9911796707
TMI Blog1987 (5) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of this business activity by the trust, it belonged to a partnership firm consisting of Chandrakant Kumudchandra Cheeda, and Snehalata Ratilal Chotalia. They had taken as tenants an immovable property belonging to the above company Elphinstone Dye Works Pvt. Ltd. in Old Prabhadevi Road, Bombay. Later on, when the Western India Warehousing Corporation activities was assigned to the trust which acquired it as a going concern together with its goodwill and beneficial advantage, the trust incurred certain expenses and started earning some income from the warehouse which was given to the Customs Department. 2. The company went into liquidation and was represented by the Official Liquidator. Though, in the beginning the Official Liquidator was receiving the rent @ Rs. 3,000 per month on behalf of the company, later on, the old arrangement was challenged by him in the court of law. According to him, the agreement between M/s. Western India Warehousing Corpn. and the latter assignment by the firm in favour of the trust was stated to be void and it was claimed that it should not be held binding on the Official Liquidator. The relief sought was that the vacant possession of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deed of Mortgage dated 13-10-1965. The Official Liquidator naturally became apprehensive at this step of Muktaben that if the Company's property is sold away by auction sale, the Official Liquidator will lose the chance of recovering the said sum of Rs. 57,920 every month. He thereupon took out Company Judge's Summons, being Company application No. 206 of 1975 against the said Muktaben and obtained an ad-interim injunction on 13-12-1975 preventing her from exercising the power of sale. The Official Liquidator categorically contended that Muktaben's taking over the transfer of the mortgage was only with a view to protect the tenancy of the Trustees in respect of the said premises. " " It is relevant to mention several dates in order to appreciate further facts. The original agreement of tenancy was dated 7-4-1972 entered into between the Company on the one hand and the partner of Western India Warehousing Corporation on the other hand. The relevant winding up petition was filed on 17th April, 1973. The Official Liquidator was appointed provisional Liquidator in the said petition by an order dated 10th September, 1975. Final order for winding up was made by the Bombay High Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power of sale will not be exercised till the time clause 3 is complied with. (2) Respondent No. 1 accepts that the Respondent Nos. 2 to 5 are the tenants of the mortgaged property in accordance with the Deed of Assignment dated 7th January, 1974 and agreement of tenancy dated 7-4-1972. (3) Respondent Nos. 2 to 5 undertake to pay to the applicant a sum of Rs. 7,73,931.00 within six weeks from the date hereof. (3A) The applicant will pay in the first instance out of the said amount within the period of two weeks the property tax, water charges, rates, other taxes, charges outgoings, assessments, land revenues and other impositions paid and/or due and payable under clause 1 of the Indenture of Lease dated 15th December, 1943 in respect of the mortgaged property for the period up to the date of these consent terms. (4) Agreed that Respondent No. 1 will not be entitled to claim the mortgage debt from the amount referred to in clause No. 3. " (14) Agreed that the said mortgage and the transfer of mortgage are valid and subsisting. (15) Within one week from the completion of sale the Official Liquidator will deliver possession of the said property to the purchaser by attorni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he referred to the various claims made by the parties before the Court. It had been alleged in the application by the Official Liquidator that the assessee was in wrongful occupation of the premises since 17th April, 1973 and therefore they were liable to pay to the Official Liquidator mesne profit or compensation for such wrongful occupation at the rate of Rs. 60,000 per month from 1973. He referred to the directions given by the IAC who had referred to the allegation of fraud as made by the Official Liquidator. Relying on the affirmation made by the Official Liquidator, it was stated that the assessee had no title to the premises and it could not be treated to be a good title. It was also pointed out that the assignment of the tenancy in favour of the assessee was challenged on the ground of invalidity. According to the Official Liquidator it had been stated in his petition that the assessee was a trespasser and was not occupying the property in any legal manner. The CIT(A) referred to the contention of the IAC that prior to the Consent Decree, the assessee-trust did not have any existing good title to the tenancy of the property in question. The CIT(A) further quoted from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sublet whole or any part of the premises or transfer their interest therein. It had been agreed that the landlord-company would not have any objection to such subletting. The assignees had paid certain sum of money for fixtures and furnitures and also another sum of Rs. 45,000 towards goodwill. It was therefore submitted that the whole going concern had been validly assigned to the trust. The assessee-trust was also put in possession of the above premises with effect from 7-1-1974. As the landlord-company M/s. Elphinstone Dye Works had gone under liquidation, their rent was being paid to him and several receipts signed on behalf of the Official Liquidator has been filed. All these receipts are for the year 1974 and certain months of 1975. 9. It was submitted that the Official Liquidator who had been appointed in September 1973 challenged the arrangements between the company and the firm and later on with the trust. The Official Liquidator had addressed letters to the Collector of Customs who had taken the warehouse for their use asking for the rent to be paid to the company. He challenged the tenancy in favour of the assessee-trust assessed in the status of association of perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Department. He further submitted that the payment was not to cure any defect in the title or to complete the title of the assessee. It was only to protect and defend the title or the right of the assessee in the enjoyment of the above premises. He submitted that the payment was made to facilitate the carrying on of the commercial activities of the assessee and to ensure the continued receipt of business income. 11. The Departmental Representative, on the other hand, submitted that the CIT (A) has discussed the matter at great length and the payment had been made only to cure the defect in the title or to complete the title. He submitted that but for the acceptance of the tenancy by the Official Liquidator there was no valid right with the assessee and it was after the payment of this amount that such right was acquired. He therefore submitted that the payment was of capital nature as it was made to cure the defect in the title or to perfect the title and not for merely protecting or defending the title of the assessee in the premises. It was also submitted by him that the assessee obtained an enduring benefit as a result of this payment and this amount constituted a multiple of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses on the acquisition of shares was held to be a capital expenditure as it was a new asset which was being acquired. A reference was also made to the decision of the Supreme Court in the case of CIT v. Jalan Trading Co. (P.) Ltd. [1985] 155 ITR 536 where it was held that a new company which acquired a new right to carry on business of sole selling agency and it was agreed to pay 75 per cent of its annual net profits for acquiring this right and claimed this expenditure as deduction. It was held that it was a capital expenditure. 14. As it would appear from the above discussion, facts of the above cases are entirely different. As regards the assessee acquiring an enduring benefit under the arrangement, the learned counsel for the assessee has drawn our attention to the decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 wherein it was held that even if an expenditure is incurred for obtaining an advantage of enduring benefit, it may sometimes be on revenue account and it is not every advantage of enduring nature acquired by an assessee that brings the assesses within the principles laid down in the test of enduring benefit. What was materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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