Law:

Section:

Section 37(1) of the Income-tax Act, 1961 (Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922) - Business expenditure - Allowability of - Assessment year 1951-52 - Whether a sum spent in trying to get an agency agreement or a licence would nevertheless be capital expenditure, notwithstanding fact that intended agency or licence was not ultimately secured - Held, yes - Assessee company, which had taken out jute mill on lease, spent certain sum towards stamp duty on renewal of said lease - A dispute arose as regard to validity of said renewed lease because it was signed by person not authrorised by lessor company - Dispute, however, was settled and a fresh lease was executed by assessee-company in favour of lessor company but on a very much more enhanced rental - Lease deed did not contain any covenant for renewal - Assessee carried on factory and mill in lease-hold premises - Whether, on facts, it could be said that acquisition of lease was acquisition of capital asset - Held, yes - Whether expenditure incurred by assessee on stamp duty on renewal of lease could not be claimed as revenue expenditure under section 10(2)(xv) of 1922 Act - Held, yes FACTS The assessee-company was the lessee of a jute mill situated at Ellore. For the first time the lease of the jute mill was procured by the assessee company in 1944 for a period of five years. On the expiry of the first five years in 1949 that lease was renewed for a further period of five years by a deed dated 16-3-1950. The assessee paid stamp duty in respect of said renewal of lease. A dispute arose between the lessor and the assessee-company regarding the validity of this lease. The board of directors of the lessor company contended that this lease was signed by the secretary and the treasurer who had really no authority to sign on its behalf. The lessor therefore contended that the lease of the 16-3-1950, was ineffective and invalid. This dispute, however, was settled and a fresh lease was executed by the assessee-company in favour of the lessor company but on a very much more enhanced rental. The assessee claimed that the amounts paid as stamp duty should be allowed during the year of…

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