9911796707
|
Home
Issues Involved:
1. Whether the expenses incurred under the head "Lease contract paid" amounting to Rs. 11,250 were of a capital nature or revenue nature. Issue-wise Detailed Analysis: 1. Nature of Expenses Incurred (Capital vs. Revenue): - Facts: The assessee, a partnership firm, entered into agreements with Shri Jagannath Temple Managing Committee to quarry stones for a total sum of Rs. 16,000 for three years. The assessee claimed Rs. 11,250 as deductible under section 37 of the Income-tax Act, 1961, arguing it was revenue expenditure. - Revenue's Contention: The Revenue argued that the expenditure was capital in nature as it granted the assessee the right to win, raise, and carry away stones, which was an acquisition of a right of a permanent nature. - Tribunal's Decision: The Tribunal upheld the Revenue's view, holding the expenditure as capital expenditure. - Legal Precedents Discussed: - Assam Bengal Cement Co. Ltd. v. CIT: Payment for protection fees was held as capital expenditure since it provided an enduring benefit. - Hood Barrs v. IRC: Payments for the right to fell and carry away trees were considered capital expenditure. - Pingle Industries Ltd. v. CIT: Payments for extracting stones were capital expenditure as they were for acquiring a capital asset. - H. J. Rorke Ltd. v. IRC: Payments for rights to enter land and diminish its value were capital expenditure. - K. T. M. T. M. Abdul Kayoom v. CIT: Payments for exclusive fishing rights were capital expenditure. - CIT v. Jalan Trading Co. (P.) Ltd.: Payments for acquiring sole selling agency rights were capital expenditure. - Contrary View Cases: - Mohanlal Hargovind of Jubbulpore v. CIT: Payments for tendu leaves were revenue expenditure as they were raw materials for bidi manufacturing. - CIT v. Cinceita Private Ltd.: Expenditure on lease deed preparation was revenue expenditure. - CIT v. M. B. Umbrella Industries: Payments for using a trade mark were revenue expenditure. - CIT v. Rex Talkies: Expenditure on repairs and renovations for a cinema theatre was revenue expenditure. - Court's Analysis: The court noted that the criteria for determining capital or revenue expenditure depend on the facts and circumstances of each case. The court emphasized that the expenditure in question was for acquiring the right to quarry stones, which was a capital asset providing an enduring benefit. - Conclusion: The court concluded that the expenditure incurred by the assessee was capital in nature and not revenue expenditure. Therefore, it was not admissible for deduction under section 37 of the Income-tax Act, 1961. Judgment: The question referred was answered in the affirmative, confirming that the Tribunal was justified in holding the expenses incurred under the head "Lease contract paid" as capital expenditure.
|
