M/S. SAMRAT HOLDINGS PVT LTD, MUMBAI V. THE ITO 2(3)(3),

ITA 1012/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1167 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 16-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 11-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABANI K NAYAK
• Assessee Lawyers: SANDIP CHETIWAL
• Keywords: Capital asset; Business income; Revenue expenditure; Capital expenditure
• Section: 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & B. RAMAKOTAIAH (A M) I.T.A.NO. 1012/MUM/2008 (ASSESSMENT YEAR : 2003-0 4) M/S. SAMRAT HOLDINGS PVT. LTD. ORIEN HOUSE ADI MARZBAN HOUSE MUMBAI-400 001. VS. ITO 2(3)(3) MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AAACS5185P ASSESSEE BY : SHRI M.M. GOLVALA & SHRI SANDIP CHETIWAL DEPARTMENT BY : SHRI ABANI K. NAYAK ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 15.11.2007 OF LEARNED CIT(A)-XXX, MUMBAI RELATING T O A.Y. 2003-04. 2. ONLY GROUND OF APPEAL RAISED BY THE ASSESSEE REA DS AS FOLLOWS :- LEARNED CIT(A) IN LAW AND ON THE FACTS OF THE CASE ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS. 3,47 ,500/- BEING LEGAL FEES PAID TO M/S. BODHANWALA AND CO., ADVOCAT ES AND SOLICITORS TO PROTECT THE RIGHT AND TITLE OF THE AP PELLANT IN THE PROPERTY. 3. THE ASSESSEE IS A COMPANY. IT CARRIES ON BUSINES S OF INVESTMENT IN SHARES AND SECURITIES. THE MUMBAI PORT TRUST (MPT) HAD BY AN INDENTURE OF LEASE DATED 15.10.1957 DEMISED TO ONE VISHINDAS DALLOOMAL AS LESSEE A PIECE AND PARCEL OF PROPERTY BEING PLOT OF LAND A DMEASURING 200.67 SQUARE METERS TOGETHER WITH HOLDINGS STANDING THERE ON VIZ., MODY BAY ESTATE, 45, VAJU KOTAK MARG, BALLARD ESTATE, MUMBAI -400 001, HEREINAFTER REFERRED TO AS THE PROPERTY. THE LESS EE DIED ON 17.7.1994 LEAVING BEHIND A WILL UNDER WHICH, THE PROPERTY WAS GIVEN ABSOLUTELY TO M/S. SAMRAT HOLDINGS PVT. LTD. 2 HIS WIDOW MRS. SITABAI VISHINDAS NARUMALANI. THE WI DOW DIED ON 15.1.1998. THE LEGAL HEIRS OF THE WIDOW BY A DEED D ATED 6.5.1992 ASSIGNED THEIR RIGHTS OVER THE PROPERTY TO ONE M/S. CROWN HOLDINGS (P) LTD. THE ASSESSEE WAS THE REAL BENEFICIARY OF SUCH ASSIGNMENT AND THIS WAS RECOGNIZED, ACCEPTED BY M/S. CROWN HOLDINGS (P) LTD. BY A DECLARATION OF TRUST DATED 21.12.1995. 4. THEREAFTER THE ASSESSEE MADE ATTEMPTS TO GET IT SELF RECOGNIZED AS TENANT IN PLACE OF THE ORIGINAL TENANT BY LETTER DA TED 7.6.1996. THE ASSESSEE CONTINUED TO MAKE SIMILAR ATTEMPTS. THE AS SESSEES ADVOCATE FORWARDED ALL DOCUMENTS TO MPT TO RECOGNIZE THE ASS ESSEE AS TENANT. MPT ALSO DEMANDED ARREARS OF RENT, PREMIUM PENALTY ETC. FOR THE PERIOD FROM 1.1.1971 UPTO 30.9.1999 FROM THE ASSESSEE. 