INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Capital or revenue expenditure - Non-refundable premium received in terms of lease deed -

Assessee challenged the order of Tribunal holding that proportionate premium on leasehold lands paid by assessee was capital in nature. Assessee contended that Tribunal failed to interpret the five years lease deeds and appreciate that proportionate premium on leasehold lands was nothing but advance payment of rent and the same was not a capital expenditure.Held: Tribunal had relied on the case of JCIT v. Mukund Ltd. (2007) 106 ITD 231 (Mum), wherein it was held that due to termination clause in the lease deed, on termination of lease, the premium was non-refundable and therefore, could not be considered as advance rent, as claimed by assessee. However, in terms of leases between assessee and its lessors, such terms were not there between them. Rent being depressed rent could only be appreciated as such if there is recital about it in the lease rent. Finding by Tribunal that assessee's agreements were exactly similar with the agreements in Mukund Ltd. (supra) was perverse.

REFERRED : CIT v. Madras Auto Service (P) Ltd. (1998) 99 Taxman 575 (SC) : 1998 TaxPub(DT) 1407 (SC), Krishak Bharati Cooperative Ltd. v. Dy. CIT (2013) 350 ITR 24 (Del) : 2012 TaxPub(DT) 2636 (Del-HC), CIT v. H.M.T. Limited (1993) 67 Taxman 506 (Karn) : 1993 TaxPub(DT) 915 (Karn-HC), Dy. CIT v. Balmer Lawrie & Co. Ltd. [ITA. No. 1481/Kol/2011, dt. 30-4-2012] and Jt. CIT v. Mukund Ltd. (2007) 106 ITD 231 (Mum-Trib) (SB) : 2007 TaxPub(DT) 1600 (Mum-Trib).

FAVOUR : In assessee's favour.

A.Y. :

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