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2008 (10) TMI 333 - HC - Income TaxBusiness Expenditure- Capital and Revenue Expenditure- The assessee, a company engaged in the business of manufacture of cotton and yarn, claimed deduction of Rs.5,17,280 which was paid towards gratuity. This was disallowed on the ground that the assessee has not paid the same during the previous year relevant the assessment year and that as per section 43B, any sum payable by the assessee could be allowed as a deduction in computing income of that previous year in which the same is actually paid. It also claimed deduction of Rs. 2,31,38,952 being the replacement cost of the machinery as a revenue expenditure. The Commissioner held that it was not capital expenditure and therefore to be allowed as revenue expenditure. Held that- (i) that the amount contributed to the gratuity fund after the close of the previous year but before filing the return of income was deductible. (ii) that in the absence of the requisite details regarding the production capacity remaining constant even after replacement, the matter to be remitted to the Commissioner (Appeals).
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