T.J. Joice, Accountant Member - (1.) THIS is an appeal filed by the assessee and is directed against the order of the CIT(A), 26-3-1993 for the assessment year 1991-92.
(2.) We have heard Shri D. Devaraj, the learned counsel for the assessee and Shri N.S. Raghavendra, the learned DR. The only issue involved in this case is with regard to the disallowance of Rs. 1,02,650 which was claimed by the assessee under the head "registration fees". It was explained by the assessee that the expenditure was towards stamp, registration and other charges in connection with the execution of a document in relation to enhancement of the lease period and lease rent payable by the assessee to one Smt. Jagati Kumari, wife of late Shri L. Bharat Singh in terms of a letter of arrangement dated 22-2-1983. As per the existing lease agreement, the assessee was obliged to pay only Rs. 1,000 p.m. as rent and this lease deed was to expire only in the year 2022. However, a new deed was executed for enhancement of rent and for extending the period of lease as stated earlier, by which the rent was raised to Rs. 2,000 p.m. and the period of lease was extended so as to expire in the year 2047. The Assessing Officer disallowed the enhanced rent paid for the year amounting to Rs. 12,000 as he did not recognise the new deed as valid. However, the CIT(A) allowed this claim as a revenue expenditure as the lease rent was enhanced on account of inflationary trend and the parties to the agreement were not related to each other. However, with regard to registration fees in respect of the new lease deed, he was of the opinion that the expenditure related the years 2022 to 2047. In this process, the assessee obtained an enduring advantage which was to be treated as capital expenditure. Moreover, the assessee had obtained a right to property under the Transfer of Property Act and such interest was a capital asset. In this view of the matter, he concurred with the decision of the Assessing Officer in disallowing the amount of Rs. 1,02,650 towards registration fees. The learned counsel for the assessee reiterated the submissions made before the lower authorities and argued that the expenditure on registration fees was only revenue expenditure as it was for improving the life of the existing asset. According to the learned counsel this cannot be termed as capital expenditure as no new asset was acquired by the assessee. On the other hand, the learned DR supported the order of the Assessing Officer and the CIT(A) in this respect, by pointing out that the expenditure in question related to the acquisition of an asset or of an enduring advantage and such expenditure can only be termed as capital in nature. He also referred to the various decisions relied on by the CIT(A) in support of the conclusion reached by him.
(3.) AFTER considering the rival submissions and the evidence on record, we find that the decision of the CIT(A) does not call for any interference, as it is based on the proper appreciation of the facts of the case. The learned CIT(A) has relied on the ratio of the following decisions in support of the conclusion reached by him : • Gobind Sugar Mills Ltd. v. CIT [1979] 117 ITR 747 (Cal.); • East India Commercial Co. (P.) Ltd. v. CIT [1964] 54 ITR 81 (Cal.); • CIT v. Bengal Assam Investors Ltd. [1969] 72 ITR 319 (Cal.); • Hotel Rajmahal v. CIT [1985] 152 ITR 218 : 19 Taxman 22 (Kar.). It may be mentioned in this connection that since the original lease deed was existing upto the year 2022 and the new deed was executed for extending this period upto 2047. The expenditure incurred on such lease deed cannot be treated as relating to the accounting year relevant for the assessment year 1991-92 with which we are concerned here. In view of the remoteness and the extension of the period mentioned in this lease deed, we concur with the view taken by the revenue authorities that the expenditure is not of revenue nature but really capital in nature as it results in getting an enduring advantage to the assessee, in the form of interest in property for a long period. Hence, no interference is called for with the impugned order which is hereby upheld.;