CPT V24P7-Art1 (Content).pmd - Taxmann

(c) Lease rental shall be paid at the rate of
2.5% of the premium, which could be
enhanced after 12 years of lease.
In respect of premium paid, the assessee had
been claiming it as revenue expenditure on
pro rata basis over the life of lease since last
15 years. The AO disallowed the same in the
relevant year contending that the lease had
enduring benefits over 90 years, thus, it had
to be treated as capital expenditure. CIT(A)
and ITAT upheld the order of AO.
The High Court held in favour of revenue -
The order of disallowance was upheld on the
basis of following grounds:
(a) Lease Premium is not an advance rent
as held by the Supreme Court in CIT v.
Madras Auto Service P. Ltd. [1998] 99 Taxman
575;
(b) Lease premium was paid by lessee to
secure possession of the land, which was
the pre-condition as well as the one-time
consideration;
(c) The lease was for 90 years which substantially
and virtually created ownership right
in favour of lessee;
(d) The restrictions were consistent with the
nature of asset created, i.e., leasehold right.
Hence, amortization of lease premium could
not be allowed. Further, the High Court held
that blind adherence to the rule of consistency
would lead to anomalous results. Also there
can’t be wide application of the rule of consistency
as the HC in its earlier ruling in a different
case has held that the rule of consistency can’t
be of inflexible application.
Authorities can’t re-examine objects of
a trust with a view to cancel its registration
In Bombay Presidency Golf Club Ltd. v. DIT
[2012] 23 taxmann.com 319 (Mum. - Trib.),
assessee was a club and all activities of assessee
were towards promotion of game of golf and
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other ancillary activities carried were only
incidental to said game only. The AO sent a
proposal to the DIT(E) for cancellation of
registration of assessee on the ground that the
assessee had been carrying on activities in the
nature of trade, commerce, business, etc.
Therefore, it was hit by the first proviso to
section 2(15) as amended by the Finance Act,
2008, with effect from 1-4-2009. He, therefore,
cancelled the registration of the assessee under
section 12AA(3). It held that the assessee could
not be held to be carrying out activities of
charitable purposes and the assessee was directly
hit by the first proviso to section 2(15), where
there is a deeming provision that such an
activity is not for charitable purposes.
The Tribunal held in favour of assessee - It
held that registration of assessee couldn’t be
cancelled due to the following facts:
(a) The activities of club were restricted amongst
its members and all the activities were
towards its objects and other ancillary
activities were only incidental to said game
only;
(b) There was no evidence and material on
record to show that activities of assessee
were done on any business principle or
assessee had been pursuing its business
activities with reasonable continuity;
(c) Expenditure of assessee was far more than
receipts; and
(d) Further be more, nowhere it had been
brought on record that activities of assessee
were not governed by principle of
mutuality or it had been dealing with
non-members.
Amount received by trustee-cumbeneficiary
on dissolution of trust is not
‘gift’ to be taxed under section 56
In Ashok C. Pratap v. Addl. CIT [2012] 23
taxmann.com 347 (Mum. - Trib.), the trustees
were the parents and the beneficiaries were
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 69
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