Commissioner Of Income Tax v. M/S.gopal Associates

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.9 of 2002 Judgment reserved on: 8.8.2008. Date of decision:12.8.2008 Commissioner of Income Tax ..Appellant Versus M/s.Gopal Associates ..Respondent Coram The Hon’ble Mr. Justice Deepak Gupta, Judge. The Hon’ble Mr. Justice V.K.Ahuja, Judge. Whether approved for reporting?[1] No For the Appellant.: Mr.Vinay Kuthiala and Ms.Vandana Kuthiala, Advocates For the Respondent: None. Deepak Gupta, J. This appeal was admitted on the following substantial question of law: “1.Whether on the facts and in the circumstances of the case, the ITAT was right in law holding that the expenditure incurred on stamp duty and registration charges at the time of execution of lease agreement for taking on lease the Fruit Processing Plant for seven years, was allowable as revenue expenditure.” The brief facts necessary for decision of the case are that during the assessment year 1994-95 the assessee took on lease a Fruit Processing Plant from the HPMC. The lease deed was executed on 27.12.1993 for a period of 7 years. It is not disputed that in fact the lease deed was terminated w.e.f. 17.3.1994. The assessee had 1Whether the reporters of the local papers may be allowed to see the Judgment? spent a sum of Rs.3,44,251/- as stamp duty and registration charges on the lease deed. The Assessing Officer treated this expenditure as capital expenditure by relying upon the judgment of the Karnataka High Court reported in the case Hotel Rajmahal vs. Commissioner of Income-Tax, 152 ITR 218. On the other hand, the assessee relying upon the judgments of the Madras, Kerala and Gujarat High Courts reported in Sri Krishna Tiles and Potteries Madras (P.) Ltd. Vs. Commissioner of Income-Tax, 173 ITR 311, Plantation Corporation of Kerala Ltd. Vs. Commissioner of Agricultural Income-Tax, 205 ITR 364 and Gujarat Machinery Mfg.Ltd. vs. Commissioner of Income-tax, 211 ITR 1010, contends that the amount spent as stamp duty and registration charges should be treated as revenue expenditure. The CIT(A) and Tribunal accepted the plea of the assessee. The Revenue has filed the present appeal challenging the order of the learned Tribunal. The Karnataka High Court in Hotel Rajmahal’s case (supra) did not really discuss the matter in detail but held that when for the first time the assessee enters a lease deed securing lease holding rights for a long period, the expenditure incurred on stamp duty, registration and legal fees etc. should be treated as expenditure of capital nature. However, the Madras High Court in Sri Krishna Tiles and Potteries Madras case (supra) followed the law laid down by the Bombay High Court in CIT vs. Cinceita (P.) Ltd. 137 ITR 652 and disagreed with the decision of the Karnataka High Court. It was held that irrespective of whether the incidental expenditure is incurred in or connection with or related to capital expenditure the same has to be treated as revenue expenditure. The Kerala High Court also took this view in Plantation Corporation’s case (supra). The Gujarat High Court in Gujarat Machinery’s case (supra) dealt with the same question and held that the amount spent on registration and stamp charges is revenue expenditure. No other judgment has been pointed out to us. We follow the reasoning given by the Bombay, Madras, Kerala and Gujarat High Courts and respectfully disagree with the judgment of the Karnataka High Court. In view of the above discussion, the substantial question is answered against the revenue and the appeal is dismissed. No order as to costs. ( Deepak Gupta ), J. August 12, 2008 PV ( V. K. Ahuja ), J.