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TMI Blog2019 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] the entire amount was allowable as revenue expenditure. However, the assessee has been claiming the sum proportionately over the period of lease. This has been allowed in earlier two years. In absence of any change in facts and circumstances in our considered opinion there was no reason for the AO to take a different stand. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... year the assessee has paid premium of ₹ 2,50,00,000/-on lease rent. Out of which assessee claimed ₹ 50 lakhs to Brandon & Company Pvt. Ltd. (BCPL) as premium on leave and license, represent amortized amount paid to the previous tenant. The said consideration was paid to BCPL as compensation for procuring the surrender of tenancy rights for assessee to take possession of the premises for its commercial use. The assessee was asked by the AO to justify the claim. In response, the assessee furnished its reply. The submission made by the assessee was considered but not found to be acceptable by the AO due to the following reason:- "1. The tenancy right is a capital asset as per Income Tax Act. 2. The assessee has not produced any registered document/supporting evidences as per Maharashtra Rent control Act, 1991 which can substantiate claim of purchase of tenancy right. 3. Assessee's submission is that it has entered into leave and license agreement and on which lease rent is being paid. If the submission is accepted for while, then also assessee cannot claim amortization of lease premium paid as it is again capital in nature. • 4. The tenancy right is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be considered as a conclusive factor to determine taxability/ deductibility in the hands ,of the other party to the transaction. In this regard, the Appellant places strong reliance on the decision of Honourable Supreme Court in case of Empire Jute Co. Ltd. v/s. C/T [(1980) 124 ITR 1] wherein the Honourable Supreme Court has held as under (relevant extract reproduced): "In the first place, it/s not a universally true proposition that what may be a capital receipt in the hands of the payee must necessarily he capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material in determining whether the payment is revenue or capital disbursement qua the payer..........Whether it is capital expenditure or revenue expenditure would have to he determined having regard to the nature of the transaction and other relevant factors. 6. In light of the above, the Appellant submits before your Honour that the treatment given by Brandon in its income-tax return is not a relevant factor to determine the capital or revenue nature of expenditure in the hands of the Appellant. In absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndon has offered the said compensation of INR 25,000,000 as income under the head 'Capital Gains' and have paid long term capital gains tax on the same in the assessment year 2012-13, but it is the contention of the Appellant that it has neither acquired any capital asset nor acquired any enduring right! benefit. In absence of bringing into existence any capital asset in the hands of the Appellant, the compensation paid out of business exigency, Which has not resulted into advantage of enduring nature, would allowable as a revenue expenditure . In this regard the reliance placed on the decisions of the Honourable 'Supreme Court in case of Empire Jute Co (supra) and CIT v/s. Madras Auto Service (P.) Ltd. [(1998) 99 Taxman 575] is found to be applicable. The relevant extract of the decision of Honourable Supreme Court in case of Madras Auto Service (Supra) is as under: "...In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view .since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using ..... X X X X Extracts X X X X X X X X Extracts X X X X
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