Income Tax Appellate Tribunal - Madras
Income-Tax Officer vs Gemini Pictures Circuit (P.) Ltd. on 16 March, 1990
Equivalent citations: [1990]34ITD94(MAD)
ORDER
D.S. Meenakshisundaram, Judicial Member
1. This appeal by the Revenue arises out of the income-tax assessment of M/s Gemini Pictures Circuit P. Ltd., the assessee herein. The assessment year is 1981-82,for which the previous year ended on 31-3-1981. The assessee company carries on business in film distribution. In its income-tax return for this year, the assessee claimed a sum of Rs. 4 lakhs on account of lease rent paid to Vasan Charitable Trust as revenue expenditure. The Income-tax Officer disallowed the claim in the following words in the assessment order:--
LESS: The assessee has claimed an expenditure of Rs. 4,00,000 on account of lease rent paid to Vasan Charitable Trust. Lease rent used to be paid in earlier years as per a deed of settlement, according to which such rent was payable up to 30-09-2027. For the accounting year relevant to assessment year 1980-81, the rent paid was Rs. 35,890 which was allowed as a revenue expenditure. However, during the accounting year under consideration, a lump sum payment of Rs. 4,00,000 was made by the assessee in order to relieve itself of the obligation to pay annual rent up to 30-09-2027. As the assessee has undoubtedly procured an advantage or benefit of enduring nature once and for all by this lump sum compensation, it will be treated as capital expenditure and, therefore, disallowed...Rs. 4,00,000.
2. Aggrieved by this disallowance, the assessee preferred an appeal objecting to the same among other things, to the Commissioner of Income-tax (Appeals). It was argued before the C.I.T.(Appeals) that the payment of Rs. 4 lakhs had been made to Vasan Charitable Trust, who is the Head Lessor in order to ensure uninterrupted enjoyment of the leased out property, and that the assessee in its turn had obtained from it sub-lessees the rent receivable up to 30-9-2027 and offered the lump sum so received by it for taxation. It was therefore entitled to the deduction of the lump sum paid to the Head Lessor, namely Vasan Charitable Trust, in consideration of the trust waiving its right of re-entry on the demised property on the ground of nonpayment of lease rent. It was submitted that the whole object and purpose of this lump sum payment was to ensure that the sub-lessees were granted uninterrupted right to enjoy the properties leased out to them, that what the assessee had actually paid was the recurring revenue expenditure in a lump sum and thereby it had only removed the recurring disadvantage. It was also submitted that it could not be held to have secured any enduring advantage and that the expenditure was made for the convenient and economical running of the business of the assessee. In support 'of these contentions, the assessee relied on the decision of the Madras High Court in CIT v. Madras Auto Service Ltd. [1985] 156ITR 740/13 Taxman 370.
3. The Commissioner of Income-tax. (Appeals) found that by a deed of lease dated 4-10-1967 Shri T.S. Srinivasa Iyer leased 88 grounds 2171 sq.ft. of land situated at old 121, Mount Road, Madras in favour of the assessee-company and that the said T.S. Srinivasa Iyer subsequently settled the same property on Vasan Charitable Trust, subject to the said lease dated 4-10-1967 in favour of the assessee-company By virtue of the said lease deed dated 4-10-1967 and the renewal thereof by document No. 1243 of 1975 dated 22-9-1975, the assessee was bound to pay lease rent as stipulated in the lease deeds annualy up to 30th September, 2027 up to which date the said lease would be in existence. The CIT (Appeals) further found that with the consent of the Head Lessor, Vasan Charitable Trust, the assessee-company leased out on sub-lease 22 grounds 1231 sq. ft. of the leased property to Parsn Builders and another area of 13 grounds 1804sq. ft. to Green Garden (P) Ltd., both forming part and parcel of the aforementioned 88 grounds 2171 sq. ft. leased out to the assessee by Shri T.S. Srinivasa Iyer. Thus, Parsn Builders and Green Garden (P) Ltd. became the sub-lessees of the property under the assessee-company. According to the sub-lease deeds, the sub-lessees were bound to pay annual lease rent to the assessee-company up to 30-9-2027, the date on which the said sub-leases would also expire. In order to do away with the possible default of payment of annual rent, the sub-lessees paid the assessee-company by way of a lump sum the rent due for the entire period up to 30-9-2027 and that the payment received by the assessee was offered for assessment in the assessment year 1976-77. The CIT (Appeals) found that at the time of receiving this lump sum by way of future rents payable, the assessee had given up its right of re-entry on the ground of non-payment of lease rent by its sub-lessees, but that the right of the re-entry vested in the Head Lessor, namely Vasan Charitable Trust on which the property was ultimately settled, continued to exist and remained in force. As the sub-lessees desired to enjoy the leased out properties without any interruption and wanted to ensure that the holders of the property, namely Vasan Charitable Trust, did not revoke the lease in favour of the lessees and invoke the right of re-entry on the ground of non-payment of rent, the assessee, to achieve this end, had agreed and paid a sum of Rs. 4 lakhs to Vasan Charitable Trust and got the Trust to waive its right of re-entry on the ground of nonpayment of annual rent.
