TaxTMI 
TaxTMI 
2012 (11) TMI 325
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.... deduction of amortization of lease premium to the Assessing Officer, they ought to have done the same for the year under consideration? (ii) Whether the premium/lumpsum amount paid in lieu of payment of annual rent for taking land on a long lease would be deductible as rent under Section 30 of the Income Tax Act, 1961? (iii) whether the premium/lumpsum advance lease rentals paid in consideration for the grant of lease of land is deductible as revenue expenditure under Section 37 of the Income Tax Act, 1961.?" 2. At the outset it was urged on behalf of the assessee that the only question of law which arises is correctness of disallowance directed by the Income Tax authorities, on account of the assessee's amortization c....
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....e's claim. The Appellate Commissioner rejected the assessee's contention for the assessment years 1999-2000 on the basis of the following reasonings : "6.1 The appellant has submitted before me that various pieces of land have been taken on lease by the company at different places and in all such agreements, the appellant does not have any ownership rights over the land and the lease hold rights are available only for specified periods. In all cases, the land will revert back to its original owner at the end of the lease period. Relying on the decision of the Supreme Court in the case of Empire Jute Company Limited -124-ITR-1 as well as other decisions, it is submitted that since the premium paid in respect of the lease agreements does n....
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....lant of the Karnataka High Court and respectfully following the same, I hold that the premium paid by the appellant on all such lease agreements as are similar to the agreement entered into with MIDC for land at Usar, constitutes revenue expenses. In view of the Supreme Court decision in the case of Madras Industrial Investment Corporation Limited- 225 ITR 802 (SC) the total amount of lease premium paid in respect of such agreements should be amortized over the period of lease and only the amount pertaining to the relevant previous year should be allowed as a deduction. The AO is, therefore, directed to verify all the lease agreements in respect of which the amortization is claimed and allow the pro-rata lease premium in respect of such agr....
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....the subsistence of the lease arrangements is a strong indication that the heavy premium paid in all instances constituted advance rental which clearly qualifies for deduction for amortization. It has emphasized that every acquisition of each lease hold rights, contrary to the Tribunal's observation, amounts to a capital expenditure. Here, learned counsel urged that it is important to consider the nature of advantage in a commercial sense and so understood if the expenditure fall in the capital field would it not qualify as revenue expenditure. In this regard, learned counsel relied upon the judgment of the Supreme Court in CIT v. Madras Auto Services [1998] 233 ITR 468. He also relied upon the judgment of the Madras High Court in CIT v. Gem....
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....e. 7. It is no doubt true that the decisions in HMT (Supra), Sun Pharmaceuticals (supra) and Gemini Arts (supra) dealt with fact situations where the assessee had obtained long lease, and where the Court found the down payment as lumpsum premium to be a real advance rental payment which therefore qualify as revenue expenditure. At the same time, this Court is also aware of the fact that in Madras Auto services (supra), the leased land contained a dilapidated structure, and since it could not be used by the assessee, the parties therefore agreed that the assessee could construct upon the land at its own cost but at the same time it would have no right or title in the new construction. All this was taken into consideration by the Court to ....