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The Calcutta Bench of the Tribunal in the case of Vijay International v. ACIT (253ITR26) held that the expression “ used” under section 30 with reference to deduction of rent for building does not mean, “ actually utilized”. The Bench held that even passive user would entitle deduction. In this case the assessee took a godown on rent but did not make use of it for about four years and infact thereafter surrendered by the assessee. It was noted by the Tribunal that the assessee was in expectation of getting business boosted in a very large way, which did not materialize. The Bench held that a businessman is required to have a long vision and should take into consideration the future possibilities of improvement into business and in such course if it incurs any expenditure it must be held as a deductible expense.

In an interesting note the bench held that if the godown was taken for the purpose of business and not utilized otherwise, it must be considered as having been used for the purpose of business of the assessee. It was held that such expenditure would fall under omnibus section 37(1) of the Income tax Act, 1961. The judgment is a clear pointer to the fact that even a wasteful expense can be claimed subject however to the fact that the same is incurred in the course of existing business or in the course of expansion of the existing business.

In a further note the Bench disagreed with the view held by the MP High Court in the case of Noshirwan and Co. Pvt. Ltd. Vs. Commissioner of Income-tax (77ITR822) and agreed to the view held by the Gujarat High Court in the case of Commissioner of Income-tax Vs. Tolat (R.) and Co (126ITR551). In the earlier case it was found that the building was under construction for which reason it was held that the rent paid in respect of it is not allowable as a deduction under section 30. It was further held that the expenditure incurred in payment of rent is not allowable under section 37 either, as expenditure laid out wholly and exclusively for the purposes of the business as section 37 does not apply to any expenditure of the nature described in sections 30 to 36.The Calcutta Bench however held that even if it be argued that since the godown under construction was not actually used by the assessee, the provisions of section 30 would not be applicable what it has got to be said that in such condition, the expenses would be allowable under section 37(1). The Delhi Tribunal in the case of Jainsons SS vs. Assistant Commissioner of Income-tax (76ITD51) also held so.

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