4. On the above facts, the CIT (Appeals) held that the ratio of the decision of the Madras High Court in the case of Madras Auto Service Ltd. (supra) relied on by the assessee fully applied, to allow the assessee's claim. The CIT(A) pointed out that in the present case other things remaining equal, the assessee-company would have had to pay lease rent to its Lessor, Vasan Charitable Trust, year after year till 20-9-2027, being the date on which the lease granted to it by Shri T.S. Srinivasa Iyer would expire. He further pointed out that this property had been settled by the said Srinivasa Iyer on Vasan Charitable Trust and that the assessee in the course of exploiting this property had given it on sub-lease to Parsn Builders and Green Garden (P) Ltd. and had obtained from these two sub-lessees lump sum payments of the lease rent payable by them well into the twenty first century, in return for the sublessees being relieved from the burden of paying the rents annually to the assessee who had the right of re-entering the properties in the event of failure to pay such rents by the two sub-lessees. The CIT (Appeals) further found that however the overriding title of the Head Lessor, namely Vasan Charitable Trust tore-enter the sub-leased properties on the ground of default of payment of rent subsisted and that in order to free the sub-lessees from this encumbrance, the lump sum payment had been made by the assessee to the Trust. He held that otherwise the payment would have been made in a recurring manner year after year till the subsistence of the lease, namely 30-9-2027. He held that this payment of Rs. 4 lakhs substituted or surrogated a revenue expenditure, as held by the Madras High Court in the case of Madras Auto Service Ltd. (supra) and therefore the said payment was allowable as revenue expenditure. Accordingly he allowed the assessee's claim for the deduction of the sum of Rs. 4 lakhs and partly allowed the assessee's appeal. It is against this order of the LIT (Appeals) that the department has preferred the present appeal to the Tribunal.
5. Though at the time of hearing of the appeal it was pointed out on behalf of the assessee by its learned counsel that the issues raised by the revenue were concluded by the order of the Appellate Tribunal on similar facts in the allied case of Gemini Arts (P.) Ltd. v. 1TO [IT Appeal Nos. 332 and 690 (Mad.) of 1986] for the assessment year 1981-82 decided by the Appellate Tribunal, Madras Bench-A dated 26-8-1987, the learned Departmental Representative, Shri S.K. Jha contested the same and submitted that the earlier decision of the Tribunal was not applicable to the facts of the present case. We therefore heard the parties at great length and also perused the authorities and the materials relied on by them in support of their contentions.
6. According to the revenue, Vasan Charitable Trust, the lessor of the assessee, had waived its right to re-enter the property by receiving this payment of Rs. 4 lakhs from the assessee, that it represented an enduring advantage, the benefit of which was available to the assessee till 30th September, 2027, and therefore it amounted to capital expenditure. It was further argued by Shri Jha on behalf of the revenue that this sum of Rs. 4 lakhs represented expenditure of future years, which could not be allowed in this year as it was not a revenue expenditure of this year. He contended that the decision of the Madras High Court in Madras Auto Service Ltd.' s case (supra) would not apply to the facts of the present case and that further the said decision had not become final since further appeal to the Supreme Court had been filed. He further submitted that the Commissioner (Appeals) ought to have followed the decision of the Supreme Court in the case of M.K. Bros. (P.) Ltd. v. CIT [1972] 86 ITR38.
