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TMI Blog1991 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ea 223 sq. ft. are under construction in the S.L.N. Charities premises facing Vanivilas Institute Road, Bangalore and they are expected to be ready for occupation by the end of June, 1978. The management have proposed to lease these shops on rental basis. Tenders are invited from the interest parties in the prescribed fror to be obtained from Charities office on any working day between 9 a.m. and 1 p.m. The Charities will be at liberty to reject any or every offer by way of tender without assigning any reason. The accepted tenders will be liable for execution of necessary rental deeds with the Charities as per existing rules of the management. The sealed tenders may be addressed to Secretary, S.L.N. Charities, Fort, Bangalore 560 002 on or before 20th May, 1978." In the tender form, the applicant was required to mention as to how much rent he was willing to offer and also as to how much amount he was willing to pay by way of contribution. The assessee submitted tender for the grant of lease of two shops. The assessee offered rent of Rs. 400 per month per shop and contribution of Rs. 32,000 per shop. The tender of the assessee was accepted and two shops were allotted to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue in the case of Ramakrishna Co. vs. CIT (1973) 88 ITR 406 (Mad). In that case, one cinema theatre building had been taken on lease by one K. Viswanathan. The unexpressed portion of the lease deed was 10 years and 8 months. The assessee obtained on lease from K. Viswanathan his right, title and interest in the cinema building and had to pay Rs. 1 lakh by way of consideration in addition to payment of monthly rents payable by K. Viswanathan. The assessee claimed deduction for a sum of Rs. 9,375 being the proportion of the total consideration of Rs. 1 lakh, for the year under consideration in addition to the monthly rents as a deduction under s. 10(2)(xv) of the Indian IT Act 1922, in computing its total income. The High Court held that the amount having been paid by the assessee for the acquisition of a capital asset constituted capital expenditure and the Department was justified in denying deduction for it. 6. Attention is also drawn to the following words of Lord Greene M.R., in Henriksen vs. Grafton Hotel Ltd. (1942) 24 Tax cases 453 : (1942) 10 ITR (supp.) 79 : "A payment of this character appears to me to fall into the same class as the payment of a premium on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and a deduction for it cannot be allowed. The payment under consideration, though called by the name contribution, is in fact, only premium for the acquisition of tenancy and the Department was justified in holding that the expenditure on the payment of premium being capital expenditure cannot be allowed as a deduction. 10. The learned authorised representative of the assessee had relied on the decision of the Bombay High Court in the case of CIT vs. Cinceita (P) Ltd. (1982) 28 CTR (Bom) 250 : (1982) 137 ITR 652 (Bom). In the case, the assessee took on lease for an initial period of 20 years a building on a monthly rent of rs. 3,500 with an option for renewal of the lease at a higher rent, to be used as the business premises of the assessee. For the relevant assessment year, the assessee claimed as deduction an expenditure of Rs. 10,700 towards registration fees, stamp duty and solicitors' fee in connection with the drawing up of the lease deed. The question arose whether the expenditure was capital expenditure or revenue expenditure. The High Court was of the view that the expenditure claimed by the assessee being only the expenditure required for drawing up a proper and effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractual restriction on the right of every mill to work its loom to their full capacity, and purchase of loom hours by a mill had, therefore, the effect of relaxing the restriction on the operation of loom to the extent of the number of working hours per week transferred to it, so that the transferee-mill could work its looms for longer hours than permitted under the working time agreement and increase its profitability. The expenditure incurred by the appellant for the purpose of removing a restriction on the number of working hours for which it could operate its looms with a view to increasing its profits was revenue in nature and allowable as a deduction under s. 10(2)(xv). By the purchase of looms hours no new assets was created and there was no addition to or expansion of the profit-making apparatus of the appellant. The acquisition of additional looms hours did not add to the fixed capital of the appellant; the permanent structure of which the income was the product or fruit remained the same; it was not enlarged nor did the appellant acquire a source of profit or income when it purchased the loom hours. The expenditure incurred for the purpose of operating the looms for longe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest available to the assessee for a period exceeding six years from the date the interest vested in the assessee. The Supreme Court accepted the contention of the assessee. Relying on this decision of the Supreme Court, it has been sought to be argued on behalf of the assessee in the present case that the tenancy being only for a period of 11 months, it could not be said to constitute an asset and the expenditure in question could not, hence, be regarded as being capital expenditure. 16. The above mentioned case decided by the Supreme Court, on which the assessee has relied, does not establish that the tenancy for a period less than six years would not normally constitute an asset. Under the provisions of the WT Act, the definition of the term "asset" specifically excluded interest in property which was for a period less than six years. But for this specific exclusion, it is understood that the interest in property, though to last for a period less than six years, was property. If the legislature had not looked upon such an interest to be otherwise an asset, there was not need to specifically provide for this exclusion. It may be that the assessee has acquired the tenancy for a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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