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Commissioner of Income-tax, Bombay City-i Vs. Hoechst Pharmaceuticals Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 92 of 1968
Judge
Reported in[1978]113ITR877(Bom)
ActsIncome Tax Act, 1961 - Sections 37
AppellantCommissioner of Income-tax, Bombay City-i
RespondentHoechst Pharmaceuticals Ltd.
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateF.S. Talyarkhan, Adv.
Excerpt:
- - expenses so incurred for securing the premises on lease for a short period of five years were, therefore, clearly in our view, allowable as revenue expenditure......securing the premises on lease for a short period of five years were, therefore, clearly in our view, allowable as revenue expenditure. the tribunal has relied upon a decision of the supreme court in india cements ltd. v. commissioner of income-tax [1960] 60 itr 52, and the ratio spelt out therein that where there is no express prohibition, an outgoing by means of which an assessee procured the use of a thing by which he made profit was deductible from the receipt of the business to ascertain the taxable income. in our view, the tribunal has, therefore, taken the correct view of law and consequently the reference must be answered in the affirmative and in favour of the assessee. the question is accordingly answered in the affirmative and in favour of the assessee. revenue to pay the.....
Judgment:

Chandurkar, J.

1. On the findings recorded by the Tribunal it has been established in this case that an expenditure of Rs. 15,500 was incurred by the assessee for the purpose of acquiring office premises at New Delhi and that in connection with the same transaction, stamp duty of Rs. 750 has been paid. The question was whether these payments were allowable deductions while computing the total income of the assessee in respect of the assessment year 1964-65. The claim of the assessee was rejected by the Income-tax Officer as also by the Appellate Assistant Commissioner. The Appellate Tribunal held that the expenditure claimed by the assessee was a revenue expenditure and was, therefore, allowable. The following question was, therefore, referred at the instance of the revenue under section 256(1) of the Income-tax Act, 1961 :

'Whether, on the facts and in the circumstances of the case, it was, rightly held that the payments of Rs. 15,500 as brokerage and Rs. 750 as stamp duty in connection with the acquiring of the New Delhi office were allowable deductions while computing the total income of the assessee.'

2. Mr. Joshi on behalf of the revenue has contended that the lease was for a period of five years and that the expenditure incurred must be treated as having been incurred for the purpose of bringing into existence an asset or advantage of an enduring character.

3. It is difficult for us to accept the contention advanced on behalf of the revenue. The period of the lease which is only five years cannot be said to be such a long period that the assessee can be said to have acquired or brought into existence an advantage of an enduring character. The amount was obviously paid by the assessee to a third party with whose intervention the lease was secured. The office premises were obtained with a view to carry on the business activity of the assessee-company and the facility so obtained could not be an advantage of any enduring nature. Besides, the terms of the lease are not on record and, therefore, no other considerations can be taken into account for finding out whether any asset of an enduring character was acquired. The brokerage was really in the nature of the remuneration paid in order to avail of the services of the broker with a view to acquire the premises on rent. Similarly, the stamp duty was required to be paid in order to bring about the document of lease. Expenses so incurred for securing the premises on lease for a short period of five years were, therefore, clearly in our view, allowable as revenue expenditure. The Tribunal has relied upon a decision of the Supreme Court in India Cements Ltd. v. Commissioner of Income-tax [1960] 60 ITR 52, and the ratio spelt out therein that where there is no express prohibition, an outgoing by means of which an assessee procured the use of a thing by which he made profit was deductible from the receipt of the business to ascertain the taxable income. In our view, the Tribunal has, therefore, taken the correct view of law and consequently the reference must be answered in the affirmative and in favour of the assessee. The question is accordingly answered in the affirmative and in favour of the assessee. Revenue to pay the costs of the assessee.


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