7. Shri Jha pointed out with reference to the preamble of the agreement that the amount in question was a lump sum down payment and not an advance payment of rent, that the sum of Rs. 4 lakhs was not for the entire property, but for the two portions specified in Schedules II and III, which had been sub-leased by the assessee to Parsn Builders and Green Garden (P.) Ltd. and that therefore the decision of the Madras High Court would not apply to the facts of the present case. He also pointed out that the lease rent pay able for the entire property by the assessee wasRs.35,890 per annum as mentioned in the assessment order by the ITO, whereas the agreement provided for the two portions sub-leased by the assessee only. The learned departmental representative relied on the decision of the Madras High Court in CIT v. Pioneer Engg. Syndicate [1989J 175 ITR 93 wherein the distinction between capital and revenue expenditure was pointed out and contended that revenue expenditure could be allowed only against revenue income and that leasing out of property was not of the assessee's business. Shri Jha argued that the assessee-company had entered into this agreement to oblige the sub-lessees and not for the purpose of any of its trading activities, not for its business activity in film distribution. He therefore contended that the question of the expenditure being incurred for efficient running of the business of the assessee did not arise, as the payment made was not for making more profits, but for reducing the profits. Shri Jha vehemently contended that even though the sum of Rs. 4 lakhs was not Salami, as it was a lump sum compensation paid as a down right payment, it should be deemed to be Salami, which would be capital expenditure, as held by the Madras High Court in the case of Sri Krishna Tiles & Potteries Madras (P.) Ltd. v. C/T[1988] 173 ITR 311. According to Shri Jha, clause '2 of the agreement conferred an enduring advantage on the assessee, who got a definite right in its favour. He therefore submitted that the order of the CIT (Appeals) allowing the assessee's claim was erroneous and that therefore the same should be set aside and the ITO's order restored on this issue.
8. Shri. T. Srinivasamurthy, the learned counsel for the assessee refuted these contentions of the revenue and submitted that they proceeded on a total misconception of the true nature of the payment made by the assessee to Vasan Charitable Trust. He placed before us copies of the original lease deed dated 4-10-1967 executed by Shri T.S. Srinivasa Iyer, who was also known as S.S. Vasan, in favour of the assessee-company and pointed out that according to clause 22 of this deed the right of re-entry of the lessor on the demised premises was speltout, not only for default in payment of rent for three months, but also for continuance of the breach of any of the covenants by the lessees. For facility of reference, the said clause is quoted below :-
22. Notwithstanding the period of lease hereunder granted to the lessees, it is hereby agreed that if any part of the rent hereby reserved shall be in arrears for 3 months after becoming due or if there shall be a continuance of the breach of any of the covenants by the lessees herein contained even after notice of the same to the lessees by the lessor, the lessor may determine the lease and re-enter the demised premises.
[Emphasis supplied] The learned counsel next referred to the following paragraph in the preamble of the agreement dated 22-3-1980 between Vasan Charitable Trust and the assessee, which was relied on by the department :-
Whereas the right of re-entry of the Party of the First Part herein due to nonpayment of rent by the Second Part is still intact and in force and whereas the Party of the Second Part herein is desirous of ensuring that the waiver right of re-entry due to non-payment of rent is made absolute with reference to the property mentioned in Second Schedule and Third Schedule and with this end in view and in order to do away with the possible default of payment of annual rent, by them to the Party of the First Part and offered to pay a lump sum compensation by which they will be relieved of the obligation to pay annual rent up to 30-9-2027.
9. The learned counsel submitted that no doubt the payment made is a lump sum payment which was made once and for all and it is also described as compensation. According to the learned counsel, these would not make any difference to the revenue nature of the expenditure incurred by the assessee and convert it into capital expenditure. The learned counsel submitted that the word "compensation" means only "just equivalent or recompense", and nothing more, as pointed out in Mitra's Legal and Commercial Dictionary. He further submitted that the entire agreement should be read as a whole and the emphasis should be placed on the operative portion of the deed and not merely on the preamble, as done by the departmental authorities. The learned counsel submitted that what the agreement dated 22-3-1980 sought to ensure was to put an end to the right of re-entry of the lessor on account of non-payment of annual rent, but the right of re-entry of the lessor for breach of other covenants under the original lease document was totally preserved and continued to remain in force. Therefore, the object and purpose of the payment of the sum of Rs. 4 lakhs by the assessee to Vasan Charitable Trust was to extinguish the assessee's liability to pay annual, rent to Vasan Charitable Trust and nothing more. This payment of Rs. 4 lakhs has not brought into existence any new capital asset, nor acquired any new right, nor has it brought into existence any such right as alleged by the department, to hold that there was any enduring advantage in favour of the assessee. In fact, Vasan Charitable Trust had not given away anything in favour of the assessee, as would be clear from clause 1 of the agreement dated 22-3-1980. The learned counsel pointed out that clause 2 of this agreement made it clear that the other conditions and covenants of the original lease deed should be observed by the lessee, namely the assessee. In this connection, he referred toclauses9to 12,14 to 16,18and 19of the original lease deed dated 4-10-1967 and pointed out that for breach of any of these clauses, the right of re-entry of the lessor under clause 22 was preserved and clause 1 of the agreement only extinguished the right of re-entry of the lessor on the ground of any alleged default on account of non-payment of annual rent by the lessee.
