Madras High Court
Commissioner Of Income-Tax vs Gemini Arts P. Ltd. on 1 August, 2001
Equivalent citations: [2002]254ITR201(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, C. Nagappan
JUDGMENT R. Jayasimha Babu, J.
1. The assessee which had leasehold for 48 years chose to pay with the consent of the lessor the rent for 47 years in the assessment year 1981-82. The lease was for a period of 48 years from February 18, 1980, and the lump sum payment was made on March 22, 1980. The terms of the lease did not contemplate any increase in the rate or rental during the period of lease. The lessee got no other advantage by reason of this lump sum payment except the relief of not having to make the annual payment during the period of lease.
2. The contention of the Revenue that the assessee had received an advantage of enduring nature by making such a lump sum payment has been negatived by the Tribunal and in our view rightly.
3. The Supreme Court in the case of CIT v. Madras Auto Service Private Ltd. [1998] 233 ITR 468, has held that to decide whether expenditure is revenue or capital one has to look at the expenditure from a commercial point of view. The court observed (page 472) "Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure". Had the assessee chosen to pay rent annually for each and every year of lease such expenditure certainly would have to be regarded as revenue expenditure. The fact that the payment was made in lump sum for the entire duration of the lease does not alter the character of it being a revenue expenditure.
4. The expenditure so incurred by the assessee being of a revenue character it has to be deducted from its income in the year in which the expenditure was incurred. The Tribunal was right in holding that the expenditure should be allowed in the assessment year in which the expenditure was incurred.
5. The other question1 referred is as to whether the assessee was entitled to an investment allowance on a new colour film printing machine as held by the Tribunal. This court in the case of CIT v. Prasad Productions P. Ltd, [2001] 249 ITR 502 with regard to the processing and drying plant belonging to a film processing laboratory, has held that investment allowance is allowable on such equipment. Similar is the position here. The Tribunal was right in holding that the assessee is entitled to investment allowance on new colour film analyser and the new colour film printing machine.
6. All the questions referred are answered in favour of the assessee and against the Revenue.