Cost to be included in purchase of land..??

Tax queries 794 views 6 replies

Mitesh Goyal

Articled Assistant

37 Points Joined November 2009

Dear all,

Can any one guide me on the following case:

Case

A private Limited company engaged in Business of Trade in Land & Building. Purchased Land and held it as stock in trade Claimed as expenditure the following.

1) Purchase Cost (As per Deed)

2) Stamp Duty & Registrtion Expenditure

3) Payment made for obtaining possession from the persons who had unauthorised possession over the land.

I want to know whether the Expenditure mention in point no (3) allowed as per income tax act. Please suggest the relevant section or case law.

Replies (6)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

Any expenditure incurred wholly and exclusively for carrying on its business can be claimed for tax purpose.

As the assessee is engaged in the business of buying & selling land, so any expenditure in this connection would be wholly deductible. As per pt3 the expnediture incurred on pymt made to such person would be deductible becasue if the land is not possessed by the assessee he cant carry on his business. However the pymt made would be subject to the asst made by the AO and as per the court rulings. But it maybe disallowed to some extent.

CA Prateek Garg

CA in Practice

1447 Points Joined November 2009

I think it should be allowed in full. Since you are claiming it as an business Expenditure.

Section 37 allowed any expense if following conditions are satisfied -

1.) Expense must be related to business

2.) it must not be of Personal nature

3.) it must be related to relevant PY

4.) it must not be of capital nature.

In your case all the conditions are satisfied hence expenditure should be allowed in full. (Expenditure is not of capital nature as exclusively related to stock in trade.)

Mitesh Goyal

Articled Assistant

37 Points Joined November 2009

If the company is engaged in construction activity then what would be the situtaion??

Amber Jain

Article Assistant

206 Points Joined August 2012

As per my views i don't think so that deduction will be allowed because as per the Explanation given in Sec 37 of income tax act , 1961 any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.

sanjana

article

80 Points Joined October 2011

Originally posted by : Amber Jain
	As per my views i don't think so that deduction will be allowed because as per the Explanation given in Sec 37 of income tax act , 1961 any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.