5. IN THE MEANTIME, MPT INCREASED RENTS OF PREMISE S OWNED AND LEASED BY IT. THE SAME WAS CHALLENGED BY SEVERAL TENANTS, BEFORE HON'BLE BOMBAY HIGH COURT. THE HON'BLE SINGLE JUDGE STRUCK DOWN THE PROPOSED INCREASE IN RENT AS ARBITRARY BY JUDGMENT DATED 4.1 0.1980. THE DIVISION BENCH BY ORDER DATED 1.8.2000 MODIFIED THE ORDER OF HON'BLE SINGLE JUDGE. ACCORDING TO ASSESSEE EVEN THIS ORDER WAS IN FAVOUR OF THE TENANTS. ACCORDING TO THE ASSESSEE, MPT HAS INTERPR ETED THE JUDGMENT IN A MANNER AND HAS SOUGHT TO RAISE A DEMAND OF RS. 2, 06,88,330/- BY THEIR LETTER DATED 11.1.2002 ADDRESSED TO THE ASSES SEES ADVOCATE BEING ARREARS OF RENT PAYABLE FOR THE PERIOD FROM 14.1.19 85 TO 31.3.2002 BY THE ESTATE OF SMT. SITADEVI MARUMALANI. ALL THE TENANTS OF PROPERTIES OF MPT ALSO RECEIVED SIMILAR DEMAND FROM MPT. THE TENANTS HAD ALSO FILED AN APPEAL BEFORE HON'BLE SUPREME COURT AGAINST THE JUD GMENT OF DIVISION BENCH OF HON'BLE BOMBAY HIGH COURT. THE ASSESSEE SO UGHT TO IMPLEAD ITSELF AS AN INTERVENER BEFORE HON'BLE SUPREME COUR T. THE ASSESSEE IN THIS REGARD HAD FILED IA NO. 100 OF 2002 IN CIVIL A PPEAL NO. 5559 OF 2001 BEFORE HON'BLE SUPREME COURT FOR BEING RANKED AS IN TERVENER IN THE PENDING PROCEEDINGS. THE ASSESSEE HAD ALSO CHALLENG ED THE ARBITRARY M/S. SAMRAT HOLDINGS PVT. LTD. 3 INCREASE OF RENT PROPOSED BY MPT IN THEIR LETTER DA TED 11.1.2002 REFERRED TO ABOVE. 6. THE ASSESSEE HAD INCURRED THE FOLLOWING EXPENSE S IN CONNECTION WITH THE ABOVE PROPERTY. THE TOTAL LEGAL FEES PAID OF RS . 3,47,500/- TO M/S. BODHANWALA & CO., ADVOCATES AND SOLICITORS COMPRISE D OF AS UNDER:- 22,500/- FOR ATTENDING MATTERS BEFORE SUPREME COURT OFFICE PREMISES CASE. 1,75,000/- FOR PROTESTING AGAINST INCREASE IN FAIR RENT PROPOSED BY BOMBAY PORT TRUST OF OFFICE PREMISES 1,50,000/- FOR RENEWAL OF LICENSE OF OFFICE PREMISE S 3,47,500/- TOTAL WE HAVE ALREADY SEEN THAT THE ASSESSEE WAS ON THE O NE HAND ATTEMPTING TO GET ITSELF RECOGNIZED AS TENANT OF MPT AND IN TH IS REGARD ITS ADVOCATES WERE CORRESPONDING WITH MPT. IN THIS REGARD THE ASS ESSEE INCURRED CERTAIN LEGAL EXPENSES. THIS IS EXPENSES ARE FOR GE TTING RENEWAL OF THE LEASE. THE OTHER EXPENDITURE PAID TO ADVOCATES IS AGAINST THE INCREASE IN RENT DEMANDED BY MPT. 7. THE PROPERTY IN RESPECT OF WHICH THE ABOVE DISP UTES WERE GOING ON WAS SUB-LET BY THE ASSESSEE TO ONE M/S. RBI PRINT A ND PUBLISHING LTD. THE ASSESSEE RECEIVED A RENT OF RS. 86,031/- FROM T HE SUB-TENANT. THE ASSESSEE PAID RENT TO MPT OF RS. 1,11,857/- BESIDES RATES AND TAXES RS. 1,02,734/- TO BMC. THE ASSESSEE RETURNED A LOSS OF RS. 1,28,560/- UNDER THE HEAD INCOME FROM OTHER SOURCES IN RESPE CT OF THE INCOME FROM SUB-LETTING. RENT PAID TO MPT RS. 1,11,857/- ADD : RATE AND TAXES RS. 1,02,734/- RS. 2,14,591/- LESS : RENT RECEIVED FROM SUB-TENANT RS. 86,031 /- LESS RS. 1,28,560/- 8. IT IS IN THE ABOVE BACKGROUND OF FACTS THAT WE HAVE TO EXAMINE THE CLAIM OF THE ASSESSEE OF LITIGATION EXPENSES OF RS. 3,47,500/- WHETHER ARE M/S. SAMRAT HOLDINGS PVT. LTD. 4 ALLOWABLE AS REVENUE EXPENDITURE AND ENTITLED TO DE DUCTION WHILE COMPUTING TOTAL INCOME. 9. