2019 (8) TMI 569

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....n of law was framed for answer: "Whether the learned Tribunal has committed error in not following its earlier order dated 11th April, 2008 passed in assessee company's own case in ITA 348/Kol/2007 while interpreting the fiveyears lease deeds to hold that proportionate premium on lease hold lands was nothing but advance payment of rent and the same was not a capital expenditure and as such, the business deduction should be allowed under Section 37(1) of the Income Tax Act, 1961." Mr. Jhunjhunwala, learned advocate appears on behalf of appellant. He submits, judgment of the Tribunal has given rise to question formulated for answer. Advance rent paid by his client-assessee and thereafter amortized each year, has been disallowed. T....

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....ble also as per the terms and conditions of the agreement with the MIDC. Therefore, the consideration of Rs. 2.04 crore was paid to the MIDC as a price for obtaining the leasehold rights for a period of 99 years from the MIDC in favour of the assessee." Assessee relies on judgment of Supreme Court in CIT versus Madras Auto Service (P.) Ltd. reported in (1998) 99 Taxman 575 (SC), paragraphs 6, 7 and 13. Paragraph 13 is reproduced below: "13. 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 expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the compan....

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....ming part of the demise premises. Reentry clause 5 in the lease provides for reentry on default of payment of rent reserved, upon granting opportunity to lessee to make good the default. Mr. Bhowmik, learned advocate appears on behalf of revenue and relies on Division Bench judgment of Delhi High Court in Krishak Bharati Co-operative Ltd. versus Deputy Commissioner of Income Tax reported in (2013) 350 ITR 24 (Delhi). He submits, the Division Bench considered Madras Auto Service (P.) Ltd. (supra) and found therein assessee's case to be distinguishable from it. He relies on paragraph 18 in the judgment, which is set out below: "In the present case, what is apparent is that the lessee (assessee) paid a substantial amount (Rs. 2.53 ....

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....assessees' submission that the amount of Rs. 2.53 crores paid in 1989 had to be treated as advance rent, which could be amortized annually, in equal instalments, as is urged on its behalf." Perusal of impugned order reveals assessee had relied upon H.M.T. Ltd. (supra) in the Tribunal. In considering submissions based on this judgment, the Tribunal said as follows: ". . . . . it seems to us that use of the term premium in the agreement in respect of advance rent paid does not render the payment anything more than rent paid in advance instead of paying the same in future periodically. There is absolutely no indication in the agreement with the amount paid by the assessee as a consideration paid by it for being let into possession ....