2000 (7) TMI 58

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....er cent. ? 2. Whether, on the facts and in the circumstances of the case and also for the reasons stated in enclosure to the reference application, the Tribunal is right in law and fact, (i) in holding that the expenditure is a capital expenditure as it was incurred in connection with or incidental to the acquisition of the capital asset ? (ii) in upholding the claim of the assessee for deduction of depreciation in respect of the amount of Rs. 6,31,267?" With regard to question No. 1, it is covered by the decision of the Supreme Court in CIT v. Anand Theatres [2000] 244 ITR 192. The Supreme Court has held that the building used for running a hotel or cinema business is not plant for the purpose of depreciation. On the basis o....

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....diture, but this claim had been disallowed. In the fresh assessment, the assessee claimed it as a revenue expenditure. This was disallowed on the ground that it was not a liability of the transferee. According to the assessee, it had to incur the liability in order to run the business and, therefore, the same should be allowed as revenue expenditure. Alternatively, it was contended that it should be allowed as capital expenditure and depreciation on the same should be allowed. The Assessing Officer treated it as capital, but did hot grant depreciation. The Commissioner of Income-tax (Appeals) held that it is capital expenditure and disallowed the depreciation on the ground that the expenditure was not part of the purchase consideration and ....

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....assessee. No tangible assets were brought into existence to enable the assessee to claim depreciation. This expenditure can only be considered as any other expenditure incurred by the assessee before the commencement of the business. The assessee has discharged the liability on behalf of the seller. Therefore, no asset has emerged on which depreciation can be allowed. It is also not going to increase the value of various assets purchased by the assessee. This does not form part of the purchase consideration. The advocate Shri Roy Chacko, for the assessee, contended that as a matter of fact, the expenditure was a revenue expenditure, But the Tribunal accepted only the alternate contention of the assessee that it is a capital expenditure w....