INCOME TAX ACT, 1961

Business Expenditure - Allowability-Lease rent for use of land for 99 years

Assessee claimed deduction in respect of lease rent for use of land for 99 years. Assessee submitted that lease rent in respect of land allotted to it was very nominal and payment was nothing but advance rent. It claimed impugned rent as revenue expenditure. AO disallowed claim on the ground that assessee had acquired a benefit of enduring nature in form of use of land for 99 years and land had been transferred through registered deed i.e. acquisition of fixed asset. CIT(A) disallowed but Tribunal allowed the deduction. Held: Tribunal was of view that by obtaining land on lease, capital structure of assessee did not undergo any change. It only acquired to carry on business profitably by paying nominal lease rent. Therefore, Tribunal was justified in holding that lease rent paid by assessee was allowable as revenue expenditure.

Income Tax Act, 1961 Section 37(1)

Decision: In favour of Assessee.
A.Y. 1994-95

Dy. CIT v. Sun Pharmaceuticals Ind. Ltd.