Dipak Kumar Sen, J.
1. In the assessment year 1975-76, the accounting year ending on December 31, 1974, Mather & Platt (India) Ltd., the assessee, a company incorporated in the United Kingdom, obtained lease of a premises in New Delhi and another lease of premises at Calcutta known as 'Nilhat House' respectively for periods of 15 and 20 years. The assessee acquired the said leases for its offices at Calcutta and New Delhi.
2. In the said assessment year, the assessee paid a fee of Rs. 42 to its lawyers, viz., Sandersons & Morgans, Calcutta, in connection with the lease agreement for its office at Nilhat House, and Rs. 380 to Orr Dignam & Co., New Delhi, for consultation regarding the lease of the said office at Delhi.
3. On account of fees for registration of the lease agreement in respect of the premises, Nilhat House, and miscellaneous expenses connected therewith, the assessee incurred an expenditure of Rs. 2,160. The assesseefurther paid Rs. 12,500 to Cox & Cooks for securing the lease of Nilhat House.
4. In its assessment to income-tax for the said assessment year, the assessee claimed deduction of all the aforesaid expenditure aggregating to Rs. 15,082 as a business expenditure.
5. The assessment was made by the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner ascertained, inter alia, that the said Rs. 12,500 had been paid to Cox & Cooks for securing the lease of Nilhat House. He found further that the lease of Nilhat House was for a period of 20 years on terms that the rent payable would be subject to an enhancement to the extent of any increase in the occupier's share of the municipal tax, such rent in any event was liable to be increased after 10 years and that the lease of the premises at Delhi was for a period of 15 years. The Inspecting Assistant Commissioner rejected the contention of the assessee that securing of the two leases could not be considered to be an acquisition of capital assets. He held that the two leases resulted in an enduring benefit to the assessee. The said Rs. 15,082 was found to be expenses incurred by the assessee for the purpose of retaining such enduring benefit and, therefore, deduction of the sum as claimed by the assessee was disallowed as being capital expenditure.
6. Being aggrieved, the assessee preferred an appeal from the said order of the Inspecting Assistant Commissioner to the Commissioner (Appeals). The Commissioner (Appeals) found that the said expenditure of the said amount of Rs. 15,082 had been incurred in connection with the lease agreement for new offices opened by the assessee. He noted that the Inspecting Assistant Commissioner had found that such expenditure had given an enduring benefit to the assessee. He agreed with the view taken by the Inspecting Assistant Commissioner and rejected the appeal of the assessee on this point.
7. Being aggrieved, the assessee preferred a further appeal by way of a cross-objection before the Tribunal. Before the Tribunal, a decision of the Supreme Court in India Cements Ltd. v. CIT : [1966]60ITR52(SC) was cited on behalf of the assessee in support of its contentions. The Tribunal found that the facts in India Cements Ltd.'s case : [1966]60ITR52(SC) were different from the facts to the case before it and that the said decision had no application in the case of the assessee. The Tribunal held that the case of the assessee was covered by a decision of this court in Gobind Sugar Mills Ltd. v. CIT : [1979]117ITR747(Cal) Applying the said decision, the Tribunal dismissed the cross-objection of the assessee.
8. On an application of the assessee under Section 256(1) of the Income-tax Act, 1961 ('the Act'), the Tribunal has referred the followingquestion as a question of law arising out of its order for the opinion of this court;
'Whether the Tribunal was right in holding that legal expenses and other expenses incurred for obtaining leases of the office premises at Calcutta and Delhi were not allowable in computing the total income ?'
9. At the hearing before us, learned advocate for the assessee submitted that the assessee at the material time had been carrying on business in India. It is in furtherance of such business, it was submitted, that the assessee had obtained the said two leases. The expenditure incurred by the assessee in order to obtain the said two leases were for the purposes of carrying on the business of the assessee or for purposes incidental thereto.
