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Section 37(1) of the Income-tax Act, 1961 - Capital or revenue expenditure - Assesses shifted business premises at the instance of municipality and constructed shop at new premises - Whether cost of construction allowable as revenue expenditure - Held, on facts, no Facts The assessee shifted his business to a new plot at the instance of the local municipal authorities and incurred certain expenditure on construction of a new shop there. The assessee claimed it as revenue expenditure, on the ground that the shop was not constructed for starting any new business and that it was to be donated to the municipality after 7 years. The ITO rejected the assessee's claim. The AAC dismissed the appeal, recording a finding that the fact that the new lease was only for 7 years, could not be ascertained. On further appeal, the Tribunal held that the cost of construction should be treated as revenue expenditure. On reference : Held Admittedly, the assessee had brought into existence a capital asset. The building was put up by his own volition. The failure of the assessee to prove that he was entitled to occupy the premises only for a period of 7 years, would, in any case, mean that the capital asset must be held to have belonged to him like any other capital asset. It was not established that the advantage was of any limited nature and without going into the question as to whether 7 years period was so short that the advantage could not be treated as being of an enduring character, it was clear that the expenditure incurred was of a capital nature. Accordingly, the Tribunal was not correct in allowing it as a revenue expenditure. Case review CIT v. J.N. Bhowmick [1978] 111 ITR 747 (Ori.) distinguished. Cases referred to CIT v. J.N. Bhowmick [1978] 111 ITR 747 (Ori.), CIT v. Vasant Screens [1980] 124 ITR 835 (Bom.) and Benarsidas Jagannath, In re [1947] 15 ITR 185 (Lahore)(FB). IT Reference No. 140 of 1980. R.J. Joshi, R.G. Deshpande and A. Shelot for the Applicant. C.J. and P.D. Thakkar for the Respondent. Judgment Chandurkar, J. - The assessee was carrying on its business in old Bhaji Bazar in Akola. The assessment year in question is 1976-77. During the previous year…

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