Commissioner Of Income Taxchennai v. M/S. Ucal Fuel Systems Ltd.raheja Towersdelta Wing Unit

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 5.6.2007 THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A) No.418 of 2007 Commissioner of Income TaxChennai...Appellant Vs. M/s. Ucal Fuel Systems Ltd.Raheja TowersDelta Wing Unit 505177, Annasalai, Chennai...Respondent ----- Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'B' Bench dated29.8.2006 in ITA No.401/Mds/2001 for the assessment year 1997-98.against the order of the Commissioner of Income-Tax (Appeals)-X, 121,Mahatma Gandhi Road, Chennai-34 dated 15.11.2000 and made in ITANo.322/1999-2000 against the order of the Joint Commissioner ofIncome Tax, Special Range XI, Chennai-600 006 dated 14.12.99 in GIRNo.2.U/AAA CU 0541 K. -----For Appellant: Mr.J.Naresh Kumar, Jr.S.C.----- J U D G M E N T(Delivered by P.D.DINAKARAN,J.) The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal in ITA No.401/Mds/2001 dated 29.8.2006,raising the following substantial question of law. "Whether in the facts and circumstances of the case, theTribunal was right in holding that the upfront lease rentcharges paid for taking the land and building atPondicherry on lease for a period of 20 years for thepurpose of setting up the new unit at PIPDIC Industrialestate at Pondicherry, is a revenue expenditure? https://hcservices.ecourts.gov.in/hcservices/ 2.1. The assessee filed its returns for the period during therelevant assessment year claiming a sum of Rs.30.00 lakhs and Rs.8.00lakhs paid for taking land and building at Pondicherry on lease for aperiod of twenty years, as revenue expenditure. 2.2. The Assessing Officer, finding that the assessee had takenthe land on lease for twenty years for setting up a new unit atPIPDIC Industrial Estate at Pondicherry, that the amount paid by theassessee as advance was in the nature of discounted value of thelease amount otherwise payable over the period of twenty years andthat the assessee had treated the said payment as capital in itsbooks of account in order to project a boosted profit to impress theshare holders, treated the said payment as capital expenditure. 2.3. Aggrieved by the order of the Assessing Officer, theassessee preferred an appeal before the Commissioner of Income Tax(Appeals), who, holding that the entire expenditure could not betreated as revenue in nature for the purpose of deduction under theIncome Tax Act, when the assessee had treated the same as capital inits books of accounts for the purpose of projecting a boosted profitto impress the share holders, dismissed the appeal confirming theorder of the Assessing Officer. 2.4. On further appeal by the assessee, the Income Tax AppellateTribunal, following the decision in Commissioner of Income Tax v.Gemini Arts P. Ltd. (254 ITR 201), allowed the appeal. Hence, thepresent appeal by the Revenue. 3. The learned Standing Counsel appearing for the Revenuefairly contends that the issue raised in the above appeal has alreadybeen decided by this Court in favour of the assessee in Commissionerof Income Tax v. Gemini Arts P. Ltd. (254 ITR 201). 2.4. On further appeal by the assessee, the Income Tax AppellateTribunal, following the decision in Commissioner of Income Tax v.Gemini Arts P. Ltd. (254 ITR 201), allowed the appeal. Hence, thepresent appeal by the Revenue. 3. The learned Standing Counsel appearing for the Revenuefairly contends that the issue raised in the above appeal has alreadybeen decided by this Court in favour of the assessee in Commissionerof Income Tax v. Gemini Arts P. Ltd. (254 ITR 201). 4. In Commissioner of Income Tax v. Gemini Arts P. Ltd. (254ITR 201) the assessee therein had entered into a leasehold agreementfor forty eight years and paid the rent for forty seven years aslumpsum and claimed the entire sum as deduction. The Tribunalallowed the same on the ground that the expenditure was incurredwholly and exclusively for the purpose of business. On a reference,following the decision of the Apex Court in Commissioner of IncomeTax v. Madras Auto Service P. Ltd. (233 ITR 468) wherein it was heldthat to decide whether expenditure is revenue or capital one has tolook at the expenditure from a commercial point of view and whateversubstitutes for revenue expenditure should normally be considered asrevenue expenditure, this Court has held as follows: "Had the assessee chosen to pay rent annually for each andevery year of lease such expenditure certainly would have to be regarded as revenue expenditure. The fact that thepayment was made in lump sum for the entire duration of thelease does not alter the character of it being a revenueexpenditure." 5. Following the ratio laid down in the decision cited supra, wedo not find any substantial question of law arises for ourconsideration. Hence, the appeal is dismissed. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.kplTo1. The Assistant Registrar, Income Tax Appellate Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Madras-90.2. The Commissioner of Income Tax, Chennai.3. The Commissioner of Income Tax (Appeals)X, 121, Mahatma Gandhi Road, Chennai-34.4. The Joint Commissioner of Income-Tax, Special Range XI, Chennai-6.+ 1 CC To Mr.Pushya Sitaraman, Advocate SR NO.31675 T.C.No.418 of 2007 GV {CO}TP/18.3.2009.