10. It was submitted further that the said expenditure, in any event, was not directly related to the acquisition of the leaseholds. It had not been found as a fact that the object of the assessee in incurring the said expenditure was to obtain an enduring benefit. The authority below, it was contended, had proceeded on the basis that the assessee had ultimately obtained an enduring benefit as a result of the acquisition of the said two leaseholds.
11. Learned advocate for the assessee also submitted that the benefit which the assessee had obtained by acquisition of the said two leaseholds could not, in any event, be said to be an enduring benefit so that it could be concluded that the said expenditure was capital in nature. It was submitted that the decision of this court in Gobind Sugar Mills Ltd.'s case : [1979]117ITR747(Cal) could be distinguished on facts from the instant case. The assessee in that case was running a sugar mill and a new lease of another sugar mill acquired by the assessee was not for the purpose of the existing business of the assessee. In the instant case, the assessee did not acquire a new business but had incurred the expenditure for the purpose of its existing business.
12. Learned advocate for the Revenue contended to the contrary He submitted that it had been found by the Commissioner (Appeals) that the assessee had incurred the expenditure in dispute for the purpose of acquiring new offices. He submitted further that the assets acquired by the assessee under the said leases were capital assets and that the expenditure incurred by the assessee in obtaining the said assets or in connection therewith must be held to be capital expenditure. He submitted that the controversy raised in the instant case was covered by the decision of this court in Gobind Sugar Mills Ltd.'s case : [1979]117ITR747(Cal) .
13. In support of the respective contentions of the parties, a number of decisions were cited at the Bar which are noted hereafter.
14. (a) Atherton v. British Insulated & Helsby Cables Ltd. [1925] 10 TC 155. In this case, the question before the House of Lords was whether the expenditure incurred by the taxpayer to establish a pension fund providing pension for all existing and future employees in their old age resulted in the taxpayer obtaining a substantial and lasting advantage throughout its business life and was a capital expenditure.
The following observation from the judgment of Viscount Cave L.C. was relied on by the Revenue (p. 192):
'When an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason fin the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.'
15. (b) Anglo-Persian Oil Co. Ltd. v. Dale [1931] 16 TC 253 (CA). In this case, the English Court of Appeal quoted with approval the observations of Lord Cave in Atherton's case [1925] 10 TC 155 (HL) and further observed as follows (p. 274):
'It should be remembered, in connection with this passage, that the expenditure is to be attributed to capital if it be made 'with a view to' bringing an asset or advantage into existence. It is not necessary that it should have that result. It is also to be observed that the asset or advantage is to be for the 'enduring' benefit of the trade. I agree with Mr. Justice Rowlatt that by 'enduring' is meant 'enduring in the way that fixed capital endures'.'
16. (c) Assam Bengal Cement Co. Ltd v. CIT : [1955]27ITR34(SC) . In this case, it was held by the Supreme Court that a protection fee paid annually during the period of a lease and a further protection fee payable annually for five years were capital expenditure and were not deductible under Section 10(2)(xv) of the Indian Income-tax Act, 1922. In this case, the Supreme Court quoted with approval the following observations of Mahajan J., as his Lordship then was, sitting in the Full Bench of the Lahore High Court (p. 44) :
'Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment;......... Expenditure may be treated as properly attributable to capital when it is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade.........'
17. The Supreme Court further observed as follows (p. 45):
'A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether itis drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question however arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is incurred for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If, on the other hand, it is made not for the purpose of bringing into existence any such asset or advantage, but for running the business or working it with a view to produce the profits, it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence, it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital.....'
18. (d) East India Commercial Co. (P.) Ltd. v. CIT : [1964]54ITR81(Cal) . In this case, a Division Bench of this court held that a sum paid towards stamp duty for an ineffective deed of lease was in the nature of capital expenditure and was not allowable as a deduction in computing the income of the assessee. It was found that the assessee was seeking to obtain a renewal of a lease of jute mill. It was held that the acquisition of such leasehold was a capital asset in the nature of the business carried on by the assessee. The court observed as follows (p. 85):
'A stamp duty paid on such an ineffective and invalid lease which fails to procure the capital asset by the ordinary common sense test would not be a capital expenditure. It was an abortive and unsuccessful expenditure to secure capital.
