TMI Blog1993 (9) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the surtax liability is not deductible while computing total income ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the claim of the assessee that payment of entrance fee to the Sports Club of Gujarat Limited is expenditure of revenue nature and holding that the payment conferred on the assessee a benefit or an advantage of enduring nature and, therefore, expenditure of capital nature ?" For the assessment year 1975-76, the following question is referred: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the surtax liability is not deductible while computing total income ?" The aforesaid questions arise in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Therefore, surtax is not an expenditure laid out wholly and exclusively for the purpose of business and is not an allowable deduction under section 37 of the Income-tax Act, 1961. For this purpose, the court referred to various decisions including the decision of the Supreme Court in the case of CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140. In that case, the Supreme Court considered the question, as to whether the estate duty paid by the assessee-company was an expenditure incurred wholly and exclusively for the purpose of its business. The court held that payment of estate duty by the assessee was as a statutory agent with a view to discharging a statutory duty unconnected with the business, though the occasion for the imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets or whether the expenditure is for carrying on a concern or for running the business. If the aim and object of the expenditure is for carrying on the concern, then it is a revenue expenditure. Hence, in our view, it would be difficult for us to accept the contention of the Revenue that the entrance fee paid by the assessee for getting the membership of the sports club can be termed as capital expenditure. The question as to whether a particular expenditure is a capital expenditure or a revenue expenditure is dealt with in detail by the Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377. The court referred to various decisions particularly the decision in the case of City of London Contract Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is capital or revenue is required to be determined after taking into consideration various aspects and the relevant criterion is the purpose of the outlay and its intended object and effect, considered in a common sense way having regard to business realities. Further, with regard to the test of enduring benefit, the court observed that in a given case, the test of "enduring benefit" might break down. For this purpose, the court relied upon the following observations in the case of CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257, 262 (SC): "There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