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ABOVE EXPENDITURE WAS A CAPITAL EXPENDITURE BECAUSE IT RELATED TO ACQUISI TION OF A CAPITAL ASSET VIZ. ACQUIRING LEASEHOLD INTEREST OVER IMMOVABLE PR OPERTY. ACCORDING TO THE ASSESSEE, THESE EXPENSES RELATED TO PROTECTING RIGHT AND TITLE OF THE ASSESSEE IN THE PROPERTY AND ARE ALLOWABLE AS REVEN UE EXPENDITURE. THE ASSESSEE RELIED ON THE DECISION OF HON'BLE MADRAS H IGH COURT IN THE CASE OF CIT VS. OPN ARUNACHALA NADAR 141 ITR 620(MAD), W HEREIN IT WAS HELD THAT LITIGATION EXPENSES TO PROTECT INCOME PRODUCIN G BUSINESS ASSET IS TO BE ALLOWED AS A DEDUCTION. THE ASSESSING OFFICER, H OWEVER, DISTINGUISHED THE SAME AS A CASE WHERE THE INCOME PRODUCING BUSIN ESS ASSET WAS TO BE ALLOWED AS A DEDUCTION. THE ASSESSING OFFICER HOWEV ER, DISTINGUISHED THE SAME AS A CASE WHERE THE INCOME PRODUCING ASSET WAS A SALT PAN. THEREAFTER THE ASSESSING OFFICER ANALYSED THE BILL OF COST NO. MSB/40 OF 2002 RAISED BY THE ASSESSEES ADVOCATES M/S. M.S. B ODHANWALLA & CO. FOR A SUM OF RS. 1,50,000/- AND HELD THAT THE LITIG ATION EXPENSES RELATE TO ACQUISITION OF A CAPITAL ASSET AND THEREFORE THE SA ME WAS CAPITAL EXPENDITURE. THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING ABOUT THE REMAINING LITIGATION EXPENSES OF RS. 1,97,500/-. TH ESE EXPENSES RELATED TO PAYMENT OF FEES IN CONNECTION WITH INTERVENER AP PLICATION FILED BY THE ASSESSEE BEFORE HON'BLE SUPREME COURT CHALLENGING T HE LEGALITY OF INCREASE IN RENT BY MPT. THE BILLS OF THE ADVOCATES ARE AT PAGES 42 & 45 OF THE ASSESSEES PAPER BOOK. THOSE EXPENSES ARE IN CONNECTION WITH CHALLENGE TO INCREASE IN MONTHLY RENT AND CANNOT BE SAID TO BE EXPENSES FOR ACQUIRING ANY CAPITAL ASSET. THE ASSESSING OFFI CER HELD THAT THE EXPENDITURE WAS CAPITAL EXPENDITURE AND DISALLOWED THE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE. HE ALSO HELD THAT T HE PROPERTY WAS NOT BUSINESS PRODUCING ASSET. M/S. SAMRAT HOLDINGS PVT. LTD. 5 10. ON APPEAL BY THE ASSESSEE, LEARNED CIT(A) CONFI RMED THE ORDER OF THE ASSESSING OFFICER. HENCE, THE APPEAL BY THE ASS ESSEE BEFORE THE TRIBUNAL. 11. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE EXPENSES IN DEFENDING THROUGH COURT PROCEEDINGS THE PROPOSED IN CREASE IN RENT WAS A REVENUE EXPENDITURE AND WAS INCURRED ONLY TO ENSURE THAT A REVENUE OUTFLOW IN THE FORM OF ENHANCED RENT IS NOT INCURRE D BY THE ASSESSEE ON A REGULAR BASIS IN FUTURE. AS FAR AS EXPENDITURE INC URRED ON ACQUIRING RENEWAL OF LEASE IN FAVOUR OF THE ASSESSEE IS CONCE RNED, THE LEARNED COUNSEL SUBMITTED THAT TILL DATE THE ASSESSEE WAS N OT SUCCESSFUL IN GETTING THE RENEWAL OF LEASE IN ITS FAVOUR AND THER EFORE THERE WAS NO ACQUISITION OF ANY CAPITAL ASSET AND THEREFORE THE EXPENDITURE HAD TO BE CONSIDERED AS REVENUE EXPENDITURE. ACCORDING TO HIM THE EXPENDITURE WAS INCURRED ONLY FOR REMOVAL OF A DISABILITY AND T HEREFORE HAD TO BE ALLOWED AS A DEDUCTION. