ITAT · Chennai Bench2024§32(1) · §37
ACIT v. Eastman Exports Global Clothing (P) Ltd · ITAT Chennai: building cost on leasehold land is revenue expenditure
Is construction on leasehold land capital or revenue expenditure?
Revenue. Construction cost on leasehold land was allowable as revenue expenditure; Explanation 1 to §32(1) was not attracted.
Published 2026-07-07
Facts in brief
- For AYs 2017-18 and 2018-19, the assessee incurred cost of construction of a building on leasehold land.
Issue before the bench
Whether Explanation 1 to §32(1) converts leasehold construction into deemed capital expenditure.
Held
The expenditure was allowed as revenue; Explanation 1 to §32(1) did not apply to it.
Practitioner takeaway
Examine the lease terms before conceding capitalisation: where ownership never vests, the revenue-expenditure argument remains open.
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