CHLORIDE INDIA LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :

(2.) In order to appreciate the question we have to refer to the facts as found by the Tribunal. The assessee-company required some more space on account of the growing needs of its business. The assessee company, therefore, started negotiations in respect of premises No. 240E, Acharya Jagadish Chandra Bose Road, Calcutta. The premises were, however, at that time occupied by M/s. Gasper & Co. and in order to obtain vacant possession of the premises, the assessee paid a sum of Rs. 4,50,000 to M/s. Gasper & Company. Thereafter, the assessee claimed the payment of that sum as a revenue expenditure. The ITO disallowed the claim of the assessee on the ground that it was in the nature of capital expenditure. The ITO was of the opinion that the payment to M/s. Gasper & Company was for acquiring a benefit of an enduring nature.

(3.) The assessee preferred an appeal before the AAC. The AAC held that the payment made to M/s. Gasper & Co. was in the nature of a premium for the acquisition of vacant premises and that its right to enjoy vacant possession of the property could properly be regarded as a capital asset. The AAC, therefore, held that the money paid to purchase it or acquire it must be held to be capital expenditure.