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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 ..... acquired some kind of an enduring right of possession over the occupied area of the said premises surrendered to them by those occupants. It had the incidents of permanence. In those circumstances we agree with the revenue that the expenditure was capital in nature.- decided against assessee - ITA No. 12 of 2006 - - - Dated:- 20-7-2018 - Hon ble Mr. Justice I. P. Mukerji And Hon ble Justice Amrita Sinha For the Petitioner : Mr. J. P. Khaitan, Sr. Adv. Mrs. Sanjukta Gupta, Mr. Avra Majumder, Mr. Pramit Bag, Mr. Amitava Mitra, Mr. Parag Chaturvedi For the Respondent : Mr. M. P. Agarwalla ORDER I. P. Mukerji, J. By an order of a Division Bench of this Court dated 12th June, 2006, this appeal under Section 260A of the Income Tax Act, 1961, was admitted on the following substantial questions of law: Whether the Tribunal was justified in law in upholding the disallowance as capital expenditure of the payment of ₹ 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 appellant and Mr. Agarwal, learned Advocate for the Income Tax department cited various authorities in which property related expenditure was made by the assessee. In the cases cited by Mr. Khaitan those expenditures were treated as revenue expenditure whereas in those cited by Mr. Agarwal, they were held to be capital expenditure. The principles of law and accountancy on which the differentiation has been made by the Courts between capital expenditure and revenue expenditure, must be appreciated in order to come to a conclusion in this appeal. Under Section 37(1) of the Income Tax Act, 1961 expenses not being those described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses, laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income tax under the head profits and gains of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al expenditure and not allowable deduction (See Commissioner of Income-tax Vs. Hemraj mahabir Prosad (P.) Ltd. reported in (1989) 179 ITR 73). Compensation paid by the assessee after taking on lease a factory, to evict certain unauthorised occupants of the factory was held to be capital expenditure (see Hardiallia Chemicals Ltd. Vs. Commissioner of Income-tax reported in 218 ITR 598). The above cases were cited by Mr. Agarwala, for the Income Tax department. Mr. 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest obtaining more space by evicting M/s. Satya Sai Properties, M/s. Anam Corporation and M/s. B. K. Roy (P) Ltd. was for the business growth of the assessee. Any expenditure made in this behalf was revenue expenditure. Note the difference in the facts of this case with Commissioner of Incometax Vs. Auto Distributors Ltd. reported in 210 ITR page 222. In that case, the assessee was engaged in the business of taking property on lease with a right to sub-let. The property was sub-let augmenting the income of the assessee. On these facts the division bench of our Court held that the expenditure was revenue. The division bench judgment of the Kerala High Court in Commissioner of Agricultural Income-tax, Tribandrum Vs. Bombay Burmah Trading Corporation Ltd. reported in 131 ITR page 154 can only be justified on the ground that if the effect of incurring expenditure had a direct connection with increasing the income of the assessee, then it could be said that the expense was revenue in nature. The purchase of loom hours from others had a direct impact on the increase of income of the assessee and thus held to be revenue expenditure by the Supreme Court in Empire Jute Co. Ltd. Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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