The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently allowed a deduction to Fiserv India and held that the amount of stamp duty paid for obtaining the business premises on lease is deductible under section 37 of the Income Tax Act, 1961.
The assessee is a company engaged in the business of providing software development and maintenance services to Fiserv Global Services Inc USA. During the relevant year, the assessee paid stamp duty for the lease of business premises at sector 62, Noida which were taken on lease from Galaxy Mercantile Ltd. The stamp duty was paid in accordance with The Stamp Duty Act 1899, is a statutory levy for registering of the lease deed.
During the assessment proceedings, the Assessing Officer noted that the stamp duty paid by the assessee for registering the lease deed, though for 10 years, is not revenue expenditure and therefore, the claim for the same was rejected.
The Tribunal noted that the issue is squarely covered in favour of the assessee by the decision of the Honourable Bombay High Court in CIT versus Reliance Industrial Infrastructure Ltd (supra) wherein the assessee, in that case, took land on lease for a period of 30 years and ₹ 23.31 lakhs were paid as stamp duty in respect of deed of lease.
The Tribunal further noted the decision in the case of CIT versus Cinceita private limited wherein it was held that the period of lease for which the property has been taken cannot be regarded as a decisive test to determine the nature of the expenditure.
Directing the department to allow the claim, the Tribunal held that “the honourable High Court further held that it is not disputed that the stamp duty amount has been paid on lease deed for the carrying on of the business of the assessee and therefore the amount of stamp duty paid for has to be allowed as revenue expenditure. Further, the honourable High Court relying on the decision of the honourable Supreme Court in case of Taparia Tools Ltd versus The Joint Commissioner Of Income Tax 372 ITR 605 [231 taxmen 5] also held that same is also not deferred revenue expenditure. In view of this, we direct the lower authorities reversing the decision to allow the stamp duty charges of ₹ 68 lakhs paid by the assessee as an expenditure for the current year holding it to be revenue expenditure in nature allowable u/s 37 (1) of the act.”