1994 (2) TMI 26

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....iture?" Facts : The aforesaid question arises in the background of the fact that in the assessment year 1976-77, the assessee, Gujarat Machinery Mfg. Ltd., Kheda, inter alia, claimed total expenses of Rs. 72,776 towards execution of lease-deed expenses including stamp and registration charges. By the said deed, the assessee-company had let out its property at Worli, Bombay, which was purchased on September 30, 1974, from Vasant Engineering Works for its business purposes. After it was purchased, it was found that the area of the land was much less than what it should be to run the business of the assessee. The assessee-company, therefore, acquired another site in Thana area at Bombay and the property which was purchased in Worli area ....

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.... the contrary, as a lessor it has parted with some of its rights as owner of the immovable property in favour of the lessee. The assessee was the owner of the property and by executing the lease deed in favour of the lessee it was not acquiring any new source of income or new asset. Therefore, the expenditure for stamp duty and registration of the lease deed cannot be said to be laid out for acquisition of any property or the rights of a permanent nature. It can be stated that the said expenditure is laid out for earning rent or is spent as part of the process of profit-earning. Hence, it can be held that the expenditure in the present case is related to carrying on or the conduct of the business or in any case of earning the income by lett....

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....he lessee, he was acquiring any new source of income or that the contract of lease was any new asset for the acquisition of which the amount in question was spent by the assessee. The court held that a right, to lease out land is clearly an incident of ownership of land and when land is leased out to a tenant on rent, the income in the form of rent is income from land ; the source of income is thus the land itself ; the contract of lease cannot by any stretch of imagination be described as a source of income ; the contract of lease may no doubt regulate the relationship between the lessor and the lessee, but that does not serve as a source of income because rent paid is for the use of land and, therefore, the land alone is the source of inc....