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BIKANER GYPSUM LTD. VS. CIT, 187 ITR 39(SC). IN THE AFORESAID CASE A MINING COMPANY TOOK A MINE ON LEASE AND PAID CERTAIN SUM TO A RAILWAY COMPANY FOR REMOVAL OF RAILWAY STATION, YARD AND QUARTERS ON PART OF THE AREA TAKE N ON LEASE BECAUSE OF RESTRICTION IN LEASE ON MINING OPERATION NEAR AREA OCCUPIED BY RAILWAY. THE AMOUNT PAID WAS HELD TO BE ONLY FOR REMOVAL OF A DISABILITY AND REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEW GARAGE LTD. 129 ITR 122 (DEL) FOR THE PROPOSITI ON THAT AN AMOUNT PAID TO MAINTAIN AN EXISTING TENANCY RIGHTS DOES NO T GIVE ANY ASSET OR ADVANTAGE OF AN ENDURING NATURE AND THEREFORE IS TO BE ALLOWED AS A REVENUE EXPENDITURE. RELIANCE WAS ALSO PLACED ON T HE DECISION IN THE CASE OF HINDUSTHAN MILK FOOD MANUFACTURERS LTD. VS. CIT 179 ITR 302 (P&H) WHEREIN IT WAS HELD THAT FEES PAID TO ADVOCAT ES FOR OBTAINING LEGAL ADVICE IN CONNECTION WITH PURCHASE OF LAND FOR EXPA NSION OF MANUFACTURING ACTIVITIES WAS ALLOWED AS A DEDUCTION THOUGH THE LAND WAS NOT ULTIMATELY PURCHASED. RELIANCE WAS ALSO PLACED ON THE DECISION OF M/S. SAMRAT HOLDINGS PVT. LTD. 6 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRALCO METAL INDUSTRIES PVT. LTD. VS. CIT 206 ITR 477 (BOM) WHEREIN IT WAS HELD THAT FOREIGN TOUR EXPENSES WERE TO BE ALLOWED AS DEDUCTION U/S.37 AS A REVENUE EXPENDITURE. THE HONBLE BOMBAY HIGH COURT HAS OBS ERVED IN THE AFORESAID DECISION THAT THE EXPRESSION FOR THE PUR POSE OF THE BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. THE LEARNED COUNSEL ALSO DISTINGUISHED OTHER DECISI ONS RELIED UPON BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT, VIZ., A) GASPER (A.) VS. COMMISSIONER OF INCOME-TAX 192 ITR 382 (SC) IT WAS HELD THAT LUMP SUM RECEIVED BY A MONTHLY TENAN T IN CONSIDERATION OF PERMISSION TO NEW LESSEE TO PUT UP CONSTRUCTION AND BECOMING LICENSEE WAS HELD TO GIVE RAISE TO TRA NSFER OF A 'CAPITAL ASSET' AND GAIN THEREON WAS HELD TO BE LIA BLE TO TAXATION AS CAPITAL GAIN. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE AFORESAID DECISION RELATES TO COMPUTATION OF CA PITAL GAIN AND NOT RELEVANT IN THE PRESENT CONTEXT. B) DALMIA JAIN AND CO. LTD. VS. COMMISSIONER OF INCOME -TAX 81 ITR 754(SC) THE ASSESSEE TOOK ON LEASE FROM THE GOVERNM ENT THE MURLI HILLS FOR THE PURPOSE OF QUARRYING LIMESTONE FOR A PERIOD OF ONE YEAR. THEREAFTER THE ASSESSEE WORKED THE QUARRY AS AGENT OF THE GOVERNMENT WITH AN UNDERSTANDING THAT THE MURLI HILLS WOULD BE ULTIMATELY LEASED OUT TO THE ASSESSEE. WHILE THE ASSESSEE WAS IN POSSESSION OF THE MURLI HILLS AS AGENT OF THE GOVER NMENT THE KALYANPUR LIME CO., ON THE BASIS OF AN EARLIER AGRE EMENT WITH THE GOVERNMENT, FILED A SUIT FOR SPECIFIC PERFORMANCE A ND IN THE ALTERNATIVE DAMAGES AGAINST THE GOVERNMENT, IMPLEAD ING THE ASSESSEE ALSO AS A DEFENDANT. THE SUIT WAS RESISTED BY THE GOVERNMENT AS WELL AS BY THE ASSESSEE. THE ASSESSEE INCURRED THE SUM OF RS. 1,29,994 IN RESISTING THE SUIT, IN WHICH ULTIMATELY THE SUPREME COURT GRANTED A DECREE FOR DAMAGES, AND THE QUESTION WAS WHETHER