Revenue expenditure treatment for storage tank on leased premises where tenant acquired no capital asset and section 32(1A) did not apply

Expenditure on constructing a cemented storage tank on leased premises was treated as revenue expenditure because the assessee, as tenant, did not acquire ownership of any structure erected under the lease and no capital asset came into existence in its hands. The analysis also noted that the lease was for a short duration, so the benefit of the tank was limited and did not justify capital treatment. On that reasoning, section 32(1A) of the Income-tax Act, 1961 was not attracted, and the Revenue's appeal failed.

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Issues: Whether the expenditure incurred on construction of a cemented storage tank on leased premises was capital expenditure or revenue expenditure and whether section 32(1A) of the Income-tax Act, 1961 was attracted.

Analysis: The assessee was a tenant, and the storage tank was constructed on rented premises under a lease which made any structure put up by the tenant non-owned by the tenant. The expenditure did not bring into existence any capital asset in the assessee's hands. On the additional reasoning adopted in concurrence, the lease was of short duration and the benefit of the tank was limited, so the expenditure could not be treated as capital in nature for the purpose of section 32(1A).

Conclusion: The expenditure was held to be revenue expenditure, and the Revenue's appeal failed.

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