Dipak Kumar Sen, J. - (1.) Gobind Sugar Mills Ltd., the assessee, had been carrying on business of running a sugar mill. Under a deed of lease executed on the 30th August, 1969, it obtained a lease of another sugar factory at Matihari in consideration of an annual rental of not less than Rs. 25 lakhs for a period of five years. For the execution of the said deed, the assessee had to incur some expenditure on account of stamp fees, registration charges, solicitor's fees, etc., which aggregated Rs. 54,824. In the assessment year 1971-72, the relevant previous year ending on the 30th June, 1970, the assessee in its assessment to income-tax claimed deduction of the said amount as a revenue expenditure incurred for the purpose of business. The ITO rejected the said claim on the ground that the same had been incurred for acquiring the right to run a factory on lease and, therefore, the expenditure was of a capital nature.
(2.) Being aggrieved, the assessee preferred an appeal. The AAC, following a decision of the Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52, held that the expenditure in question had been incurred by the assessee for the use of a property under a leasehold for a limited period of time and that such expenditure had been incurred to obtain the use of the premises and to facilitate the carrying on of the business of the assessee. The AAC, accordingly, upheld the contentions of the assessee.
(3.) The revenue preferred a further appeal before the Tribunal. It was contended in the appeal that an expenditure incurred for acquiring a right to run the said sugar mill for the said period of five years was definitely on capital account and that a capital asset in the form of the assessee's right to run and exploit the said factory for the said period had come into existence under the said lease. Accordingly, the expenditure incurred on that account was submitted to be in the nature of capital expenditure. The decision of the Supreme Court in the case of India Cements Ltd. [1966] 60 ITR 52 was sought to be distinguished on the ground that the expenditure in that case had been incurred for the purpose of obtaining a loan. An earlier decision of the Supreme Court in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 was cited for the proposition that the expenditure incurred for the initial outlay in the setting up of a business or a venture could not be said to be on revenue account.;