TMI Blog2015 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is related to carrying on of the business operations of the assessee. It is an integral part of the profit earning process. Moreover the expenditure has not resulted in the acquisition of any tangible/ intangible asset. The expenditure therefore is revenue in nature. Merely because the expenditure results in enduring benefit is not enough to categorize it is capital in nature. This issue has been settled by the Supreme Court in Empire Jute Co. Ltd. Vs. CIT (1980 (5) TMI 1 - SUPREME Court) - Decided in favour of assessee. - ITA No. 1309/Chd/2012 - - - Dated:- 4-8-2015 - Bhavnesh Saini, JM And T R Sood, AM For the Appellant : Dr Amarveer Singh For the Respondent : Sh Rajiv Sood ORDER Per Bhavnesh Saini, JM This ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e main object of generating hydro electric power. During the impugned AY, it filed its return of income on 29-09-2009 declaring an income of ₹ 120,47,63,829/- under normal provisions and book profit for MAT was shown at ₹ 2139,97,27,180/-. Subsequently the return was revised on 17/06/2010 and ₹ 849.35 crores, pertaining to Advance Against Depreciation (AAD) was reduced from the book profit u/s 115JB. Assessment was framed u/s 143(3) vide order dt 29-12-2011,computing income under the normal provisions at ₹ 120.47 crores and the Book Profit as per 115JB at 2140,64,39,486/-. Addition of ₹ 849.35 crores was made to Book Profit on account AAD and addition of ₹ 8,19,00,000/- was made to income computed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income received in advance, The AO added back the same to the Book Profits by holding that : a- AAD is an accrued income and liable to be credited to P L Account and exclusion of AAD, violated Part II III of Schedule VI of Companies Act and contravention of these established norms of preparing drawing book profit u/s 115JB empowered AO to add AAD to the audited profit of the assessee for purpose of MAT. b- AAD was linked with diminution in value of assets it fell squarely within the ambit of clause (i) to Explanation 1 of 115JB of the Act. 5. On appeal Ld. CIT(A) deleted the addition. 6. The issue is no longer res-integra as it is covered by the decision of Hon'ble Supreme Court in the case of NHPC Vs. CIT 320 ITR 374 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self states at para 6.9 thereof that expenditure on catchment area treatment plan during construction is capitalized alongwith dam . The nature of the expenditure remains the same even for the post-construction period. Therefore, ₹ 8.19 crores on account of CAT expenses are held to be capital expenditure and disallowed. 8. In appeal, the Ld. CIT(A) vide para 7 at page 13 held as under : 7. The rival submissions have been carefully considered with reference to the facts of the case. It is noted that the CAT expenditure is incurred by the appellant every year and a substantial part of it is a mandatory charge paid to the Department of Forest and Department of Fisheries. The catchment area of river Satluj is a vast area over w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es into existence by virtue of this expenditure. All these facts are undisputed and have not been rebutted by the Revenue. It is evident from the above facts that the CAT expenditure is related to carrying on of the business operations of the assessee. It is an integral part of the profit earning process. Moreover the expenditure has not resulted in the acquisition of any tangible/ intangible asset. The expenditure therefore is revenue in nature. Merely because the expenditure results in enduring benefit is not enough to categorize it is capital in nature. This issue has been settled by the Supreme Court in Empire Jute Co. Ltd. Vs. CIT 124 ITR 1(SC) wherein the Court has held : ii. There may be cases where expenditure, even if incur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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