Business expenditure: Section 37(1) of I. T. Act, 1961- A. Y. 2003-04- Assessee paid stamp duty for a contract executed with State Road Transport corporation in course of business- Since stamp duty paid by appellant during year under consideration was a compulsory statutory levy and it would not restrict profits of future years and was incurred wholly and exclusively for purpose of business- It must be allowed in its entirety in year in which it was incurred and it could not be spread over a number of years-

The assessee paid stamp duty in relation to contract executed with Maharashtra State Road Transport corporation. The Assessing Officer disallowed the claim for deduction of the said expenditure. CIT(A) allowed the claim but the Tribunal upheld the order of the Assessing Officer.

On appeal by the assessee the Gujarat High Court reversed the decision of the Tribunal and held as under:

“i) The payment of stamp duty is not for business expediency but it is in the nature of a compulsory levy under the Bombay Stamp Act. It is legally settled that accounting practice cannot over ride the provisions of the Income-tax Act, 1961. Stamp duty paid by the appellant during the year under consideration is a compulsory statutory levy and would not restrict the profits of the future years and ordinarily revenue expenditure incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred and it cannot be spread over a number of years.

ii) If any statutory expense is required to be paid, in view of decision of the Apex Court in India Cements Ltd. vs. CIT [1966] 60 ITR 52, such expense is required to be allowed in the same year. The Apex Court in the case of Taparia Tools Ltd. vs. Jt. CIT [2015] 372 ITR 605/231 Taxman 5/55 taxmann.com 361 also observed that as per the ordinary rule revenue expenditure incurred in a particular year is to be allowed in that year.

iii) Thus, if the assessee claims that expenditure in that year, the department cannot deny it. However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of ‘matching concept’ is satisfied, which upto now has been restricted to cases of debentures. Therefore, it is rightly observed by the Commissioner (Appeals) that the expense is required to be allowed in the same year.

iv) In view of above, the Tribunal has committed an error in law in confirming the disallowance of Rs. 12,28,560 towards stamp duty expenses actually incurred by the appellant for executing contract with Maharashtra State Road Transport Corporation. Accordingly, this appeal is allowed.”