10. The learned counsel submitted that the decision of the Madras High Court in Madras Auto Service Ltd.'s case (supra) fully applied to the facts of the present case and was rightly followed by the CIT(A) to allow the assessee's claim. The learned counsel next submitted that the decision of the Supreme Court in the case of M.K. Bros. (P.) Ltd. (supra) relied on by the learned departmental representative was a case of application of income for the purpose of acquiring a sole selling agency and was therefore inapplicable to the facts of the present case. The learned counsel submitted that in the present case the assessee-company secured no fresh right or asset, nor was it a case of any application of income by the assessee. Referring to the decision of the Madras High Court in the case of Sri Krishna Tiles & Potteries Madras (P.) Ltd. (supra) the learned counsel submitted that admittedly the sum of Rs. 4 lakhs was not paid as premium or as Salami, as contended by the revenue, as the property was already leased out to the assessee under the original lease deed dated 4-10-1967 and its renewal on 22-9-1975. Therefore, Section 105 of the Transfer of Property Act would not apply to the facts of the present case and hence this decision of the Madras High Court would be of no assistance to the revenue. He also argued that the decision in the case of Pioneer Engg. Syndicate (supra) also would not apply to the assessee's case to justify the disallowance made by the Income-tax Officer.
11. Finally the learned counsel for the assessee submitted that no special advantage or right was either created or conferred on the assessee by the agreement dated 22-3-1980, that the assessee-company had received the entire rent for the portions sub-leased by it, from its two sub-lessees for the entire lease period and had also offered the same for assessment as its business income in the earlier assessment year 1976-77, as found by the CIT (Appeals) in para 3 of his appellate order and that on the same parity of reasoning, the entire rent paid by the assessee to its lessor for the entire lease period would be allowable as revenue expenditure and was rightly allowed as such by the CIT (Appeals). He therefore submitted that the decision of the CIT (A) should be confirmed and the revenue's appeal dismissed.
12. The learned counsel submitted that the lump sum amount received from these two sub-lessees towards the annual rent payable by them to the assessee under the sub-leases totalled Rs. 28,56,600, which it had offered for assessment as its income in the assessment year 1976-77 relevant for the year ended 31-3-1976. He also relied on the decision of the Appellate Tribunal in the case of Gemini Arts (P.) Ltd. (supra) as fully supporting the assessee's case.
13. On a careful consideration of the submissions urged on both sides in the light of the materials placed before us, we are of the considered view that the decision of the CIT (Appeals) allowing the sum of Rs. 4 lakhs as revenue expenditure is correct and that the same should be upheld. The learned counsel for the assessee is right in his submission that the entire agreement dated 22-3-1980 entered into between Vasan Charitable Trust and the assessee should be read as a whole and we should not confine ourselves only to the opening part of the preamble on which reliance is placed by the department to determine the true nature of the payment made by the assessee. Clauses 1 and 2 of this agreement, which are relevant for our purpose, are quoted below:--
1. In consideration of the Party of the Second Part having paid to the Party of the First Part a sum of Rs. 2,50,000 (Rs. Two Lakhs fifty thousand only) and a sum of Rs. 1,50,000 (Rs. One lakh fifty thousand only) (the payment thereof the Party of the First Part hereby admit and acknowledge) the Party of the First Part do hereby agree that the Party of the Second Part shall not be liable to pay any rent reserved and fixed under the Deed of Lease dated 4-10-1967 and renewal thereof by deed of lease dated 22-9-1975 for the remaining lease period, viz., 1-4-1980 to 30-9-2027.
2. Except for the covenant for payment of rent, the Party of the Second Part shall be liable to observe and perform the other terms and conditions and covenants on the part of the Party of the Second Part contained in the said deed of lease dated 4-10-1967 and the said Deed of lease by way of renewal dated 22-9-1975.
