Commuted, discounted lease rent is deductible in the year of payment: Delhi HC

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Commuted, discounted lease rent is deductible in the year of payment: Delhi HC 

Coforge Limited v. ACIT [2021] 128 99 (Delhi HC)
Short Overview of the Case:
1. The assessee had claimed a deduction of the commuted and discounted one-time lease rent of approximately INR 7.7 million, as revenue expenditure in his ITR. He had the option, to either pay annual rent of approximately INR 0.7 million during the tenure of the lease, or a commuted and discounted one-time lease. The taxpayer had opted for the second option
2. The AO disallowed the deduction claimed towards lease rent, since he was of the view that one time lease payment gave benefits of enduring nature and hence, had to be classified as capital expenditure and not revenue expenditure.
The Hon. Delhi HC held as below:
1. There was no concept of deferred revenue expenditure under the Income-tax Act. An expenditure could be spread over a time span, only if it so provided in the ITA. One such example was section 35DD of the ITA (relating to amortisation of expenditure in case of amalgamation or demerger). The HC relied on the SC judgement in Taparia Tools Limited Vs JCIT(2015) 372 ITR 605(SC).
2. In the case under consideration, the matching principle had no applicability.
3. Since the expense is revenue in nature, the same is allowable, even though, the lease rent gave the taxpayer an enduring benefit.

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