KRISHAK BHARATI COOPERATIVE LTD Vs. DEPUTY CIT

JUDGEMENT

(1.) The following question of law was framed for consideration by this Court:

(2.) The facts necessary to decide this case are that this appeal pertains to the assessment year 2004-05 for which the order of assessment was framed by the Deputy Commissioner of Income Tax, Circle 24(1), New Delhi, in terms of Section 143 (3) of the Income-tax Act, 1961 ("the Act") on 26.12.2006. The assesse claimed a deduction of Rs. 2,75,045/-, being the amount written off towards premium paid to the NOIDA. It was urged that the expenditure did not confer any ownership right to the assesse, and allowed it to use the land for the purpose of construction of its office. The assesse contended that the expenditure was revenue in character. The assesse also urged that similar amounts were allowed in earlier years right from inception of the lease, i. e. 1989 and, argued that it should have been allowed in the relevant year too following the principle of consistency.

(3.) The assesse had entered into a lease agreement with NOIDA on 06.01.1989 for by which the land in question was demised for a period of 90 years. The assesse was entitled to construct an office complex on the land. The assesse was required to pay premium of Rs. 2,53,96,993/- to NOIDA at the time of the allotment, or demise. In addition, under the lease deed, the assesse had to pay annual lease rent @ 2.5 per cent of the premium. The lease rent could be enhanced after 12 years. The assesse amortized the expenditure by way of premium over the period of lease, and claimed deduction of Rs. . 2,75,045/- in the assessment year. The land had been earlier acquired by the NOIDA under Land Acquisition Act, 1896, for setting up an urban and industrial township. In terms of the lease, the assesse was not entitled to transfer the land before erection of the building without the permission of the NOIDA. There were other restrictions on the lessee's right to transfer, assign or alienate the land. The assesse could borrow, by mortgaging the land. In case of non-fulfilment or violation of terms and conditions of the lease agreement, building rules or any other rules prescribed by the authority, the lease could be cancelled and possession of the premises could be taken over by NOIDA.