Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1991-92 - MIDC had leased out an open plot to a company for 95 years - Company went into liquidation - Thereafter, assessee purchased entire unit, including land and building and plant and machinery for Rs. 75 lakhs from Official Liquidator - Assessee claimed said amount as a revenue expenditure being cost of land purchased from Official Liquidator - Assessing Officer held that out of Rs. 75 lakhs, Rs. 45 lakhs related to acquisition of leasehold land and, therefore, it was a capital expenditure - On appeal, Tribunal agreed with Assessing Officer that it was capital expenditure but it opined that since benefit of capital expenditure would be exhausted in 71 years, a proportionate amount relatable to each year might be allowed as deduction on account of payment of rent for that year for 71 years - Whether since Tribunal had come to conclusion that payment of Rs. 45 lakhs was a capital expenditure, it could not have directed department to apportion said amount over a period of 71 years - Held, yes - Whether direction of Tribunal to that extent was to be set aside - Held, yes - Whether since expenditure was incurred for acquiring leasehold rights of land on which assessee could carry on business, Tribunal rightly concluded that it was a capital expenditure - Held, yes FACTS An open plot of land was leased out by MIDC to a company known as APV. The lease was for 95 years. APV had paid premium under the lease dated 30-6-1970. The lease commenced from 1-8-1965. The yearly rent was Re. 1. APV went into liquidation. Thereafter, the assessee purchased the entire unit, including land, building, plant and machinery for Rs. 75 lakhs. Under the deed of assignment, by way of recital, it was mentioned that the value of the land and building, and plant and machinery stood bifurcated for the purpose of payment of stamp duty into two parts, viz., Rs. 72 lakhs for land and building and Rs. 3 lakhs for plant and machinery. The assessee claimed Rs. 72,18,588 as revenue expenses, being the cost of the land purchased from the Official Liquidator. This claim was rejected by the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492