But then we find the law to be this, that the expenditure is to be attributed to capital even if it be made 'with a view' to bring a capital asset or an advantage into existence and it is not necessary that it should in fact have that result. The cases seem to have decided that a sum spent in trying to get an agency agreement or a licence would neverthelessbe capital expenditure, notwithstanding the fact that the intended agency or licence was not ultimately secured.'
19. The court relied on the observation of Viscount Cave L.C. In Atherton's case [1925] 10 TC 155 and further observed as follows (p. 86):
'This classic observation started a whole train of cases on this branch of the law and the famous expression 'with a view to' in the above passage made the courts and judges think that so long as the 'view' was there, it was enough and it really did not matter whether the view ultimately materialised or not. Once a 'view' was there to secure a capital, no matter whether the capital in fact was acquired or not, the view or idea will stamp it as capital expenditure.'
20. (e) India Cements Ltd.'s case : [1966]60ITR52(SC) . In this case, the question before the Supreme Court was whether an expenditure incurred by the assessee in obtaining a loan was allowable as a deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922. It was held by the Supreme Court in the facts of the case that the act of borrowing money by the assessee was incidental to the carrying on of its business. The loan obtained was not an asset or advantage of an enduring nature and the expenditure was made for securing use of the money for a certain period. The Supreme Court held further that on the facts it was not relevant to consider the object for which the loan had been obtained.
21. The following observation of the Supreme Court in its judgment was relied on by the assessee (p. 63):
'To summarise this part of the case, we are of the opinion that:
(a) the loan obtained is not an asset or advantage of an enduring nature;
(b) that the expenditure was made for securing the use of money for a certain period; and (c) that it is irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure within Section 10(2)(xv)... The expression 'for the purpose of business' is wider in scope than the expression 'for the purpose of earning profits'. Its range is wide : it may take in not only the day-to-day running of a business but also the rationalisation of its administration and modernisation of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business : it may comprehend many other acts incidental to the carrying on of a business.'
22. (f) CIT v. S.B. Ramakrishnan : [1969]74ITR761(Mad) . The assessee in this case obtained a lease of a new building and in doing so he made an extra payment to the landlord over and above the stipulated rent. The question arose whether the said extra expenditure was deductible in computing the assessee's income from business in the relevant assessment year. The Madras High Court accepted the finding of the Tribunal that the expenditure was in the nature of payment of rent. The High Court noted that there was nothing to show that the extra amount was paid to the landlord to secure the lease for any particular term of years. It was held that the expenditure had been incurred for the purpose of running the assessee's business and was, therefore, deductible.
23. (g) CIT v. Belgachi Tea Co. Ltd. : [1975]99ITR99(Cal) : In this case, the question before a Division Bench of this court was whether an amount spent by the assessee for repairs to the fencing of tea gardens was allowable as a revenue expenditure. It was held that the incurring of such expenditure was primarily in connection with the carrying on of the business by the assessee as the tea plants could not be protected unless there was proper fencing. It was noted that by incurring this expenditure, the assessee had acquired certain advantages which related to its property but in spite thereof it was held that the predominant and the main purpose of incurring the expenditure being the carrying on of their business, an incidental advantage to the property resulting therefrom could not change the character of the expenditure which was revenue in nature.
24. (h) CIT v. Hoechst Pharmaceuticals Ltd. : [1978]113ITR877(Bom) : In this case, the question before the Bombay High Court was whether the expenditure incurred in payment of brokerage and stamp duty in connection with acquiring of office premises at Delhi by the assessee were allowable deduction in computing the business income of the assessee. It was found that the period of the lease was only for five years and that brokerage had been paid by way of remuneration to avail of the service of the broker with a view to acquire premises on lease rent and that stamp duty had been paid for execution of the document of lease. It was held that such expenditure incurred for acquiring the office premises for a short period of rive years was allowable as revenue expenditure. The period of five years was held to be not long enough so that it could be said that the assessee had acquired an advantage of an enduring nature.
