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2012 (6) TMI 443 - AT - Income TaxCapital or Revenue - Treatment of 'books' as 'plant' entitled to depreciation under section 32(1) of the Act, i.e., in contradistinction to being a revenue expenditure - assessee is a partnership firm engaged in running coaching classes for entrance examinations – Held that:- where the article being used is the same (books), and the purpose for which it is used also the same, i.e., for imbibing knowledge and understanding the subject, as well as teaching it, capital expenditure would not become revenue, depending upon whether the income is considered as arising from exercise of profession or undertaking a business; the purpose of expenditure being the same, as also its contribution to the earning of the income or the income generating process. books, if not used in carrying on a profession (or a specified business), would carry the general depreciation rate of 25%, and not operate to alter the character of the expenditure to a revenue expenditure Disallowance under section 40A(3) of the Act - AO found the assessee to have made cash payments in excess of Rs. 20,000/- in respect of several purchases for awards, the aggregate expenditure under which head stood claimed at Rs. 14.19 lakhs – Held that:- it does not take much strain to infer that the books of account stand manipulated to reflect the impugned payments in installments of Rs. 20,000/- in an orchestrated manner to apparently accord with the provision of law, so as to circumvent its rigour and effect, i.e., as contended by the Revenue, so that its findings cannot be faulted with. In the case of McDowell Co. Ltd. (1985 - TMI - 40038 - SUPREME Court - VAT and Sales Tax), it stands held that there was as much moral sanction behind the taxation laws as is behind any other welfare legislation, and that it stood on no less a moral plane than honest payment of tax. That, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provision should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is up to the court to take stock to determine the nature of the legal device to avoid the tax and expose the same for what it really is and to refuse to give judicial benediction to it
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