Relief to Britannia Industries: ITAT Allows claim of Deduction for Lease Premium on ground of Absence of Capital Expenditure [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) granted relief to Britannia Industries by allowing the claim of deduction for lease premium on the ground of the absence of capital expenditure. 

Britannia Industries, the appellant assessee was a public limited company engaged in the business of manufacturing and trading bakery and dairy products and had entered into certain international and specific domestic transactions. 

The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for denying the claim of deduction for lease premium for amortization of payment. 

N S Saini, the counsel for the assessee contended that the upfront lease premium on lease-hold land was nothing but advance payment of rent and the same is not a capital expenditure, and as such the deduction should be allowed under section 37(1) of the Income Tax Act,1961. 

Abhijit Kandu, the counsel for the department relied on the decisions made by the lower authorities and contended that the denial of a claim of deduction was as per the law and liable to be sustained. 

The Bench observed that in the case of Balmer Lawrie & Co. Ltd Vs CIT, the court held that the upfront lease premium on lease-hold land is nothing but advance payment of rent and the same was not a capital expenditure, and as such the deduction should be allowed. 

The two-member bench comprising Sonjay Sarma (Judicial) and Manish Borad (Accountant) held that the assessee was eligible for the claim and directed the Assessing Officer to allow the claim of deduction for lease premium of Rs. 33,00,000/- for Assessment Year 2014-15. 

To Read the full text of the Order CLICK HERE

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