Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2012 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (12) TMI 758 - AT - Income TaxShort Notice Pay for Termination of Toll Manufacturing Agreement – Capital vs Revenue Expenditure – Held that:- The test of commercial expediency cannot be reduced to the shape of a ritualistic formula, nor can it be put in a water-tight compartment. All that the law requires is that the expenditure should not be in the nature of capital expenditure or personal expenditure of the assessee and it should be wholly and exclusively laid out for the purposes of the business. It is well-settled that items of expenditure are to be considered from the point of view of a normal, prudent businessman. Business expediency was not established by the assessee at any stage of hearing, including hearing before us, for making payment to CCL in violation of the agreement. If sanctity of agreement can be ignored for the sake of argument, even then the vital question of establishing business expediency remains unanswered. In the case under consideration there is neither any danger of dent to the goodwill of the assessee nor adverse affect was looming large over the business carried on by the assessee-breach of agreement was not by the assessee. If CCL without giving stipulated notice terminated the agreement, then goodwill of the CCL would have been at stake. If any step for maintaining confidence had to be taken then that step had to be of CCL. In these circumstances we are of the opinion that if the AO could not find nexus between the expenditure incurred and the purpose of the business in the said transaction, he was justified. Business expediency was not established by the assessee at any stage of hearing, including hearing before us, for making payment to CCL in violation of the agreement. If sanctity of agreement can be ignored for the sake of argument, even then the vital question of establishing business expediency remains unanswered. - order of AO is upheld – Appeal by assessee is dismissed.
|