Land Registration Charges Incurred in Executing an Agreement to Take Business Premises on Rent is Revenue Exp. | ITAT

Case Details: RMP Infotec (P.) Ltd. vs. Assistant Commissioner of Income-tax - [2024] 158 taxmann.com 266 (Chennai-Trib.)

Judiciary and Counsel Details

• • Manomohan Das, Judicial Member & Manjunatha G., Accountant Member
  • Bimlendu Bhushan, CA for the Appellant.
  • D. Hema Bhupal for the Respondent.

Facts of the Case

The assessee company was engaged in direct multi-level marketing of goods and services, deriving income from products and services such as sales of consumer products like solar heaters, suiting lengths, dealing in insurance policies, etc.

During the assessment proceedings, the Assessing Officer (AO) disallowed the land registration charges incurred by the assessee while executing agreements for business premises. AO treated the same as capital expenditure and added it to the assessee’s income.

On appeal, the CIT(A) upheld the additions made by the AO. The aggrieved assessee filed the instant appeal before the Chennai Tribunal.

ITAT Held

The Chennai Tribunal held that a lease is not a permanent transfer of immovable property. It is for a specific period only and is terminable as per the terms and conditions of the agreement, even before the expiry of the period of the lease by both parties. Secondly, the assessee incurred the registration expenses in connection with his business.

In the instant case, the assessee needed premises to carry on the business in various places, and accordingly, the assessee took the property on rent. The period of the agreement was more than one year and attracted the compulsory registration of the agreement. The assessee could not enjoy that property forever under a rent agreement/lease. The assessee may have to vacate that property before the expiry of time, depending on the business conditions of that particular place.

Therefore, the registration fees incurred by the assessee while executing the agreements for taking business premises on rent were revenue expenditures.