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TMI Blog1991 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... to the auction held on 20-8-1973 for the purchase of the lease hold rights of the abovementioned plot, I am directed to inform you that your bid for Rs. 13,09,000 has been accepted by the authority. 2. You are now requested to deposit within 120 days from the date of issue of this letter a sum of Rs. ................ as detailed below by demand draft in favour of the DDA. Please note that no part payment will be accepted : 1. Total premium of the plot Rs. 13,09,000 2. Cost of preparation of lease deed Rs. ................. 3. Less earnest money already paid vide receipt No. 13166/70 dated20-8-1973Rs. 3,27,250 4. Balance amount to be paid Rs. 9,81,750 (Rupees Nine Lakhs eighty one thousand seven hundred fifty only). 3. Besides the above point the ground rent payable in advance up to -- will be required to be paid by the separately at the time of execution of the lease deed. The cost of stamping and registration of the lease deed and also of the corporation duty on the transfer of immovable property etc. will also be home by you. 4. Please note that if the amount demanded above is not paid within the prescribed period, it will be treated as breach of condition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the registration charges. The appellant's case is also fully covered by the decision of the Hon'ble Supreme Court in the case referred to above. I accordingly direct the ITO to allow the deduction in respect of the registration charges amounting to Rs. 2,40,160 and Rs. 1,04,720. " 6. The learned departmental representative contended that since the lease deed has not been executed the expected expenditure thereon could not be allowed as an expenditure in the year under consideration. The learned counsel for the assessee on the other hand contended that the assessee could have debited the registration charges to the cost of the land in the year 1973 itself when the land was acquired but this was not done and the estimated expenditure was debited in the year under consideration because the buildings which were intended to be raised on the plots in question had been completed and were entirely sold out. Therefore, according to the learned counsel for determining the profit arising from the transaction of acquisition of plots, raising of buildings thereon and the sale of such building, the estimated expenditure in respect of the assessee's obligation to get the lease deed executed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time was not of the essence of the contract meant a reasonable time. Whatever may be considered a reasonable time under the circumstances of the case, the setting up of that time limit did not prescribe any condition for the carrying out of that undertaking and the undertaking was absolute in terms. If that undertaking imported any liability on the appellant the liability had already accrued on the dates of the deeds of sale though that liability was to be discharged at a future date. It was thus an accrued liability and the estimated expenditure which would be incurred in discharging the same could very well be deducted from the profits and gains of the business. " 8. We have thus to see whether in the present case, there is an accrued liability and if so, whether it can be allowed in the year under consideration. 9. What is the method of accounting adopted by the assessee, is not mentioned in any of the documents placed before us, If there was an obligation to get the lease deed executed and registered according to law then according to the mercantile system of accounting, this amount should have been debited to the account in the year in which the land was acquired and sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them stamped and registered according to law, any public functionary may force them to do so or do those acts himself on their behalf and recover the cost from them. 12. Section 17 of the Indian Registration Act specifies documents that are compulsorily registrable. It is conceded on both sides, that a lease deed of the type contemplated between the parties would require registration to become legally effective. Section 49 of the Registration Act mentions the effect registration of document required to be registered. It reads as under :-- " 49. Effect of non-registration of documents required to be registered.-- No doubt required by section 17 or by any provision of the Transfer of Property Act, 1882 to be registered shall-- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power unless it has been registered. " 13. Section 3 of the Indian Stamp Act provides that certain documents shall be chargeable with the stamp duty. It is also conceded on both sides that a lease deed if duly executed between the DDA and the assessee would require a cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e risk and not execute a document or if they execute one, may not stamp it and get it registered according to law. That such is the law is evident from the fact that nothing of the sort was done between the DDA and the assessee for so many years. That people do take risk is also evident from the fact that the DDA delivered possession of the plots to the assessee without getting a lease deed executed and even allowed the assessee to raise buildings thereon. Similarly, the assessee on its part invested huge sums of money in raising multistoreyed buildings on the plots in question without getting its tide to the land legally perfected. In such circumstances, we hold that in the present case, there was neither any contractual nor any statutory liability regarding the payment of a stamp duty and registration charges in respect of documents which were yet to come into existence and, therefore, the estimated expenditure thereon was not allowable as an expenditure in computing the income of the assessee. The judgment of the Hon'ble Supreme Court in the Calcutta Company's case is of no help to the assessee. In that case the assessee had a liability towards buyers of plots. In case before us ..... 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