2005 (11) TMI 37

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..... re, under section 37(1), even though a new permanent capital asset has been brought into existence?" - assessee had put up the ground floor over the existing basement floor only to have the business premises according to the specifications put forth by TVS Suzuki Limited and further, there is a clear-cut stipulation in the lease deed that reimbursement of the expenditure is not possible from the o .....

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..... basement floor at a cost of Rs. 4,82,688, according to the specifications given by TVS Suzuki Limited to all its dealers. The assessee claimed the said sum as revenue expenditure. The Assessing Officer disallowed the said claim as not relating to business, inasmuch as a new permanent capital asset had been brought into existence and added to the income. Against that order, the assessee preferred a .....

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..... tion is covered by the decision of the Supreme Court rendered in CIT v. Madras Auto Service P. Ltd. [1998] 233 ITR 468. The Supreme Court, in the said case, while considering whether a particular expenditure is capital or revenue, held as follows: "The general principles applicable in determining whether a particular expenditure is capital or revenue expenditure are as follows: (1) Outlay is deem .....

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..... y what was taken in as capital of the business." Applying the above principles, the Supreme Court, while dismissing the appeal, held as follows: "Right from inception, the building was of the ownership of the lessor. Therefore, by spending this money, the assessee did not acquire any capital asset. The only advantage which the assessee derived by spending the money was that it got the lease of a .....

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..... xigencies, the assessee had put up the construction, in and by which, the assessee would not get any capital asset. In view of the above, following the principles laid down by the Supreme Court in the decision cited supra, the question is answered in the affirmative, against the Revenue and in favour of the assessee. The appeal stands dismissed. No costs.
Case laws, Decisions, Judgements, Ord .....

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