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2017 (12) TMI 1168 - HC - Income TaxNature of expenditure - expenses incurred for repairs, refurbishing and making improvements on the buildings taken on lease - revenue v/s capital expenditure - Held that:- Decision of the Division Bench in Joy Alukkas [2014 (6) TMI 80 - KERALA HIGH COURT] binds us inexorably with respect to the question raised on expenses incurred for refurbishing and making improvements of a leasehold building. The questions of law raised by the Division Bench admitting the instant appeals as also the reference order indicates that the additions made were on two counts: (i) the expenditure incurred on refurbishment, repairs and improvements and (ii) the superstructures constructed on leased out immovable property. The revenue expenditure made on leased out buildings has to be allowed as a revenue expenditure and not as a capital expenditure. We answer the first question in favour of the assessee and against the Department. Disallowance of expenses incurred for construction of buildings in leased out lands as capital expenditure - Lands taken on lease and constructions made thereon - Held that:- The assessee shall produce the lease deeds of period one year or above before the concerned Sub-Registrars, who shall calculate the duty payable under Article 33 of the Stamp Act and levy penalty of ₹ 10,000/- each. If the assessee pays up the amounts then the procedure as prescribed in Section 37(1) shall be complied with. The Sub-Registrar shall also register the document de-hors Sections 23 and 25 of the Registration Act, but levying registration fees as applicable and an amount of ₹ 5,000/- each as penalty. The assessee then shall produce the registered documents before the respondent A.O, who shall finalise the assessment on the principles herein above stated, determining whether the expenditure made by the assessee can be treated as a capital expenditure or revenue expenditure. If the assessee does not comply with the above directions then the respondent shall impound the documents and send it for stamping under the provisions of Section 33 of the Stamp Act to the respective District Registrars who shall pass orders at their discretion under powers conferred by Section 39 of the Stamp Act, in which event the determination of penalty will be left to the District Registrar. The assessment will also then be without looking into the documents, since the Registration Act does not provide for registration beyond eight months from the execution.
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