TaxTMI 
TaxTMI 
2004 (12) TMI 307
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the Income-tax Act has no relevance." 2. This is the case of a company and during the course of assessment proceedings it was observed by the Assessing Officer that the assessee has entered into an agreement with Maharashtra Industrial Development Corporation (in short MIDC) on 2-8-1996 for granting lease of plot of land at TTC Industrial Area, Navi Mumbai on payment of premium of Rs. 27 lakhs. On execution of the lease agreement, the possession of the plot was handed over to the company on the same date. It is also placed before Assessing Officer that a sum of Rs. 13,50,000 was borrowed from Bank of Baroda for making the payment. On the said borrowed amount expenditure of interest incurred was of Rs. 43,263. In the books of account the said amount of premium paid to MIDC along with interest totalling Rs. 27,43,263 was disclosed in the schedule of fixed assets under the head "land lease hold" as per the balance sheet drawn for the assessment year 1997-98. The claim of the assessee was that the amount of premium paid of Rs. 27 lakhs was nothing but rent paid in advance instead of paying the rent periodically, hence, to be treated as revenue or business expenditure. Similarly i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain emphasis of the argument was that the expenditure was incurred for the purpose of business and the plot was acquired to be utilized for the factory and for that purpose also money was borrowed from Bank of Baroda. The expenditure was revenue in nature because it was incurred for the purpose of business and it was nothing but the rent paid in advance. It was argued that instead of paying rent periodically for the period of lease the rent was paid at a time hence it was nothing but revenue in nature. In support copy of the agreement with MIDC dated 2-8-1996, an opinion of a Senior Counsel on the subject and the submissions filed before appellate authority are also placed on record. 5. From the side of the Revenue, learned D.R. Shri Amrish Bedi has strongly supported the view taken by the authorities below and in addition to the precedents cited in the impugned orders he has also relied upon a decision of R.K. Palshikar (HUF) v. CIT [1988] 172 ITR 311 (SC). 6. We have heard the submissions of both the sides at length in the light of the orders of the authorities below as well as the precedents cited. We have also carefully examined the terms and conditions of the impugned le....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1, for our purpose the same is negligible because for all intents and purposes the assessee-company had become the owner so naturally need not to pay any rent for a property possessed in the capacity as good an owner. This negligible amount of Re. 1, in our opinion, does not restrict the rights of the assessee-company in any manner over the impugned property. The assessee-company has acquired enduring advantage for a long period of 95 years which is also in a way a perpetual right conferred on the assessee. The argument from the side of the assessee is that the lumpsum payment represented an advance rent, but it is pertinent to mention that none of the terms of the impugned lease agreement mention any such condition. We also want to add that there is no classification on the basis of which it can be presumed that there was any clause of proportionate spread over of the said lumpsum amount into the period of lease of 95 years. The first appellate authority has also given a categorical finding that on careful examination of the terms of lease agreement, there is no material to hold that the premium was paid towards advance rent. So we have to bear this relevant aspect very much in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in hand hence distinguishable. 8. Before we proceed to examine the precedents cited, it is necessary to quote that each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such controversial issue one must not simply adopt an approach of matching of colours but deeply examine the ratio laid down therein within the edifice of facts. Doctrine of precedents is meant to be used as a guiding factor to arrive at a judicial conclusion. 9. One more case law was cited by learned Counsel, namely, CIT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468 (SC), wherein the finding was that right from the inception, the building was of the ownership of the lessor and by spending the money the assessee did not acquire any capital asset. The Hon'ble Apex Court has observed that the only advantage which the assessee derived by spending the money was that it got the lease of a new building at a low rent. It was held that from the business point of view, the assessee got the benefit of reduced rent hence the same was considered as obtaining a business advantage and the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited but the Hon'ble Court has observed that all those cases turn on different facts so hardly help in the solution of the case in hand. The Court has concluded that the assessee had acquired a long-term lease right to extract the stones and the land was not a stock-in-trade but a capital asset from which after extraction, stones were converted into stock-in-trade. The payment, though periodical was neither rent nor royalty but a lump sum payment in instalments for acquiring a capital asset of enduring benefit. Finally it was affirmed that the High Court was right in treating the outgoings as on capital account. We cannot resist ourselves to comment at this juncture that the case of revenue in the present appeal is even on stronger footing because here the payment is one time and not even periodical. Though in the case of Pingle Industries Ltd., the payment was periodic but even then it was held that the said lump sum payment was towards acquiring a capital asset of enduring benefit. 11. On the basis of the elaborate discussion and on appreciation of the factual matrix of the instant appeal though the distinction between capital and revenue is almost a perennial problem in Incom....