Commissioner of Income Tax vs S.B. Ramakrishnan

Veeraswami, J.—The question in this reference turns on the character of an outgoing of Rs. 1,001 as to whether it is a capital or revenue

expenditure. We are concerned with the assessment year 1962-63. The assessee was engaged in the manufacture and sale of ready-made

garments under the name and style of "" Sri Murugan Dress Stores "", He had several branches and the one at Tanjore had to be vacated under rent

control proceedings. And so, he obtained a lease of a new building and, in doing so, he had to pay a sum of Rs. 1,001 to the landlord as an extra

payment over and above the stipulated rent, which was not refundable. The assessee claimed deduction of this amount as revenue expenditure

which was disallowed by the Income Tax Officer with whom the Appellate Assistant Commissioner concurred. But the Tribunal found that the

expenditure was very much akin to the payment of rent for the new premises and allowed the appeal of the assessee. So the reference arises, the

question being :

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 1,001 was deductible in

arriving at the assessee''s income from business for the assessment year 1962-63 ?

For the revenue it is urged that, while the Tribunal referred to the appropriate decisions, particularly Assam Bengal Cement Co. Ltd. Vs. The

Commissioner of Income Tax, West Bengal, . , whicn. laid down the tests, it failed to properly apply them to the facts. We do not think that this

criticism is justified. The expenditure does not appear to have been incurred for the purpose of bringing into existence any asset or advantage of an

enduring character. There is nothing on record to show that the sum was paid to the landlord in order to secure the lease for any term of years. The

circumstances of the case show that the expenditure had to be incurred by the assessee for the purpose of continued running of his business,

though in a new premises. The object of the assessee, as it seems to us on the facts, was merely, by incurring the business expenditure, to produce

profits and not to create any asset of a capital character. That will suffice to dispose of the reference. The reference is answered against the

revenue with costs, counsel''s fee Rs. 250.