RAMAKRISHNA AND CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE cinema theatre building known as Chitra Talkies, Madras, was taken on lease by one K. Viswanathan on a monthly rent of Rs. 3,500 under lease deeds dated May 25, 1956, and May 26, 1956. THE lease was for a period of four years from June 1, 1957, with a right to renew the same for a further period of two terms of four years each, Viswanathan was also the holder of a licence for exhibiting cinema films. He assigned his right, title and interests under the lease deeds to Messrs. Ramakrishna and Company, a partnership firm, by a deed of assignment dated April 29, 1957. Under this document, Ramakrishna and Company had to pay a sum of Rs. one lakh by way of consideration to Viswanathan and also pay to the owners of the theatre a monthly rent of Rs. 3,500 which was payable by Viswanathan. This partnership firm consisting of five partners was registered with the Registrar of Firms on May 1, 1957, and a partnership deed also was executed on January 2, 1959, It is this firm that is the assessee in the present case.

(2.) THE assessee-firm returned an income of Rs. 42,138 for the assessment year 1960-61 from the business of exhibition of films at Chitra Talkies. In computing this income the assessee had claimed allowance for a sum of Rs. 9,375 representing a part of the consideration of the sum of Rs. one lakh paid by the assessee to Viswanathan under the agreement dated April 29, 1957, in addition to a monthly rent at the rate of Rs. 3,500 per month. THE unexpired lease after the assignment in favour of the assessee was 10 years 8 months.

(3.) THEREFORE, the question for consideration is whether the sum of Rs. one lakh paid under the document is in the nature of capital expenditure laid out or expended wholly and exclusively for the purpose of business.