Law:

Section:

Section 145 of Income-tax Act, 1961 - Method of accounting - System of accounting - Assessment year 1970-71 - Assessee claimed expense by way of rent payable for land for last 10 years - Tribunal found that amount in question was paid as rent under subsisting deed of lease for preceding 10 years and system of accounts being mercantile, liability accrued in each of years for which payment was made and, therefore, assessee was not entitled to deduction of said amount in year under consideration - Whether Tribunal was correct in its view - Held, yes FACTS The assessee-company carried on the business of manufacture and sale of sugar. It had acquired on rent land on which it built its factory, etc. In the relevant assessment year, it claimed an expense by way of rent payable for the land and taxes. In support of the claim it relied upon an award, under which the company agreed to pay to the owners on account of rent for the last 10 years. The ITO repelled this claim. On appeal, the same was accepted by the AAC. On Revenue's appeal, the Tribunal held that the amount was paid as rent under the subsisting deed of lease for the preceding 10 years, that the character of the payment was rent and the system being mercantile, the liability accrued in each of the years for which the payment was made and, therefore, the assessee was not entitled to the deduction of the said amount in the year under consideration. On reference : HELD The Tribunal took a prefectly correct view and, therefore, the assessee was not entitled to deduction of the lease rent paid in the relevant accounting period. Note : The decision was in favour of revenue. JUDGMENT Satish Chandra, CJ.- The assessee is a private limited company and carries on the business of manufacture and sale of sugar. It had acquired on rent an area of 96 acres, on which it built its factory, etc. In the assessment year 1970-71, it claimed an expense of Rs. 77,000 by way of rent payable for the 96 acres of land and taxes. In support of the claim it relied upon an award dated 5th March, 1969, under which the company agreed to pay Rs.77,000 to the owners on account of rent for the last 10 years at the rate of Rs. 50 per bigha for…

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