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2024 (3) TMI 1205 - HC - Income TaxNature of expenses - expenses on repairs and maintenance of stores and spares - revenue or capital expenditure - HELD THAT:- The Division Bench of this Court in [2019 (8) TMI 1347 - GUJARAT HIGH COURT] dismissed the appeal of the Revenue relying on an order of the Division Bench in the case of Gujarat Narmada Valley Fertilizers and Chemicals Ltd. [2023 (4) TMI 334 - ITAT AHMEDABAD] as held from the perusal of the documents, it can be seen that these expenditures were not totally on the replacement but replacement of part of machinery/plant which in totality cannot be treated at par with the repairs and maintenance that of entire Plant & Machinery. The pipelines and duel fuel burner system are forming some part of entire plant and machinery and both these parts do not function independently or used independently for the projects of the assessee company. Thus, the CIT(A) was not right in confirming the addition. In fact, these expenditures are revenue in nature. Disallowance u/s 37(1) - expenses being contribution /donation to a trust, though the same is devoid of any business expediency? - HELD THAT:- The Division Bench of this Court in [2019 (8) TMI 1347 - GUJARAT HIGH COURT] held that Agro Products of the assessee company are sold under the brand name ‘Sardar’ which is very popular amongst the farming community since more than four decades. It was an apprehension of the assessee that the construction of a statue of Sardar Vallabhbhai Paltel would significantly enhance the value of the brand name under which the assessee carries on its business. This would help enhance sales as well as exports of the company’s agro products and would as a corollary enhance the brand value of other products of the company. Thus, the contention of the Ld. AR that the expenditure was incurred wholly and exclusively for the purpose of business on account of commercial expediency and accordingly is allowable u/s 37 of the Act, appears to be genuine. Further, it appears that the funding was for State Government. The decision of Gujarat Narmada Valley Fertilisers Co Ltd. (supra) under identical facts held that, the said expenditures were allowed related to deduction under Section 37 Expenditure written off by the assessee - HED THAT:- ADMIT – Only on substantial question of law-(C) "Whether the Appellate Tribunal is justified in law and on facts in holding that the expenditure written off by the assessee has to be considered as business revenue expenditure without appreciating the fact that expenses incurred for establishing a new project will remain capital expenditure in nature even if these projects did not materialize and hence, cannot be allowed as business expenditure under section 37 of the Act?”
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