1990 (10) TMI 31 - HC - Income Tax

Assessee not liable to restore land under 1940 lease agreement. Tribunal to assess 1971 agreement for restoration charges.

The High Court of Bombay ruled that the assessee had no obligation to restore the land under the 1940 lease agreement, leading to a negative answer to the ... Business Expenditure Issues:1. Interpretation of lease agreement dated April 23, 1940 regarding liability for restoration charges as revenue expenditure under Income-tax Act, 1961.2. Whether liability under the lease agreement constitutes capital expenditure.Analysis:The High Court of Bombay addressed a reference concerning the assessee's assessment for the year 1971-72. The two questions referred by the Income-tax Appellate Tribunal pertained to the liability of the company to restore leased land and the classification of restoration charges as revenue or capital expenditure. The Department argued that previous judgments had established no liability for restoration charges. The assessee's counsel raised three reasons for reconsideration, including pending Supreme Court petition, lease agreement interpretation, and the effective date of a new lease agreement. The court noted the arguments but rejected them, emphasizing the binding nature of previous interpretations and the lack of consideration for the new lease deed by the Tribunal. The court held that the assessee had no obligation to restore the land under the 1940 lease agreement, leading to a negative answer to the first question. The court also deemed it unnecessary to address the second question in light of its ruling. The Tribunal was directed to assess the obligation under the new lease agreement dated May 7, 1971, for potential restoration charges as revenue expenditure. No costs were awarded in the judgment.