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2014 (10) TMI 4 - DELHI HIGH COURTClassification of expenses – Revenue expenses or not - Expenses on payment of salaries – Held that:- Assessee was engaged in the business of oil drilling operations and drilling oil wells - making the oil rigs operational was the very business of the assessee - It was this business activity, which yielded income in the form of earning or even hire charges – the Tribunal was of the view that the new rigs purchased by the assessee were financed - The financing cost was allowed as revenue expenditure - The new oil rigs were a new capital asset - the rigs had to be installed for the purpose of making them operational - The assessee had deployed their workers and technicians to whom salaries were paid to make the rigs operational - The business of the respondent assessee was continuous and ongoing - The business required constant deployment, installation and re-installation of the rigs, which upon purchase or on shifting from an location to the other had to be made functional - The rigs, no doubt, constitute capital asset, but, the expenditure incurred on the salary paid to the employees can be treated as capital expenditure. The expenditure was incurred on labour, i.e., wages - it would be a “revenue expenditure” unless there are special or specific reasons why it should be treated as capital in nature, the expenditure being akin to raw material - after the oil rigs were acquired by the assessee as a capital asset, they had to be made operational and functional - This was the very business or the activity, which was undertaken by the assessee - The activity required expenditure in the form of salary to workers - It was in the nature of running expenses - Drilling operations being the very business of the assessee, expenditure incurred to make the rig operational would be covered and should be treated as “revenue expenditure”, whereas the cost of the rig would fall and should be treated as a “capital expenditure” – thus, the order of the Tribunal is upheld – Decided against revenue.
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