Facts of the Case

  1. The assessee acquired land from the NOIDA Authority on leasehold rights for a period of 90 years.
  2. A lease premium of ₹2,75,045 was paid by the assessee.
  3. The Assessing Officer held that, in view of Section 269UA of the Income-tax Act, the assessee was the deemed owner of the property.
  4. The expenditure incurred for acquiring such long-term leasehold rights was treated as capital expenditure.
  5. The Commissioner of Income Tax (Appeals) affirmed the assessment order.
  6. The assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT).
  7. The ITAT also concurred with the findings of the Assessing Officer and CIT(A), thereby dismissing the assessee’s claim.
  8. However, one sentence in the Tribunal’s order mistakenly stated that the expenditure was “revenue in nature,” despite the Tribunal’s actual findings being to the contrary.
  9. The Revenue filed an appeal before the Delhi High Court for rectification of the error.

Issues Involved

  1. Whether the lease premium paid to NOIDA Authority for obtaining leasehold rights for 90 years constituted capital expenditure or revenue expenditure?
  2. Whether the statement in the ITAT order describing the expenditure as revenue in nature was merely a typographical mistake requiring correction?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the Tribunal had, throughout its order, accepted the view of the Assessing Officer and CIT(A) that the expenditure was capital in nature.
  • The sentence stating that the expenditure was revenue in nature was inconsistent with the Tribunal’s findings and conclusions.
  • The impugned sentence was a clear typographical error requiring correction.
  • Since the assessee acquired substantial leasehold rights for 90 years, the expenditure resulted in acquisition of a capital asset and could not be treated as revenue expenditure.

Respondent’s Arguments (Assessee)

  • The assessee had originally claimed that the lease premium should be allowed as revenue expenditure.
  • However, before the High Court, learned counsel for the assessee accepted that the Tribunal had actually dismissed the assessee’s ground and had treated the expenditure as capital in nature.
  • The assessee did not dispute that the sentence in question was inconsistent with the overall findings recorded by the Tribunal.

Court Findings

The Delhi High Court observed that:

  • The Tribunal had extensively discussed the issue and ultimately concurred with the findings of the Assessing Officer and the CIT(A).
  • The assessee’s appeal on the issue had already been dismissed by the Tribunal.
  • Therefore, the observation stating that the expenditure was “revenue in nature” was clearly a typographical mistake.
  • The Tribunal’s actual and intended finding was that the expenditure was “capital in nature.”
  • The inconsistency was apparent from the record and required correction.

Court Order

The Delhi High Court modified the Tribunal’s order by substituting the incorrect sentence:

“Thus it is held that the expenditure is revenue in nature”

with:

“Thus, it is held that expenditure is capital in nature.”

Accordingly, the appeal was disposed of after correcting the typographical error.

Important Clarification

This judgment does not lay down a new principle regarding the distinction between capital and revenue expenditure. The High Court merely corrected an apparent typographical mistake in the Tribunal’s order. The Court reaffirmed that the Tribunal had consistently held the lease premium paid for acquiring 90-year leasehold rights from NOIDA Authority to be capital expenditure.

Sections Involved

  • Section 269UA, Income-tax Act, 1961
  • Principles governing distinction between Capital Expenditure and Revenue Expenditur 

Link to download the order –https://delhihighcourt.nic.in/app/case_number_pdf/2011:DHC:14686-DB/AKS01092011ITA20882010_154445.pdf

 

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