Commissioner of Income Tax vs Gemini Arts P. Ltd.

R. Jayasimha Babu, J.—The assessee which had leasehold for 48 years chose to pay with the consent of the lessor the rent for 47 years in

the assessment year 1981-82. The lease was for a period of 48 years from February 18, 1980, and the lump sum payment was made on March

22, 1980. The terms of the lease did not contemplate any increase in the rate or rental during the period of lease. The lessee got no other

advantage by reason of this lump sum payment except the relief of not having to make the annual payment during the period of lease.

The contention of the Revenue that the assessee had received an advantage of enduring nature by making such a lump sum payment has been

negatived by the Tribunal and in our view rightly.

The Supreme Court in the case of Commissioner of Income Tax, Tamil Nadu II, Madras Vs. Madras Auto Service (P) Ltd., , has held that to

decide whether expenditure is revenue or capital one has to look at the expenditure from a commercial point of view. The court observed (page

472) ""Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure"". Had the assessee chosen to pay rent

annually for each and every year of lease such expenditure certainly would have to be regarded as revenue expenditure. The fact that the payment

was made in lump sum for the entire duration of the lease does not alter the character of it being a revenue expenditure.

The expenditure so incurred by the assessee being of a revenue character it has to be deducted from its income in the year in which the

expenditure was incurred. The Tribunal was right in holding that the expenditure should be allowed in the assessment year in which the expenditure

was incurred.

The other question1 referred is as to whether the assessee was entitled to an investment allowance on a new colour film printing machine as held

by the Tribunal. This court in the case of Commissioner of Income Tax Vs. Prasad Productions P. Ltd., with regard to the processing and drying

plant belonging to a film processing laboratory, has held that investment allowance is allowable on such equipment. Similar is the position here. The

Tribunal was right in holding that the assessee is entitled to investment allowance on new colour film analyser and the new colour film printing

machine.

All the questions referred are answered in favour of the assessee and against the Revenue.