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2015 (6) TMI 25 - AT - Income TaxDisallowance of compensation paid to M/s L&T - compensation for not honouring its commitment for procuring ‘seat frame’ and ‘trim covers’ from Vendors - revenue v/s capital expenditure - CIT(A) deleted the disallowance - Held that:- The nature of payment under settlement is with respect to supplies by vendors to the assessee which are inherently in revenue field. While we have noted that the A.O. has alleged that the assessee company was "certainly benefited by enduring nature" by the virtue of this agreement. We are unable to see any factual support for this allegation. As the ld. CIT(A) has rightly noted, the existence of such an enduring benefit was merely a presumption and based on nothing on record to demonstrate any such enduring benefit. As to whether the payment is capital or revenue is determined by the purpose for which the payment is made and when, as in this case, the payment is clearly relatable to the revenue field such as supplies by vendors, the purpose of payment is clearly revenue in nature. In these circumstances, unless there is any cogent material or evidence to demonstrate that the payment is capital field, the expenditure in question required to be treated as revenue expenditure. As we have mentioned earlier, there is nothing on record whatsoever, to suggest that the assessee derived any enduring benefit by making the payment for this compensation. Hence the payment in question having been made to enhance the supplies and in connection with supplies receipt during the normal course of business, was revenue in nature. - Decided in favour of assesse.
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