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2016 (12) TMI 1849 - AT - Income TaxNature of expenditure - power and fuel charges - assessee bear cost of additional power infrastructure to be established by electricity supplier - AR submitted that when the outgo did not create any asset for the assessee it was a revenue expenditure allowable u/s.37(1) - HELD THAT:- There is no dispute that there was a agreement between assessee and M/s. Ford India Pvt. Ltd by which latter leased out a property to the assessee. M/s. Ford India Pvt. Ltd was to supply electricity to the assessee for the factory in the leased property based on a shared services agreement. M/s. Ford India Pvt. Ltd had given notice to the assessee for terminating the shared supply agreement w.e.f. 1st January, 2009 is also not doubted. Electricity was an essential input for carrying on the manufacturing activity of the assessee and there can be no two opinions on this. To ensure supply of uninterrupted electricity, assessee had to agree with M/s. Ford India Pvt. Ltd to part finance the total cost of additional power infrastructure to be established by M/s. Ford India Pvt. Ltd. M/s. Ford India Pvt. Ltd would not have supplied electricity after 1st January, 2009 but for assessee agreeing to part finance the cost of the project for establishing additional power infrastructure - additional power infrastructure created was the sole property of M/s. Ford India Pvt. Ltd and assessee had no ownership over any part of the said asset. The only benefit assessee derived was supply of uninterrupted electricity, without which it could have not functioned. In this situation, the said expenditure in our opinion can only be treated as revenue expenditure which ensured continued electricity supply. The payment did not result in any enduring benefit but only enabled the assessee to carry on its day to day activities. Just because additional power infrastructure was an asset in the hand of the M/s. Ford India Pvt. Ltd, we cannot say that amount given by the assessee to M/s. Ford India Pvt. Ltd was a capital outgo. The expenditure was incurred wholly and exclusively for the business of the assessee and it did not create any asset for the assessee. It only ensured continued supply of electricity without interruption. In such circumstances, in our opinion, the expenditure was rightly claimed by the assessee as revenue outgo. Lower authorities in our opinion fell in error in disallowing the claim. - Decided in favour of assessee.
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