THE LITIGATION EXPENSES CONSTITUTED EXP ENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE B USINESS. IT WAS HELD THAT THE ASSESSEE RESISTED THE SUIT IN ORDER T O PROTECT ITS BUSINESS AND NOT TO SAFEGUARD ITS PROSPECTS OF GETT ING A NEW LEASE. IT DID NOT INITIATE THE PROCEEDINGS: IT MERELY DEFE NDED THE CLAIM MADE AGAINST IT. THE SUIT WAS LAUNCHED AGAINST IT B ECAUSE OF ONE OF ITS BUSINESS ACTIVITIES AND THEREFORE THE LITIGA TION EXPENSES WERE REVENUE EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE M/S. SAMRAT HOLDINGS PVT. LTD. 7 PURPOSE OF THE BUSINESS. IT WAS FURTHER HELD THAT WHERE LITIGATION EXPENSES ARE INCURRED BY THE ASSESSEE FOR THE PURPO SE OF CREATING, CURING OR COMPLETING THE ASSESSEE'S TITLE TO THE CA PITAL, THEN THE EXPENSES INCURRED MUST BE CONSIDERED AS CAPITAL EXP ENDITURE. BUT IF THE LITIGATION EXPENSES ARE INCURRED TO PROTECT THE BUSINESS OF THE ASSESSEE, THEY MUST BE CONSIDERED AS A REVENUE EXPENDITURE. IT WAS THE CONTENTION OF THE LEARNED COUNSEL FOR TH E ASSESSEE THAT THIS DECISION SUPPORTS THE PLEA OF THE ASSESSEE. C) JAYA HIND INDUSTRIES PRIVATE LIMITED VS. COMMISSION ER OF INCOME- TAX 161 ITR 842(BOM). THE ASSESSEE ACQUIRED SHARES OF ANOTHER COMPANY, BA. BA REFUSED TO REGISTER SHARES IN NAME OF ASSESSEE. THE TITLE TO SHARES WOULD BE COMPLETE AND VALID ONL Y ON REGISTRATION OF SHARES. THE ASSESSEE INCURRED EXPE NDITURE FOR PROSECUTING APPEAL BEFORE COMPANY LAW BOARD AND SUP REME COURT FOR COMPELLING BA TO REGISTER SHARES IN NAME OF ASSESSEE. THE SAID EXPENDITURE INCURRED WAS HELD TO BE AN EXP ENDITURE FOR ACQUISITION OF A NEW ASSET AND THEREFORE CAPITAL IN NATURE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DECISION IS NOT ON IDENTICAL FACTS AS THAT OF THE CASE OF TH E ASSESSEE. D) LIFE INSURANCE CORPORATION OF INDIA VS. COMMISSIONE R OF INCOME- TAX 167 ITR 740(BOM). THE ASSESSEE TOOK OVER THE BU SINESS OF CERTAIN INSURANCE COMPANIES. THERE WAS A DISPUTE AS TO THE QUANTUM OF COMPENSATION PAYABLE TO THE INSURANCE CO MPANIES. THERE WAS LITIGATION AND THE ASSESSEE INCURRED LEGA L EXPENDITURE. AN ALLOWANCE IN RESPECT OF THIS EXPENDITURE WAS CLA IMED BY THE ASSESSEE BUT DISALLOWED BY THE INCOME-TAX OFFICER A ND THE TRIBUNAL. THE HONBLE BOMBAY HIGH COURT HELD THAT THE ASSESSEE, WHEN IT ACQUIRED THE BUSINESS OF THE INSURANCE COMP ANIES, WAS ACQUIRING A CAPITAL ASSET. THE COMPENSATION PAID IN REGARD TO SUCH ACQUISITION WAS CAPITAL EXPENDITURE. THE EXPENDITUR E INCURRED IN LITIGATION RELATING TO SUCH CAPITAL EXPENDITURE MUS T ALSO BE TREATED AS CAPITAL EXPENDITURE. ACCORDING TO THE LEARNED C OUNSEL FOR THE ASSESSEE THE AFORESAID DECISION IS DISTINGUISHABLE BECAUSE IN THE CASE OF THE ASSESSEE THE LEASE IN ITS FAVOUR HAS NO T BEEN OBTAINED. 