Jagannatha Shetty, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred, under s. 256(1) of the I.T. Act, 1961, the following question of law for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, Rs. 11,270 being the expenditure incurred by the assessee by way of stamp, registration fee and legal expenses for the execution of registration of the lease deed dated April 24, 1974, is to be allowed in computing its income for the assessment year 1975-76 ?'
2. The facts behind the legal formulation are as follows :
The assessee is a firm consisting of five partners which came into force with effect from March 2, 1974. The assessee took over a running business with boarding and lodging facilities in the name and style 'Hotel Rajmahal' at No. 35/36, Seshadri Road, Bangalore. It also executed a lease deed dated April 24, 1974, in respect of which it had incurred an expenditure of Rs. 11,270 by way of stamp duty, registration fee and legal expenses. The lease was for a period of ten years with option for renewal for another period of ten years.
3. The assessee filed a return disclosing an income of Rs. 67,220 for the assessment year 1975-76, the relevant previous year ending December 31, 1974. Thereunder, it had deducted the aforesaid sum of Rs. 11,270 by way of expenditure incurred. The ITO completed the assessment accepting the return giving the said deduction claimed. But the Commissioner initiated proceedings under s. 263 of the Act disallowing the expenditure of Rs. 11,270 on the ground that it was of capital nature having been incurred for acquisition of a capital asset. The appeal preferred by the assessee against the order of the Commissioner was not accepted by the Tribunal. The Tribunal held that the assessee had started the business only during the relevant year for the first time and the lease taken thereof was considerably for a long period and the transaction brought into existence should, therefore, be considered as of an enduring nature.
4. Mr. Bhat, learned counsel for the assessee, urged before us that the period of lease is not relevant for consideration whether the sum claimed for deduction was in the nature of revenue expenditure or capital in nature. What is important to consider, according to the learned counsel. is whether the said amount was a necessary outgoing for the use of a thing from which the assessee is to earn profit. This contention would have been relevant provided the assessee was engaged in a business prior to the execution of the lease deed and the expenditure incurred was incidental to such business. But the assessee herein, for the first time, entered into the business in respect of which he spent the amount for executing and registration the lease deed. But for the execution of the lease deed, he would not have got the apparatus of the business and the leasehold rights. It has really brought into existence an asset of enduring nature and the expenditure in connection with the acquisition of such rights should be distinguished from the expenditure incidental to the existing business. The former cannot be allowed under s. 37 of the Act, though the latter may in certain circumstances be allowed.
5. The counsel, in support of his contention, relied upon the decision is the Supreme Court in India Cements Ltd. v. CIT : 60ITR52(SC) . We do not think that he could draw support from that decision since it was a case where a certain sum of money was spent towards stamp duty, registration fees, lawyer's fees, etc., for the purpose of the existing business of the assessee. Similar was the distinguishing feature in the following two decisions of the Bombay High Court relied upon by the learned counsel :
(i) CIT v. Hoechst Pharmaceuticals Ltd. : 113ITR877(Bom) and
(ii) CIT v. Bombay Cycle & Motor Agency Ltd.  188 ITR 42.
6. In the instant case, as we have already stated, it was for the first time that the assessee entered into the business by executing the lease whereunder he secured the leasehold rights for the initial period of ten years with an option to renew for another period of ten years. The expenditure incurred for securing this kind of business by way of stamp duty, registration charges and legal fees would be an expenditure of capital nature.
7. In the result, we answer the question in the affirmative and against the assessee.