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2014 (7) TMI 308 - AT - Income TaxNature of expenses - Revenue or capital - Loss of extinguishment of debt – Expenses on cancellation of debentures – Expenses on prepayment of future interest – Held that:- CIT(A) was of the view that by paying the amounts the company is saved from making periodic payment of interest and hence the payment has to be considered as revenue in nature and allowable as deduction – The decision in CIT vs. Associated Cement Companies Ltd. [1988 (5) TMI 2 - SUPREME Court] followed - if the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively and profitably, while leaving the fixed capital untouched, the expenditure would be on revenue account, even though advantage may endure for an indefinite future - even though a benefit may endure for an indefinite period, so long as the expenditure, if incurred in the subsequent year, is allowable as Revenue in nature, the pre-payment would also need to be considered on the same plane - the Assessee incurred expenditure for laying water pipelines which would have otherwise been considered as capital expenditure but the fact remains that the expenditure was in lieu of saving municipal tax and fees payable in future for a period of 15 years - the Assessee foreclosed the loan account by paying some additional amount which would save the Assessee from making periodic payment of interest - it has to be treated as Revenue expenditure – Decided against Revenue.
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