Accrued liability test defeats deduction for estimated registration and stamp expenses where no lease deed was executed

Estimated registration charges and stamp-related expenses were disallowed because no lease deed had been executed or registered during the relevant year, so no accrued contractual or statutory liability had crystallised. The allotment letters only contemplated payment if and when execution occurred, and the obligations under the Transfer of Property Act, the Registration Act and the Indian Stamp Act arise only once a document comes into existence for registration and stamping. The decision in Calcutta Co. Ltd. was inapplicable because it involved an admitted accrued liability to purchasers, unlike the present case where no corresponding third-party liability existed. The disallowance was therefore upheld in favour of the Revenue.

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Issues: Whether estimated registration charges and stamp-related expenses, not actually incurred during the accounting year, were allowable as a deduction in computing the assessee's income.

Analysis: The assessee's obligation to get the lease deed executed and registered was not shown to have crystallised into an accrued liability in the relevant year. The allotment letters only indicated that the assessee would bear the cost if and when such a document was executed. The legal framework under the Transfer of Property Act, the Registration Act and the Indian Stamp Act showed that registration and stamp duty obligations arise only when a document comes into existence and is presented for the relevant statutory process. Since no lease deed had been executed or registered during the year, there was neither a present contractual liability nor a statutory liability for the estimated amount. The principle applied in Calcutta Co. Ltd. did not assist the assessee because that case involved an admitted accrued liability towards purchasers, whereas no corresponding third-party liability existed here.

Conclusion: The estimated registration charges and stamp-related expenses were not allowable as deduction for the year under consideration and the disallowance was upheld in favour of the Revenue.

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