SEN J. - (1.) THE Tribunal has referred the following questions of law under S. 256(1) of the IT Act, 1961 ('the Act'): 1. Whether on the facts, and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 52,466 representing rents and taxes for Taratolla Road land was a capital expenditure and, hence, not allowable under S. 37(1) of the IT Act? 2. Whether the above expenditure of Rs. 52,466 was allowable under S. 30 of the IT Act and if so whether the Tribunal on the facts and in the circumstances of the case, was justified in not allowing the expenditure on that basis.?"
(2.) IN this proceeding the assessee year involved is 1977-78 for which the relevant year of account is the year ended on 31st Dec., 1976 The dispute relates to disallowance of rents and taxes paid for a plot of land at Taratolla Road, Calcutta. The facts of the case of the assessee as summarised by the Tribunal are as under "The assessee company took on lease 15 acres of land from the Port Commissioner of for a period of 30 years from 28th Nov., 1965 and in 1975 two thirds of the land was signed to Philips India Ltd. The claim made this year related to the balance one third portion of the land on which the company proposed to set up a factory."
(3.) THE Tribunal considered all aspects of the case and came to the conclusion we have duly considered the rival submissions. Sec. 30 deals with rent, rates, taxes, etc., of the premises used for the purpose of business or profession, whereas S. 37(1) which is in the nature of an omnibus clause specifically excludes expenditure which is in the nature of capital expenditure from its purview. The minutes of the meetings cited would show that the object was to erect a factory and godown for the purpose of future expansion. It also shows that the assessee insisted on obtaining the right of sub-leasing the land. During the year of under consideration neither a factory nor a godown had been constructed, though it had been decided to set up a factory and an administrative block. Therefore, the expenditure incurred by the assessee for the proposed expansion of the business is not a revenue expenditure but an expenditure in the nature of preliminery expenditure and consequently it should be disallowed as capital expenditure. Accordingly we reverse the decision of the CIT (A) and restore the decision of the ITO on this point.;