Law:

Section:

Section 30, read with section 32 of the Income-tax Act, 1961 - Rent, rates, taxes, repairs and insurance for buildings - Assessment year 2003-04 - Assessee-company was carrying on its business in a building taken on rent - Building was declared to be unsafe for occupation by Municipal Corporation - Consequently, an agreement was entered into between owners, tenant, other occupants and a developer, under which developer was to repair and reconstruct building at its own cost, and, after that certain area was to be handed over to co-owners - Assessee was also given its equivalent portion on condition that it would contribute towards cost incurred on repair and reconstruction - Assessee's share of cost was arrived at Rs. 1.50 crores; said agreement also provided that there would be no increase in rent payable by assessee - On above facts, Assessing Officer held that assessee had secured rights over portion of building on payment of Rs. 1.50 crores which constituted deemed ownership of building - Accordingly, Assessing Officer held expenditure of Rs. 1.50 crores to be capital in nature and disallowed it - Commissioner (Appeals) and Tribunal reversed order of Assessing Officer - Whether by contributing an amount of Rs. 1.50 crores towards re-construction, assessee obtained a commercial advantage of securing tenancy of an equivalent area of premises on same rent as before - Held, yes - Whether since there was no acquisition of a capital asset and occupation of assessee continued in character of a tenancy, expenditure of Rs. 1.50 crores could not be regarded as capital in nature but revenue to be allowable by way of deduction - Held, yes [In favour of assessee] FACTS The assessee-company was a tenant in a building occupying 5000 sq. ft. The building was declared by the municipal corporation to be unsafe for occupation and an eviction notice was served on the occupants. Thereafter, a partition suit was preferred by the co-owners of the building. A court receiver was appointed and the assessee being a tenant in the building continued to pay rent to the receiver. In that suit consent terms were entered into under which a developer was to repair and reconstruct the…

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