditure qualifies as Revenue or that which properly falls in the capital field. Several aspects are to be applied such as nature of gain by the assessee, specially in a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, the Court upheld the Revenue's contention and stated that the expenditure towards acquisition of lease amounted to "brining into existence an asset or advantage for enduring benefit of the business" and was properly attributable by way of capital expenditure cf (Assam Bengal Cement Co Limited). In Panbari Tea Company Limited (Supra), the Court underlined the fact where the party consciously chose to assign two different meanings to the expressions "Premium" and "Rent". The Court would not be justified in concluding that the premium paid constituted advance rent. Significantly this Court notices that in Panbari Tea Company Limited, the lease arrangement itself were for a period of 10 years, despite which the Supreme Court held it to c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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