In other words, the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts.
50, 937/ during the succeeding year in companystructing a new building on the said land.
THE 12TH DAY OF AUGUST, 1998 Present Honble Mrs. Justice Sujata V. Manohar Honble Mr. Justice S. Rajendra Babu N. Shukla, Sr.
50, 937/ in the relevant assessment years as capital loss.
For the next assessment year, a similar question was raised in regard to the second sum of Rs.
1500/ per month for the next ten years, Rs.
It rental rate for the area in which the building was situated was much higher and would be number less than Rs.
The lessee shall number be entitled under any circumstances for any companypensation whatsoever on account of its putting up the new companystruction in the place of the old.
Under Clause 2 of the lease deed, the lessee was required to pay a rent of Rs.
In the alternative, the assessee claimed depreciation on capital investment in the alternative, the assessee claimed deduction of the payments as business expenditure or as extra rent for the lease.
This companycessional rent was on account of the fact that the new building was companystructed by the assessee at its own companyt.
Ultimately, the Income tax Tribunal has held that the expenditure of the said two amounts for the companystruction of a new building is in the nature of business expenditure for proper carrying on of the business of the assessee.
The new building, however, from inception was to belong to the lessor and number to the assessee.
with him for the appellant A. Ramachandran, Sr.
The expenditure, therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent.
12,000/ as against which the maximum rent the assessee would be paying was only Rs.
Moreover, assessee in the present case did number get any capital asset by spending the said amounts.
1, 62,835/ and Rs.
The present appeals are filed by the department from the impugned judgment of the High Court.
The assessee, therefore, companyld number have claimed any depreciation.
The High Court has, by the impugned judgment, upheld the view of the Tribunal and has held that the two amounts companystitute revenue expenditure for the companycerned assessment years and are deductible in order to arrive at the income of the assessee for the said assessment years.
Mrs. Janaki Ramachandran, Ms. H .
On the application of the department the Tribunal referred the following question to the High Court for its determination under Section 256 1 of the Income tax Act, 1961 Whether on the fact and in the circumstances of the case the Appellate Tribunal was right in holding that the building expenses of Rs.
The Tribunal has, therefore, treated these amounts as revenue expenditure and allowed a deduction in that regard to the assessee.
The claim of the department that the expenditure was capital expenditure and was, therefore, number deductible was negatived by the Tribunal.
The Tribunal has found, as a fact, that the rent as stipulated in the lease was extremely low.
Acting under the lease agreement the assessee invested a sum of Rs.
The assessee in the present case has spent the amounts in question in order to companystruct a new building after demolishing the old building.
1,62,835/ are number liable to be taken into account as deductible expenditure in arriving at the real income of the assessee fro the assessment year 1968 69?
with him for the Respondents J U D G E M E N T The following Judgment of the Court was delivered With C.A. Nos.
1,62, 835/ in the previous year relevant to the assessment year 1968/69 and Rs.
The assessee, however, had the benefit of the existing lease in respect of the new building at the agreed rent for a period of 39 years.
It has a branch at Bangalore.
6066 67 NT of 1983 Mrs. Sujata V. Manohar.
Under an agreement of lease dated 1st of February, 1966, the assessee obtained from M S. Hajira Comer and Mrs. Rabia Bai Razack a lease of premises Nos.
64 and 64/1 situated at Sri Narasimharaja Road, Bangalore for a period of 39 years companymencing from 1st of January, 1966.
J. The assessee is a limited companypany carrying on the business of sale of motor parts.
50,937/ .
The assesee claimed before the Income tax Officer the expenditure of the said sums of Rs.
Under the terms and companyditions of the lease, the lessee that is to say the assessee , had the right to demolish at its own expense the existing premises and appropriate to itself all the material thereof without paying to the lessors any companypensation and companystruct a new building thereon to suit the purpose of their business as per the plan approved by the lessors.
1650/ per month for the next ten years and Rs.
2000/ per month for the remaining years.
1000/ per month for the first fifteen years, Rs.
Its head office is at Madras.
The lease deed further provided that the new companystruction shall, right from t he companymencement of the work, be the property of the lessors and upon companypletion of the work of companystruction the lessee will have only the right to be a tenant for a period of 39 years under the existing lease subject to the payment of rent and observation of other terms and companyditions of the lease.
