Deductibility of rent payments cannot be denied merely because the lease deed is unregistered if the expense was actually incurred.

Unregistered lease documentation does not by itself defeat deduction under the Income-tax Act where the expenditure was actually incurred for business purposes. An instrument required to be registered under section 17 of the Registration Act, 1908 is inadmissible to prove the transfer itself, but section 49 permits reliance on it for collateral purposes, including showing the nature of possession and tenancy. The decisive test for tax deduction is the factual incurring of the liability during the relevant year and whether the payment is otherwise allowable as business or revenue expenditure. On that basis, enhanced ground rent paid under the lease was deductible, and disallowance based solely on non-registration was unsustainable.

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Issues: Whether deduction of enhanced ground rent was disallowable merely because the lease deed was unregistered and whether such payment, if actually incurred for business purposes, remained deductible under the Income-tax Act.

Analysis: An unregistered document required to be registered under section 17 of the Registration Act, 1908 is inadmissible to prove a transaction affecting immovable property, but section 49 permits its use for collateral purposes. The document could therefore be looked into to determine the nature of possession and the fact that the assessee occupied the land as a tenant paying rent. The decisive question for income-tax purposes was not the validity of the document but whether the expenditure was in fact incurred during the relevant assessment years and whether it was allowable as business expenditure or revenue expenditure under the relevant provisions of the Income-tax Act. The mere circumstance that the liability arose from an unregistered instrument did not by itself destroy deductibility where the payment was actually made and was otherwise within the scope of permissible deduction.

Conclusion: The assessee was entitled to the deduction, and the disallowance based solely on non-registration of the lease deed was unsustainable.

Ratio Decidendi: For income-tax deduction, actual business expenditure is not disallowed merely because the liability is evidenced by an unregistered document; such a document may still be relied upon for collateral purposes under section 49 of the Registration Act, 1908, and the true test is whether the expenditure was in fact incurred and is otherwise deductible under the Income-tax Act.

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