These are the two operative clauses which are relevant for the purpose of determining the true nature and quality of the payment of Rs. 4 lakhs by the assessee to its lessor. It would be clear from an examination of the said clauses that this payment has not brought into existence any new right, nor acquired any new right on the assessee, but had absolved the assessee from its liability to pay annual rent every year as stipulated in the original lease deed dated 4-10-1967 and the renewal deed dated 22-9-1975 for the remaining lease period from l-4-1980to 30-9-2027. While extinguishing the right of re-entry of the Head Lessor on the ground of default in the payment of annual rent by the lessee, clause 2 preserves the right of re-entry of the Head Lessor for breach of other covenants contained in the original lease deed dated 4-10-1967 and 22-9-1975. In our view, the earlier order of the Tribunal dated 26-8-1987 in the case of Gemini Arts (P.) Ltd. referred to above fully answers all the objections raised by the revenue in the present appeal. In para 8 of the earlier order, the Appellate Tribunal has pointed out that the assessee having been already let in possession, the amount of Rs. 1,80,000 paid under the deed dated 22-3-1980 did not represent a premium at all and therefore it could not be treated as capital expenditure. In para 9 they have pointed out that the mere fact that the assessee was entitled to remain in possession for a long number of years under the lease deed did not make the expenditure a capital expenditure, especially when that right was not acquired by the payment of this particular expenditure and had already been acquired under the earlier lease deed. The Tribunal examined the actual nature of the expenditure in para 10 of their order and found that the sum of Rs. 1,80,000 only represented a substitution of a lump sum payment in the place of the original contract to pay annual rent, which was undoubtedly a revenue expenditure. The Tribunal further found that the decision of the Madras High Court in the case of Madras Auto Service Ltd. (supra) fully applied to the facts of the case to hold that the expenditure in question was revenue expenditure. In para 11, the Tribunal negatived the alternative submission of the revenue that even if the expenditure was to be considered as revenue expenditure, the entire expenditure could not be taken into account in computing the income of a particular assessment year, as they related to the right of the assessee to remain in possession for a long number of years. The Tribunal rejected this argument by relying on the decision in the case of Hindustan Commercial Bank Ltd., In re [l952] 2l ITR 353 (All.). Finally, the Tribunal justified the allowance of this amount of Rs. 1,80,000 under Section 37 of the Act in para 12 of their order in the following words;-
12. There is also a justification for this in the provisions of the Act itself. The expenditure in question is allowable as an expenditure laid out or expended wholly and exclusively for the purpose of the business Under Section 37, such expenditure. That section does not limit the expenditure to that incurred for the purpose of earning the income of the year. As long as it is laid out for the purpose of business the fact that the assessee may derive some benefit from that expenditure for a period of more than a year does not detract from the eligibility of deduction under that section. Under the original lease deed the rent was payable annually and, therefore, only the rent which accrued and was payable for that year could be allowed as a deduction. When that contract to pay an annual rent was substituted by the contract to pay a lump sum, the original contract to pay the annual rent was discharged in terms of Section 67 of the Indian Contract Act. What survives and is in force is only the substituted contract under which the lump sum becomes payable and accrues the expenditure in the previous year relevant to this assessment year itself. While the nature of the payment remains the same because it was the substitution or a surrogate of an earlier revenue expenditure, the point of accrual of the expenditure has undergone a change due to the novation and hence the entire amount becomes deductible Under Section 37 of the Income tax Act, 1961. Therefore, we are unable to accept the alternative submission of the revenue. In the circumstances, we find that the expenditure of Rs. 1,80,000 was an admissible deduction Under Section 37 and we direct the ITO to allow the same in computing the total income.
We respectfully agree with the entire reasoning of the Tribunal referred to above. In our view, the entire reasoning of the Tribunal in the earlier order referred to above would apply with equal force for allowing the sum of Rs. 4 lakhs claimed by the assessee as revenue expenditure in the present case.
14. The decision in the case of Sri Krishna Tiles & Potteries Madras (P.) Ltd. (supra) would apply to the facts of the present case, as the sum of Rs. 4 lakhs was admittedly not paid as Salami or as premium for obtaining the lease of the demised premises under the agreement dated 22-3-1980. Therefore, it cannot by any stretch of imagination be deemed to be Salami or premium merely because it is a lump sum payment.
