COMMISSIONER OF INCOME TAX Vs. AGARWAL TRADING CO

JUDGEMENT

(1.) 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, relevant to the assessment year, the assessee was called upon by the municipal authorities to shift his business to a new open plot in new Bhaji Bazar where admittedly the applicant himself constructed A new shop at a cost of Rs. 26,518.

(2.) IN the assessment proceedings for the assessment year in question the assessee claimed that the expenditure incurred for the construction of the new shop should be allowed as revenue expenditure because he was compulsorily required to build a new shop on land which was not his own. Before the ITO it was the case of the assessee that the shop constructed by him was to be donated to the municipality after seven years. The claim of the assessee was rejected by the ITO. In appeal, the AAC recorded a finding that it could not be ascertained whether the assessee was given a lease only for seven years and it could not be presumed that the assessee would be ousted from the shop after seven years. The appeal filed by the assessee thus came to be dismissed.

(3.) THE learned counsel appearing on behalf of the Revenue has contended that the assessee in this case has clearly brought into being an asset which is a capital asset and there is really no question of treating the expenditure so incurred as revenue expenditure. He has referred us to a decision of this Court, to which one of us was a party, in CIT vs. Vasant Screens (1980) 124 ITR 835 (Bom), in which the decision of the Orissa High Court in Bhowmick's case (supra), has been considered and expenditure incurred for converting a godown into a cinema theatre, which the assessee had to bear, was treated as being of a capital nature. Mr. Thakkar appearing on behalf of the assessee has contended that the expenditure is incurred in the course of the business and that the shop was not constructed for starting any new business afresh. Coupled with this fact, according to the learned counsel, the fact that the assessee was required to part with the possession after seven years should also be considered. The learned counsel contended that since the shop was required to be gifted away to the municipality after seven years the assessee could not be said to have acquired any advantage of an enduring nature, with the result, according to the learned counsel, that the expenditure was rightly treated as revenue expenditure by the Tribunal.