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TMI Blog1981 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... amble (b), (c) and (e) read as follows: "(b) The Assignor is also entitled to the tenancy rights of the said premises and is lawful use occupation and possession thereof. (c) The Assignor has agreed with the Assignee to sell to and sign unto the Assignee the said business as a going concern together with the goodwill thereof as well as tenant's fittings, fixtures, stationery, furniture, telephone and all other effects and things lying and being in the said premises and used in connection with the said all other tangible and intangible right privileges and advantages pertaining to the said business from all incumbrances and free from all book-debts, Govt. dues and any other debts of liabilities at or for the price of Rs. 2,17,000. (e) As incidental to the transfer of the said business as a going concern the Assignor has also agreed to assign and transfer his monthly tenancy rights and entire interest into and upon the said premises without any cash consideration". 3. On the above, a question arose before the ITO as to whether the sum of Rs. 1,82,000 paid by the assessee is allowable as a revenue expenditure. The ITO held that since the assessee purchased the business con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the amount of Rs. 1,82,000 paid by the assessee should be allowed as a deduction as it is payment for obtaining tenancy which is essential for the purpose of carrying on business. 5. The ld. Deptl. Rep. vehemently opposed the contentions of Dr. Pal. According to him, the agreement clearly spells out the consideration which the assessee paid and having regard to cl. (e), it cannot be contended that the consideration paid by the assessee is for acquiring tenancy rights. He has also argued that there is no sufficient evidence to go behind the contract. The circumstances relied on by Dr. Pal, according to the ld. Deptl. Rep., Mr. Lahiri are not sufficient to go against the contract. He also contended that assuming that the consideration was for the purpose of acquiring tenancy rights, even then the amount is not allowable. He has also made out a point that the entire amount of Rs. 1,82,000 cannot be considered for the purpose of acquiring tenancy rights. 6. We have given careful consideration to the facts of the case and to the rival submissions. It appears to us that the assessee's case must fail both on facts and in law. The assessee wants us to accept the proposition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd "for goodwill and all tangible and intangible rights of and purtenent to the said business" to the extent of Rs. 1,82,000 yet the ld. Counsel wanted us to believe that the above contract was not what the deed purported to say, that it was altogether different, namely, the contract to purchase the tenancy rights only of the assignor, and that even through the contract said that on cash was paid for such tenancy right and that its assignment was merely "incidental to the transfer of the said business as a going concern", the assessee company had paid Rs. 1,82,000 for the purchase of the tenancy rights and that the business as a going concern was not purchased. To support the above stand the assessee placed to evidence on record. Neither the resolution dt. 24th Jan., 1976 passed by the Board of Directors of the company authorising the above deal nor the oral evidence of the Director concerned, who signed the said deed on behalf of the company in support of the assessee's present stand has been placed on record. The evidence of the assignor i.e. Yusuf Ali Gulam Hussain Arsiwala in support of the assessee's case is also not on record. The only evidence relied upon in support of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpret the contract itself. The rights of the parties flow, not from the hidden intention in the reassess of one of the contracting party's mind, but from the explicit terms of the contract on which both the sides have agreed. So any everment as to the true intention of the assessee cannot be allowed to colour our judgment while examining the terms of the present contract. Then, even such everment as to the assessee's real intention reads to be proved. The present appellant is a company; its intention can be explicit only through the resolution of the Board of Directors. Such resolution was admittedly passed on 24th Jan., 1976 as is mentioned at the last page of the contract, and, as the contract itself is in terms of it, it has to be inferred that there is no contradiction in the resolution and the terms of the contract. That being so the plea of the assessee that it had paid Rs. 1,82,000 as the price of the tenancy rights cannot be countenanced on the basis of existing evidence. 8. The facts of Guzdar Kajora Coal Mines Ltd. vs. CIT (85 ITR 599) were altogether different. It was nobody's care there that the deed of conveyance was not what the deed purported to say. The deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an asset by the assessee would be a piece of evidence and prima facie the statements or figures given therein would show how much the cost of the asset to the assessee is. But, if circumstances exist showing that a fictitious price has been put on the asset or there is fraud or collusion between the vendor and the assessee and there has been inflation or deflation of value for ulterior purposes it is open to the IT authorities to refuse to accept the price mentioned or allocation given in the deed or alleged by the assessee and to ascertain what the actual cost was or to determine the allocation between depreciable and non-depreciable assets". 10. When the facts of the present case are contrasted with the above facts. no similarity what so ever is recognisable in them. Nobody has placed on record in the present case circumstances and evidence to show that a fictitious price has been put on a certain asset or that there was fraud or collusion between the assignor and the assessee and that there has been inflation or deflation of value for ulterior purposes. Even an ulterior purpose has not been spelt out or suggested. In the Guzdar Colliery's case substantial evidence was place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tenancy right is treated as capital asset and the decision has nothing to do with the issue on hand. There is great force in the contention of Dr. Pal. The decision relied on by the ld. Deptl. Rep. does not advance the case further than what we have held above. The second case is more opposite and supports the stand of the Revenue. Dr. Pal no doubt tried to distinguish this case on the ground that the lease was for 5 years whereas in the instant case the tenancy is only month to month. We do not think that that distinction has any bearing on the principle decided by their Lordships. We have already shown that the assessee definitely got an enduring benefit or advantage by acquiring the tenancy right having regard to the fact that the assessee cannot be evicted. In other words, the assessee parted with substantial amount only with a view to carry on business in the premises as long as possible. The period may not be fixed but definitely it is indefinite. Therefore, the consideration paid for acquiring such a right, in our view, is capital in nature. In the opinion of the Hon'ble Calcutta High Court, expressed in the above case, i.e. 117 ITR 743, once the finding was reached that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring for the Revenue stated that though the decisions of the two High Courts relied on by the CIT (A) are against the Revenue, and there is no authority in favour of the Revenue, yet he wanted to keep the issue alive. During the course of arguments, he raised an additional plea that the claim is not allowable under s. 36(2) as bad debt. In reply, Mr. Pal contended that the authorities relied on by the CIT (A) fully support the assessee's plea. In so far as the additional plea is concerned Dr. Pal objected to the consideration of the same on the ground that it would involve looking into fresh facts and also because the ground has not been taken even as an additional ground. He has also pointed out that it was not the case of the ITO at any stage and that the CIT (A) also did not say that the claim is allowed as a bad debt. All through, according to Dr. Pal, the amount was considered as irrecoverable advance. 19. In our opinion, the decisions relied on by the CIT (A) fully support the claim of the assessee. So far as the additional plea is concerned, to agree with Dr. Pal. The plea sought to be urged by Mr. Lahiri was never taken by the ITO. The application of under s. 36(2) was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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