The Tax Publishers2021 TaxPub(DT) 0066 (Del-Trib)


Section 37(1)

Where assessee paid one time fees to HUDA for enabling it to lease out a part of the area in which the hospital was run, for running a food court, a pharmacy and parking area the fees paid and such payment was directly related to the day-to-day running of the business of hospital by the assessee. Inasmuch as the assessee was not the owner of the land, the question of assessee getting the benefit of enhancement of value of the property did not arise, them the sum so paid was allowable as revenue expenditure.

Capital or revenue expenditure - Expenses towards fees to HUDA - One time lease fees -

During the assessment proceedings, AO noticed that assessee had debited a sum on account of leasing fee paid to HUDA and stated that such fee was paid towards charges for obtaining admission to lease out to build a property constructed on land allotted by HUDA. Basing on that AO inferred that assessee company had itself admitted that it was one-time payment to HUDA, a charge for obtaining permission for renting out a portion of the property and therefore, in terms of the judgment of Apex Court in Arvind Mills Ltd v. CIT (1992) 197 ITR 422 (SC) : 1992 TaxPub(DT) 1381 (SC), such capital expenditure would not become Revenue expenditure merely by reason that it was incurred in connection with the illness activities which ultimately resulted in efficiently carrying on day-to-day business. AO brought the said amount to tax, after allowing 5% thereof towards depreciation. Held: Fee paid to HUDA was to secure permission to lease a part of the area for a food court, a pharmacy and parking area, which clearly indicated that the government's permission was required as the hospital was on a leasehold land and the assessee did not have the right to alienate, which was the ultimate test for ownership. This expenditure was directly related to the day-to-day running of the business of the assessee in connection with the running of the hospital because the patients and doctors as well as the paramedical and administrative staff from the vertex around which the activities/business of the hospital operated.

Relied:Arvind Mills Limited v. CIT (1992) 197 ITR 422 (SC) : 1992 TaxPub(DT) 1381 (SC) Empire Jute Company Limited v. CIT 1980 TaxPub(DT) 1083 (SC).


FAVOUR : In assessee's favour

A.Y. : 2012-13



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