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TMI Blog2016 (6) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... e represented on behalf of the assessee. 3. It was submitted by the ld. Departmental Representative that the only issue in the Revenue's appeal is against the action of the Commissioner of Income Tax (Appeals) in treating the payment towards Compensatory Lease Cancellation as revenue expenditure as against the action of the Assessing Officer in holding the same as capital expenditure. It was the submission that in 1975 or thereabouts, one Shri Chan Chin Shing and M/s. Sirsat Jewellers had taken on lease shops admeasuring 119 sq.mts. on the ground floor of a building on 'Odlem Culagor' in respect of Shri Chan Chin Shing and 19 sq.mts. on the ground floor of the said building by M/s. Sirsat Jewellers. Subsequently, the said land and building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Airport Authority of India reported in (2012) 340 ITR 407 (Delhi)(FB). It was the submission that the assessee having acquired the land and building, through amalgamation, and the assessee being the owner of the property, had no business reason to make the payment for surrender of lease of such property, especially when the assessee could have very well have evicted the tenants through due process of law. It was the submission that there were other tenants also, who had been vacated and no consideration was paid in respect of those tenants. It was the submission that consequently, the Commissioner of Income Tax (Appeals) erred in allowing the claim of the assessee that the said expenditure was revenue in nature. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had requested the tenants to vacate. It was the submission that the said two tenants being Shri Chan Chin Shing who was running a restaurant under the name and style of Nanking Restaurant and M/s.Sirsat Jewellers was running a jewellery shop. The said two persons showed reluctance to surrender their shops and consequently, negotiations had been entered into with them and settlement reached to, on account of which, the said amount of Rs.40,50,000/- was paid for lease cancellation. It was the submission that the said expenditure had been wholly and exclusively incurred only for the business purpose of the assessee. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of Shriram Buildcon Ltd. reported in 306 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon'ble Bombay High Court in the case of Shriram Buildcon Ltd. (supra) shows that this was a case of Civil Contractor and Builder, who wanted to have the tenancy vacated, so that his stock in trade being the land could be put to use for the business. Consequently, the facts of the said case are different from the assessee's case. The decision relied upon, on behalf of the assessee, by the decision of the Hon'ble Calcutta High Court in the case of Auto Distributors Ltd. (supra) shows that the decision that was a case of unauthorized tenant more in the nature of his squatter. In respect of the decision of the Hon'ble Kerala High Court in the case of Bombay Burmah Trading Corporation Ltd. (supra), it was a case of expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. If any such asset or advantage for the enduring benefit of the business s is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure." When these principles are applied to the facts of the assessee's case, the following emerge:- 1) The lease agreement clearly shows that they are liable for termination after a period of 03 months notice and the lease agreement have not been regularly renewed, though the lessee continued wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Directors of the assessee company in respect of authorization for cancellation of the lease, also talks as compensation and for loss of business. A perusal of the agreement entered into by the assessee shows the relinquishment of the lessees lease rights and interest in the leased premises. It is clearly a capital asset has come into existence in the hands of the assessee, which is of enduring benefit for the business of the assessee and consequently, the expenditure is liable to be treated as capital expenditure. A perusal of the assessment order shows that the Assessing Officer not only treated the same as capital expenditure also, but an expenditure out of the capital, but in the grounds of appeal, the issue of capital expenditure has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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