12. THE LEARNED D.R. RELIED ON THE ORDER OF THE CIT (A). IT WAS ALSO SUBMITTED BY HIM THAT THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE CASES WHERE THE INCOME IN QUES TION WAS ASSESSED AS BUSINESS INCOME. IT WAS POINTED OUT BY HIM THAT TH E ASSESSEE SUBLET THE PROPERTY AND WAS DERIVING RENTAL INCOME THERE FROM WHICH WAS ASSESSED M/S. SAMRAT HOLDINGS PVT. LTD. 8 AS INCOME FROM OTHER SOURCES. IT WAS NO PART OF TH E ASSESSEES BUSINESS TO ACQUIRE TENANCY RIGHTS AND DERIVE INCOME BY LEAS ING THEM. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS F AR AS THE EXPENSES TO GET THE LEASE RENEWED IN FAVOUR OF THE ASSESSEE OF RS.1,50,000/- ARE CONCERNED, WE ARE OF THE VIEW THAT THOSE EXPENSES A RE CAPITAL IN NATURE. THE FACT THAT THE ASSESSEE HAS NOT BEEN SO FAR SUCC ESSFUL IN GETTING THE RENEWAL IN ITS FAVOUR IS NO GROUND TO TREAT IT AS R EVENUE EXPENDITURE ESPECIALLY WHEN THE RENEWAL HAS BECOME IMPOSSIBLE O R HAS BEEN REFUSED. THE EXPENDITURE WAS FOR ACQUIRING A CAPITAL ASSET V IZ., LEASE HOLD RIGHTS AND THEREFORE THE SAME WILL BE CAPITAL EXPENDITURE. 14. AS FAR AS THE REMAINING EXPENDITURE IS CONCERN ED, IT IS CLEAR FROM THE DOCUMENTS ON RECORD THAT THEY WERE INCURRED IN CONN ECTION WITH FILING AN APPLICATION AS INTERVENER BEFORE THE HONBLE SUPREM E COURT IN THE PENDING APPEAL AGAINST MPT BY THE VARIOUS TENANTS. THE LITIGATION IN QUESTION IS WITH REGARD TO INCREASE IN RENT PROPOSE D BY MPT. THE ASSESSEE AS A TENANT WOULD BE CLEARLY AFFECTED BY A NY INCREASE IN RENT AND THEREFORE IT WAS NECESSARY FOR THE ASSESSEE TO INCUR THESE EXPENSES TO ENSURE THAT A RECURRING EXPENDITURE OF A REVENUE NATURE IS AVOIDED IN FUTURE. THE ASSESSEE HAS BEEN DECLARING THE INCOME FROM SUBLETTING THE PROPERTY AS INCOME FROM OTHER SOURCES. THE ASSESSE E U/S.57(III) WOULD BE ENTITLED TO DEDUCTION OF ANY EXPENDITURE INCURRE D FOR EARNING INCOME WHICH IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE RENT WHICH THE ASSESSEE PAYS TO MPT WOULD BE AN ALLOWABL E DEDUCTION AGAINST INCOME IN THE FORM OF RENT FROM SUB-LETTING THE PRO PERTY WHICH IS OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LEGAL EXPENSES INCURRED TO ENSURE THAT SUCH ALLOWABLE EXPENDITURE DOES NOT INCREASE, IN OUR VIEW, WOULD BE ALLOWABLE DEDUCTION. IT CANNOT BE SAID THAT THESE EXPENSES ARE FOR EITHER PRESERVATION OF A CAPITAL A SSET OR ACQUIRING A CAPITAL ASSET BUT ARE EXPENSES INCURRED TO ENSURE T HAT THERE IS NO INCREASE IN RECURRING REVENUE EXPENDITURE IN FUTURE . WE ARE OF THE VIEW EXPENDITURE TO THIS EXTENT SHOULD BE ALLOWED AS A D EDUCTION. AS FAR AS M/S. SAMRAT HOLDINGS PVT. LTD. 9 THESE EXPENSES ARE CONCERNED, NONE OF THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE OR THE LEARNED D.R . ARE ON IDENTICAL FACTS. WE THEREFORE DIRECT THAT THE ABOVE EXPENDIT URE VIZ., RS.1,97,500/- BEING EXPENSES INCURRED IN CONNECTION WITH PROCEEDI NGS BEFORE THE HONBLE SUPREME COURT SHOULD BE ALLOWED AS A DEDUCT ION. 15. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 9 TH DAY OF JULY, 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 9 TH JULY, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS