COMMISSIONER OF INCOME TAX Vs. TOLAT R AND COMPANY

JUDGEMENT

(1.) IN this case at the instance of the revenue, the following questions has been referred to us :

(2.) WE are concerned in the instant case with the assessment years 1971 -72 and 1972 -73, the previous years being financial years 1970 -71 and 1971 -72. The assessee is a registered partnership firm and carries on the business of giving on hire, loud speakers, film projector, stage lighting, cine -photography and repairing of electronic equipments, radio sets, etc. The office of the firm was situated at Sankdi Naka, Ahmedabad, since last 30 years and the area available was 180 sq. ft. The assessee, therefore, took on lease land at Relief Road, Ahmedabad. The land was taken on lease on April 1, 1970, and the assessee started construction of the show -room and office building on the area admeasuring 1,470 sq. ft. The construction work was started in May, 1970, and it was completed in march, 1973. The assessee claimed to have started the use of this new office and the show -room at Relief road, and continued the use of the old office at Sankdi Sheri Naka also. During the previous year ended march 31, 1971, the assessee claimed payment a sum of Rs. 12,600 as lease rent for the period April 1, 1970, to March 31, 1971, and claimed deduction of the same as business expenditure. The ITO allowed the expenditure as business expenditure while computing the total income from business for the assessment year in question.

(3.) AGAINST the decision of the Commissioner the assessee filed an appeal before the Income -tax Appellate Tribunal and again relied on the judgment in IRC v. Falkirk Iron Co. Ltd. [1933] 17 TC 625 and reliance was also placed on a decision of the Supreme Court in the Case of CIT v. Malyalam Plantations Ltd. : [1964]53ITR140(SC) . The Tribunal observed that the payment of the lease rent was not in respect of a new asset being acquired by the assessee but it was the lease rent paid in order to keep the business in proper running. The tribunal further observed that even if a building was not put to use, the rent would be a permissible deduction under s. 37 of the Act is such building was acquired for the purpose of business. The Tribunal held that the action of the ITO in permitting the deduction was perfectly justified and the Commissioner was not correct in withdrawing such allowance under s. 263. Hence, the Tribunal allowed the appeal of the assessee and set aside the order of the Commissioner.