Stamp duty and registration charges for a long-term lease were treated as revenue expenditure when incidental to monthly rent premises.

Stamp duty and registration charges incurred for a long-term lease deed may be treated as revenue expenditure where they are directly attributable to securing premises on monthly rent. The lease term of 29 years and 11 months, and the fact that registration was required because the lease exceeded one year, supported the view that the outlay was incidental to the leasing arrangement rather than capital in nature. On that reasoning, the expenditure was held allowable as revenue expenditure and the assessee succeeded on the issue.

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Issues: Whether expenditure incurred towards stamp duty and registration charges for a long-term lease deed is allowable as revenue expenditure.

Analysis: The lease deed provided for monthly rent and a lease term of 29 years and 11 months. Monthly rent payable for the premises was not in dispute as revenue expenditure. The expenditure towards stamp duty and registration charges was incurred only because the lease deed required registration for a term exceeding one year, and the duty was computed on the basis of rent and security deposit. The deciding factor was the character of the expenditure in the context of taking the premises on lease for monthly rent, read with the surrounding facts of the transaction.

Conclusion: The expenditure towards stamp duty and registration charges was held to be revenue expenditure and the issue was answered in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee obtained the benefit of treatment of the disputed expenditure as revenue in nature.

Ratio Decidendi: Expenditure incurred for stamp duty and registration charges, when directly attributable to securing premises on lease for monthly rent, may be treated as revenue expenditure if the surrounding facts show it to be incidental to the leasing arrangement.

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