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TMI Blog2018 (7) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in law in upholding the disallowance as capital expenditure of the payment of Rs. 62 lakhs made by the appellant to the sub-tenant inducted by it in an earlier year for resuming the sub-tenanted portion of Wallace House for its own business use and its purported findings in that behalf are arbitrary, unreasonable and perverse? Whether the Tribunal was justified in upholding the disallowance as capital expenditure of the payment of Rs. 21.20 lakhs made by the appellant to its distributor for resuming for its own business use the portion of Wallace House which the appellant had allowed the distributor to use in the past and for setting the distributor's claim and its purported findings in that behalf are arbitrary, unreasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties Limited and M/s. Anam Corporation. Similarly, it paid Rs. 21.20 lakhs to Mr. B. K. Roy (P) Ltd. to vacate the third floor of the premises. The question which falls for consideration is whether this expenditure incurred by the company was capital or revenue in nature? The learned Income Tax Appellate Tribunal 'B' Bench, Calcutta expressed the opinion in its order dated 31st August, 2005, that the payment of Rs. 83.20 lakhs made by the appellant to M/s. Satya Sai Properties Limited, M/s. Anam Corporation and M/s. B. K. Roy (P) Ltd. was to be treated as capital expenditure and not revenue expenditure. It affirmed the order of the Commissioner of Income Tax (Appeals). Both Mr. Khaitan, learned senior advocate appearing for the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss then it is revenue expenditure but if made for possession of an asset or right of a permanent character then the expenditure is capital in nature. (Bombay Stream Navigation Co. (1953) P. Ltd Vs. CIT (1965) 56 ITR 52). Payment of Rs. 1,15,000/- to perfect the title to a capital asset, i.e, a Mill was held to be a capital expenditure (V. Jaganmohan Rao Vs. CIT (1970) 75 ITR 373). The test is whether the expenditure creates a new asset or is for furtherance of business of the assessee (See Dalmia Jain & Co. Ltd. Vs. CIT (1971) 81 ITR 754). In Chloride India Ltd. Vs. Commissioner of Income Tax, West Bengal reported in 130 ITR page 61, Mr. Justice Sabyasachi Mukharji delivering the judgment of a division bench of this Court, after considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. J. P. Khaitan, learned senior advocate cited Empire Jute Co. Ltd. Vs. Commissioner of Income -tax reported in 124 ITR page 1. In this case Jute Companies formed the Indian Jute Mill Association. By an agreement between themselves they restricted the number of working hours of looms per week to not more than 45 hours per week per mill. However, a mill which worked for less hours could transfer for consideration those hours to another mill. The Supreme Court reversing the judgment of the High Court held that this purchase of loom hours was revenue expenditure. No new asset was created. Purchasing loom hours resulted in increased profit. If the expenditure incurred helped in facilitating the assessee's trading operations or enabling the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per month. They say that they were not the owners, lessee or sub-lessee of the property but were only in possession thereof, claiming to be a monthly tenant. Hence, they had no permanent title or interest. Two entities M/s. Satya Sai Properties Limited and M/s. Anam Corporation also got into the subject premises, inducted by the assessee. With them the assessee struck a deal that if they vacated the premises they would be compensated, by being paid Rs. 62 lakhs. The deal materialised. Another company M/s. B. K. Roy (P) Ltd. was inducted into the third floor by the assessee. They were distributing the assesses's fertiliser production on a whole sale basis. They were also removed from occupation of the premises by the assessee by payment of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... byasachi Mukharji for the division bench said: "Therefore, the nature of the transaction that was found by the Tribunal was that M/s. Gaper & Co. had the legal right to be in possession, which legal right, the assessee, in the instant case, had to obtain or had to procure and for procuring that legal right to possession which was with M/s. Gasper & Co. by virtue of Section 108(c), being the lessee of the original landlord, there necessarily had to be the extinction of that right, that is to say, M/s. Gasper & Co.'s right to possession and that right to possession which flows from the right which M/s. Gasper & Co. obtained, was acquired by the assessee. If the right to possession be a right, which is capital, it is a capital of enduring na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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