Case Law Details
Coforge Limited (Formerly Known AS NIIT Technologies Ltd) Vs ACIT (Delhi High Court)
Conclusion: Commuted value of lease rent at 11 times the rent payable for 90 years @ Rs 708913/- which amounted to Rs 7798042/- was deductible as expenditure in the year of payment as assessee chose to incur the liability of a crystallised amount in the period relevant to the AY in issue i.e. AY 2007-2008, and therefore, it was entitled to seek deduction of the amount subject to fulfillment of specified conditions.
Held: The issue arose for consideration was whether the Company which had opted to pay the commuted value of lease rent at 11 times the rent payable for 90 years @ Rs 708913/- which amounted to Rs 7798042/- was deductible as expenditure in the year of payment. Revenue argued that the expenditure was for the purpose of enduring benefit and Tribunal allowed this expenditure to be divided into 90 years to be allowed in each year. It was held that Tribunal was wrong in applying the matching principle and directing that one-time lease rent should be spread equally over the tenure of the lease. As indicated hereinabove, the annual lease rent that assessee was required to pay if it had chosen the said route, was Rs. 7,08,913/-. The commuted and discounted value of the one-time lease rent was eleven (11) times the annual rent; which in absolute terms was much lower than the amount that would have accrued as rent over the entire tenure of the lease i.e. 99 years. This was the option exercised by assessee. As was evident, taking the present value or time value of the money into account, a lumpsum figure was proposed to assessee for securing leasehold rights for 90 years. The lumpsum amount paid by assessee was far less than the amount that it would have to pay if it were to choose the other option i.e. pay the lease rent on an annual basis for 90 years at the rate of Rs. 7,08,913/-. Assessee chose to incur the liability of a crystallised amount in the period relevant to the AY in issue i.e. AY 20072008, and therefore, it was entitled to seek deduction of the amount which fulfilled the following attributes- i. The expenditure was not in the nature of capital expenditure or a personal expense; ii. It was expended fully and exclusively for the purposes of the business and; iii. it did not fall within the realm of any provision of the Act which prohibited assessee from claiming this deduction.
FULL TEXT OF THE JUDGMENT/ORDER of DELHI HIGH COURT
Preface: –
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