9911796707
TMI Blog1985 (6) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12,000 pertaining to the financial year 1979-80 allowed by the Commissioner (Appeals). The facts briefly stated are that the assessee-company agreed to take certain lands at Ferozepur Road on lease from six persons with effect from 1-11-1974 as per lease agreement dated 14-10-1974 The lease was intended to be for a period of 99 years and even more but the period initially fixed and agreed to was only of five years with effect from 1-11-1974. As per clause 3 of the lease agreement, the monthly rent fixed was Rs. 1,000, it was to be paid on or before 15th day of every month following. The assessee-company did not pay the rent up to 1979 when the lessors went to the Court and by a compromise decree dated 13-11-1979, the assessee-company admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease agreement. As per the later part of clause 5, the aforesaid amount shall stand forfeited if the rent due was not regularly paid and remained in arrears for more than one year. The ITO disallowed the claim holding that expenditure was of capital nature because it was for purposes of acquiring and constructing new assets. Further, the expenditure did not relate to the accounting period relevant to the assessment year under appeal and, therefore, on both the counts it was not admissible. The claim of the assessee for deduction was, therefore, rejected by the ITO. The proposed disallowance by the ITO was also approved by the IAC in proceedings under section 144B of the Income-tax Act, 1961. 3. Aggrieved, the assessee went in appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and could not find therefrom to show that the possession of the lands was given to the assessee-company. There is no evidence on record to show whether the lessors had removed 'malba' from the leased lands and when the possession was actually handed over. The learned counsel for the assessee, however, admitted that the work regarding the establishment of marketing centre, shops, hotel, banking corner and a cinema had not commenced. He, however, contended that the expenditure on lease rent was of revenue nature and, therefore, it should have been allowed by the Commissioner (Appeals). He relied on certain judicial authorities which have been discussed in the orders of the authorities below. 5. Shri R.K. Bali, the learned senior department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees. The plaints were filed on 5-11-1979 and compromise decree was awarded on 30-11-1979, i.e., within a period of one month. He urged that the decree was collusive and not binding on the department. In this connection he referred to the judgment of the Supreme Court in the case of Kale v. Dy. Director of Consolidation AIR 1976 SC 807. 6. We have given our careful consideration to the rival submissions. We have also referred to the relevant provisions of the lease agreement, a copy of which has been filed in the paper book by one of the six lessors. We are in agreement with the Commissioner (Appeals) that there was no dispute about the lease money in the earlier years. We are also in agreement with the learned departmental representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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