AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 82
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....by erred in deleting the disallowance made by the A.O. treating the same as capital in nature?" 2. The appeal is accordingly admitted on the aforesaid question and is taken up for hearing and final disposal by consent. 3. The assessee in the present case was a tenant in a building by the name of Shriniketan at Worli and was in the occupation of an area admeasuring 5,000 sq. ft. The building was declared by the Municipal Corporation to be unsafe for occupation and an eviction notice was served on the occupants. A suit was instituted on the Original Side of this Court in a partition dispute between the owners of the property. On 13 February 1978 the Court Receiver was appointed as Receiver and the assessee being a tenant in the building cont....
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..../per month. 4. In respect of the assessment proceedings for Assessment Year an order of assessment was passed by the Assessing Officer on 29 December 2005. The Assessing Officer held that the assessee secured rights for an area of 5,000 sq. ft. on payment of a sum of Rs. 1.50 Crores and the assessee was to become a member of a society or company. This according to the Assessing Officer would constitute deemed ownership of the premises. The Assessing Officer came to the conclusion that the expenditure of Rs.1.50 Crores was of a capital nature and had to be disallowed. In appeal, the CIT (Appeals) reversed the view of the Assessing Officer and following inter alia the judgment of the Supreme Court in Commissioner of Income Tax v. Madras Auto....
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....ntage of a right to continue in premises of an equivalent area on the same rent of Rs.11,300/per month which would work out to approximately to Rs.2.26 per sq. ft.; (ii) Under the agreement which was arrived at between the assessee and the developer the assessee does not acquire title to the premises, but continues to remain a tenant in the new structure. The case of the assessee would be governed by the decision of the Supreme Court in Madras Auto. 7. The issue as to whether expenditure incurred by an assessee is of a revenue or capital nature has fallen for determination in various contexts, but in all decisions particularly of the Supreme Court what has been emphasised is that the matter has to be looked at from a commercial point of v....
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....asset, then that puts the business on another footing altogether. The Supreme Court noted that by expending money for the purposes of construction, the assessee did not acquire any capital asset and the only advantage which it had obtained was the lease of a new building at low rent. After adverting to the earlier judgments of the Court in Lakshmiji Sugar Mills Co. Pvt. Ltd. v. CIT (1971) 82 ITR 376 (SC)., L.H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT (1980) 125 ITR 293 (SC), and CIT v. Associated Cement Companies Ltd. (1988) 172 ITR 257 (SC). the Supreme Court observed as follows : All these cases have looked upon expenditure " which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expen....
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....tenant. The character of the occupation of the assessee has not been altered. The assessee by contributing an amount of Rs.1.50 Crores to the reconstruction of the building has obtained an enduring advantage but nonetheless of a commercial nature of securing an equivalent area on the same rent of Rs.11,300/in the new structure. The ownership of the new structure has not been transferred to the assessee nor has the assessee acquired any capital asset. The case, therefore, cannot be distinguished from the situation which arose before the Supreme Court for its decision in Madras Auto on any principled basis. 9. The judgment of the Supreme Court in Madras Auto has been followed by a Division Bench of this Court in Commissioner of Income Tax v.....
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....r work is a building owned by the assessee. But for the Explanation, an assessee would not be entitled to the benefit of depreciation even if the expenditure which was incurred was of a capital nature and the effect of the Explanation is to entitle the assessee to the benefit of the provisions of Section 32, if the stipulations and conditions set out in the Explanation are fulfilled. The deeming fiction is for the purposes of the statutory provision in question. But the point to be emphasised is that the explanation operates in a situation where capital expenditure is incurred by the assessee. Unless the expenditure is of a capital nature, there would be no occasion to apply the deeming fiction that is carved out by Explanation I. In the pr....