The Tax Publishers2020 TaxPub(DT) 5541 (Mum-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where revenue disallowed expenses claimed towards payment of stamp duty and registration fee for registering tenancy agreement on allegation that it was capital expenses as it was for the purpose of acquiring a perpetual tenancy right, considering fact that there were various terms and conditions in the tenancy agreement which made it clear that the right, title and interest over the tenanted property still remained with the landlord and were not transferred to the assessee, disallowance was invalid.

Business expenditure - Capital or revenue expenditure - Expenses claimed towards payment of stamp duty and registration fee for registering tenancy agreement -

Assessee was aggrieved by order of AO disallowing the expenses claimed towards payment of stamp duty and registration fee on allegation that it was in the nature of capital expenses as it was for the purpose of acquiring a perpetual tenancy right. Held: On a reading of the tenancy agreement as a whole it did not appear that there was transfer of property by the landlord to the assessee as concluded by CIT(A). Though, it may be a fact that the tenancy agreement was silent on the duration of the terms of the tenancy, however, there were various terms and conditions in the tenancy agreement which made it clear that the right, title and interest over the tenanted property still remained with the landlord and were not transferred to the assessee. Monthly rent paid by the assessee and the landlord was allowed as expenditure. That being the case, there was no reasonable basis for disallowing the stamp duty and registration charges by holding it as capital expenditure. If one went by the tenancy agreement, there was no doubt that there is no perpetual right granted to the assessee. In view of the aforesaid, it was held that the expenditure incurred by the assessee towards stamp duty and registration charges for registering the tenancy agreement was revenue in nature and allowable.

REFERRED : Balmer Lawrie & Co. Ltd. v. CIT (2019) 111 Taxman.com 316 (Cal) : 2019 TaxPub(DT) 5113 (Cal-HC), CIT v. Gopal Associates (2009) 222 CTR 307 (HP) : 2010 TaxPub(DT) 171 (HP-HC), Gujarat Machinery Manufacturing Ltd. v. CIT (1995) 211 ITR 1010 (Guj) : 1995 TaxPub(DT) 279 (Guj-HC) and CIT v. Bombay Cycle & Motor Agency Ltd. (1979) 118 ITR 42 (Bom) : 1979 TaxPub(DT) 883 (Bom-HC).

FAVOUR : In assessee's favour.

A.Y. : 2013-14


INCOME TAX ACT, 1961

Section 37(1)

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