Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Capital or revenue expenditure - Assessee-company took on licence a land for ten years, renewable for another ten years, to construct thereon airstrip to provide convenience of air travel to its executives for business purposes - Airstrip to remain property of licensing company and assessee was entitled to use same for a period of licence granted - Whether expenditure incurred on constructing air-strip resulted in benefit of enduring nature and was, therefore, capital in nature - Held, on facts, yes Facts The assessee-company obtained a plot of land from another company under licence for ten years and constructed an airstrip on it at its own cost, for the convenience of air travel of its executive from its factory site to its head office. It was agreed between the assessee and the licensing company that while latter would continue to own the plot of land and the airstrip with the building constructed thereon, the assessee would only be entitled to use, occupy and enjoy the same during the term of licence granted. It was also provided that the licence was renewable at the end of ten years for another ten years. The assessee's claim for the deduction of expenses incurred for the construction of the airstrip as business expenditure was disallowed by the ITO as well as the AAC. The Tribunal also held that though the assessee did not acquire any permanent asset, but it did acquire a right of a permanent character of the advantage of a benefit enduring for ten years and, therefore, the impugned expenditure was a capital expenditure. On reference : Held It was found as a fact that as a result of the licence having been granted to the assessee to use, occupy and enjoy the plot of land and the airstrip with the buildings constructed thereon, a benefit or advantage certain to endure for ten years and likely to endure for twenty years came into existence. It was also the finding of the Tribunal that such expenditure was related to carrying on or conduct of the business of the assessee. It, therefore, followed that the assessee incurred expenditure for the acquisition of an asset considered to be a source of profit or income. In…

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