Stamp duty as revenue expenditure was deductible in the year incurred; matching concept did not justify spreading the cost.

Gujarat HC held that stamp duty paid for executing a contract was a compulsory statutory levy under the Bombay Stamp Act, 1958 and not an item of business expediency. The assessee's accounting treatment could not override the Income-tax Act, 1961, and revenue expenditure wholly and exclusively incurred for business was ordinarily deductible in the year of incurrence. The matching concept urged by the Revenue was found inapplicable on the facts, and the authorities cited for disallowance were distinguished. The disallowance of stamp duty expense was therefore unsustainable, and the deduction was allowed in the year the expense was incurred.

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Issues: Whether stamp duty paid for executing the contract was deductible as revenue expenditure in the year of incurrence or could be spread over future years.

Analysis: The stamp duty was held to be a compulsory statutory levy under the Bombay Stamp Act, 1958 and not an item incurred for business expediency. The accounting treatment adopted by the assessee could not override the mandate of the Income-tax Act, 1961. Revenue expenditure incurred wholly and exclusively for business is ordinarily allowable in the year in which it is incurred. The principle of matching concept applied by the Revenue was found inapplicable on the facts, and the authorities relied upon by the Revenue were distinguished.

Conclusion: The disallowance of stamp duty expenses was unsustainable, and the expenditure was allowable in the same year in which it was incurred, in favour of the assessee.

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