TMI Blog1980 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ount was payable under an unregistered deed executed on January 5, 1961, which deed is said to be in partial modification of an earlier registered agreement dated November 11, 1955 ? " The relevant facts necessary for disposal of the reference may be set out as follows: The assessee is a private limited company having income from rent and service charges. For the assessment years 1962-63, 1963-64 and 1964-65, relevant previous years being the corresponding calendar years, the assessee claimed deduction of Rs. 12,000 per annum as " ground rent " in respect of the land on which the building of the assessee known as " Commercial Building " stands. In the earlier years the ground rent for this land was Rs. 500 and the department was allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of no effect and the original lease continued to be operative and in force. He held that " the correct amount of ground rent legally payable by the assessee is Rs. 500 only and not Rs. 12,000 as claimed" on the ground that the deed of lease was not registered. The claim for deduction of Rs. 12,000 was rejected and only sum of Rs. 500 was allowed in the assessment years. The assessee appealed and the AAC of Income-tax allowed the appeal holding, inter alia: " It is contended that the payment of Rs. 12,000 per annum as lease rent is justifiable in view of the gains that would accrue to the appellant-company at the end of the years and, therefore, the increased lease rent should be allowed. There is great force in the argument of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may lay down the principles of law and it is the Tribunal, the final authority, which is to determine the case finally. The central focal point for determination was the entitlement of the assessee to get the deduction claimed by him. The subject-matter of deduction was " ground rent ", that is, the enhanced rent paid by the assessee to its lessors. The assessee claimed that it had paid rent. In support thereof it produced its books of account and other materials before the authorities. It is indubitable that neither the ITO nor the Tribunal has expressed that there was no material to hold that the expenditure was not incurred by the assessee, nor is there any finding that the assessee did not expend the amounts claimed by it as bona fid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent therefor. Section 17 of the Registration Act needs to be considered along with the provisions contained in s. 49 of that Act, as they are supplementary as well as complementary to each other. We quote the relevant extract of s. 49 of the Registration Act: " No document required by section 17 or by any provision of the Transfer of Property Act, 1882, to be registered shall (a) affect any immovable property comprised therein, or ...... (c) be received as evidence of any transaction affecting such property or ......... unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882, to be registered may be received as evidence ...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 and which is not admissible for want of registration to prove a gift or mortgage or sale or lease is nevertheless admissible to prove the character of the possession of the person who holds under it." Their Lordships relied on an earlier decision of the Supreme Court in Padma Vithoba Chakkayya v. Mohd. Multani [1963] 3 SCR 229 ; AIR 1963 SC 70. In Padma Vithoba the Supreme Court held that such an unregistered lease was admissible in evidence to show " the character of possession of the lessee " under s. 49 of the (Registration) Act. Non-registration of compulsorily registrable document is inadmissible as evidence of a transaction affecting immovable property. But it may be admitted and made use of as evidence of collateral facts or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion must be allowed notwithstanding the plea that the transaction itself was illegal. We are of the opinion that in a case of expenditure as well, it matters little whether an expenditure has been incurred on the basis of a valid or invalid document ; the only question to be asked and answered is whether the expenditure was incurred in the assessment year. If it was an expenditure actually made for the purpose of the business and if it attracts the provisions of a legitimate deduction permissible under ss. 30 to 37 of the I.T. Act, the assessee shall be entitled to deduction. However, it will be for the learned Tribunal to consider whether the payment of the ground rent falls under s. 30 of the Act or under some other provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