25. (i) Gobind Sugar Mills Ltd.'s case : [1979]117ITR747(Cal) : This case has been noted and discussed earlier.
26. The following observations in this judgment were relied on by the Revenue(p. 753) :
'In the instant case, no doubt the assessee had obtained the right of user of the factory at Matihari for a period of five years, but under the lease, the assessee had also obtained something more. It had obtained a right of property under the Transfer of Property Act and in our view such an interest is a capital asset. This aspect of the matter was entirely overlooked by the Bombay High Court in Hoechst Pharmaceuticals Ltd. : [1978]113ITR877(Bom) , where the court confined its attention only to the enduring nature of the advantage. If it is found that the assessee had incurred expenditure for a capital asset, then no further enquiry whether the nature of the advantage derived therefrom was enduring or not, is called for.
...We also find little substance in the contention of Mr. Bajoria that the expenditure was not incurred directly for the lease but was an expenditure incidental to the lease and was paid to a third party and not to the lessor. What we are concerned with is the nature of the expenditure and not the recipient of the amount spent. The money may not have reached the pockets of the lessor but so far as the assessee is concerned, it incurred the expenditure for the purpose of obtaining a capital asset. Without proper registration of the deed of lease, the rights of the assessee could not be said to have been perfected under the Transfer of Property Act and the Indian Registration Act.'
27. (j) Empire Jute Co. Ltd. v. CIT : [1980]124ITR1(SC) : This decision of the Supreme Court was cited by the assessee for the following observations (p. 10):
'There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be dis-allowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case.'
28. (k) Robinson v. Scott Bader Co. Ltd. (Simon's Tax Cases 1981): This decision of the English Court of Appeal was cited for the proposition laiddown by Waller L.J. that the test whether an expenditure had been incurred for the purpose of trade is subjective as the expression 'pupose' contained an ingredient of intention. It was, however, held that in considering the purpose of a company, there might be room for some objectivity but it will normally be a test in making the substantive decision.
29. It appears to us that the assessee incurred the said expenditure aggregating to Rs. 15,082 with the object of securing two leases of premises at Delhi and Calcutta. The said expenditure has been made once and for all with the object of securing the said two leases. The said leases were for respective periods of 15 and 20 years and the leasehold premises were intended to be used by the assessee as its business offices. Fees were paid to the lawyers of the assessee in connection with the said leases and for the registration of the lease of the premises at Calcutta, the assessee incurred further expenditure. On a query from the Inspecting Assistant Commissioner, it was represented by the assessee that an amount of Rs. 12,500 had been paid to Cox & Cooks for securing the lease of the premises at Calcutta.
30. On the finding as aforesaid, it appears to us that the assessee incurred the said expenditure with a view to bringing into existence an asset or an advantage for the enduring benefit of its business. The periods of the two leases, in our view, are sufficiently long and resulted in an enduring benefit to the assessee. On the facts found, it can be held that the assessee incurred the expenditure with a view to obtain such benefit and as a result of such expenditure, in fact, obtained the benefit. The decision of this court in Gobind Sugar Mills Ltd. : [1979]117ITR747(Cal) , is an authority for the proposition that under the lease, the assessee obtained a right to property under the Transfer of Property Act, 1882, and such property is a capital asset. The said decision is also an authority for the proposition that the expenditure incidental to the acquisition of the lease would also be an expenditure of capital nature. The primary and dominant object of the assessee in incurring the said expenditure was to acquire benefits of a right to property under leaseholds.
31. For the above reasons, we find no reason to interfere with the decision of the Tribunal. We answer the question in the affirmative and in favour of the Revenue. There will be no order as to costs.
Monjula Bose, J.
32. I agree.