15. On the contrary, the latest decision of the Supreme Court in the case of CIT v. Associated Cement Cos. Ltd. [1988] 172 ITR 257 fully supports the case of the assessee. In that case, the assessee-company had incurred an expenditure of Rs. 2,09,459 towards installing water pipe lines and accessories outside the factory premises which were to belong to and be maintained by the Shahabad Municipality in accordance with an agreement entered into between the Government of Hyderabad, the Municipality and the assessee-company and claimed this expenditure as revenue expenditure. The I.T.O. disallowed the amount holding it as capital expenditure on the basis that as a result of this expenditure, the company derived an advantage of an enduring nature, namely that it would not have to pay Municipal taxes for a period of 15 years. On appeal by the company, the A AC allowed the deduction holding that the amount was the payment of a composite sum of the revenue outgoings for the following 15 years. In the appeal by the revenue, the Tribunal passed an order directing the Income-tax Officer to scrutinise the expenditure and allowed the deduction of the expenditure to the extent that it did not result in the company becoming the owner of any asset. The High Court answered the question referred at the instance of the Commissioner against the revenue. On further appeal by the Commissioner, the Supreme Court affirmed the decision of the Bombay High Court and held that the advantage secured by the respondent-company in that case by incurring the expenditure was absolution or immunity from liability to pay Municipal rates or taxes for a period of 15 years; that if these liabilities had to be paid the payments would have been on revenue account; and that therefore the advantage secured was in the field of revenue and not capital. Their Lordships therefore held that the expenditure was deductile under Section 10(2)(xv) of the Indian Income-tax Act, 1922 in computing the respondent's business profits. At page 263 of the reports, Their Lordships held as follows: -
If this principle is applied to the facts of the case before us, what we find is that the advantage which was secured by the assessee by making the expenditure in question was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of fifteen years. If these liabilities had to be paid, the payments would have been on revenue account and hence the advantage secured was in the field of revenue and not capital. As a result of the expenditure incurred, there was no addition to the capital assets of the assessee-company and no change in its capital structure. The pipelines, etc., which might have been regarded as capital assets and which came into existence as a result of the expenditure incurred did not belong to the assessee-company but to the municipality. In these circumstances, applying the principles laid down in Empire Jute Co.'s case[1980] 124ITR1 (SC), the expenditure is clearly liable to be allowed as deductible from the profits under Section 10(2)(xv) of the Indian Income-tax Act.
In our view, the ratio of this decision of the Supreme Court is directly applicable to the facts of the present case.
16. Even the decision of the Supreme Court in M.K. Bros. (P.) Ltd. v. CIT [1972] 86 ITR 38, relied on by the revenue is only in favour of the assessee and not in favour of the revenue. At page 42 of the reports, Their Lordships of the Supreme Court have held as follows:--
The answer to the question as to whether the money paid is a revenue expenditure or capital expenditure depends not so much upon the fact as to whether the amount paid is large or small or whether it has been paid in lump sum or by instalments, as it does upon the purpose for which the payment has been made and expenditure incurred. It is the real nature and quality of the payment and not the quantum or the manner of the payment which would prove decisive. If the object of making the payment is to acquire a capital asset, the payment would partake of the character of a capital payment even though it is made not in lump sum but by instalments over a period of time. On the contrary, payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure even though the payment is of a large amount and has not to be made periodically.
Again, after referring to their earlier decision in the case of Assam Bengal Cement Co. Ltd. v. CIT [ 1955] 27ITR 34 at 45 (SC). Their Lordships held as follows at page 43:-
The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence.
Applying the aforesaid ratio of this decision of the Supreme Court also, it has to be held that the sum of Rs. 4 lakhs paid by the assessee was only revenue expenditure and cannot be regarded as capital expenditure.
17. Similarly, the ratio of the decision of the Madras High Court in Poineer Engg. Syndicate's case (supra) is only in favour of the assessee, far from supporting the revenue's case, as could be seen from the head note itself.
18. We, therefore, respectfully follow the two decisions of the Supreme Court referred to above, as well as the decision of the Madras High Court in the case of Madras Auto Service Ltd. (supra) and the decision of the Tribunal in the case of Gemini Arts (P.) Ltd. (supra) and hold that the CIT (Appeals) was right in allowing the assessee's claim for deduction of the sum of Rs. 4 lakhs as revenue expenditure. Accordingly we confirm the order of the CIT (Appeals) and dismiss this appeal.