TMI Blog2003 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... -Being aggrieved by the judgment and order dated January 21, 2002, passed by the Tribunal allowing the appeal filed by the assessee for the assessment year 1996-97, the Department has come to this court by way of appeal under section 260A of the Income-tax Act, 1961. Facts: In this appeal, we are concerned with the accounting year ending March 31, 1996, corresponding to the assessment year 1996-97. During the accounting year ending March 31, 1996, the company claimed the voluntary retirement scheme expenses amounting to Rs. 10,02,23,735 incurred at Borvile plant. As per the annual report, the voluntary retirement scheme expenses were to be written off within a period of 60 months. In the past, the company had incurred the voluntary reti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility stood ascertained, quantified and paid. That, the liability was discharged during the accounting year ending March 31, 1996. The Tribunal also found that the VRS had been approved by the Commissioner of Income-tax. In the circumstances, the appeal was allowed. Being aggrieved by the decision of the Tribunal, the matter has come before us in appeal under section 260A of the Income-tax Act. The question of law on which our opinion is sought is question "B", which reads as follows: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in allowing the liability as revenue expenditure or it should be spread over the same by taking into consideration, the years for which the scheme is to be implemented an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess claim of Rs. 9,68,82,917. Mr. R.V. Desai, learned senior counsel for the Department, also relied upon the recent judgment of this court in the case of Taparia Tools Ltd. v. Joint CIT [2003] 260 ITR 102. On the other hand, Mr. Mistry, learned counsel for the assessee, contended that it is not open for the Revenue to contend that the VRS expenses were incurred in the capital field as the Assessing Officer has himself proceeded to give deduction to the assessee to the tune of Rs. 33,40,818. He pointed out that even according to the Department, the said expenses were revenue expenditure and it is for this reason that the Assessing Officer has given deduction of a smaller amount of Rs. 33,40,818 as against the assessee's claim for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the services was a payment made with a view to save business expenditure in the accounting period as well as a few subsequent years but, such payment was not made for acquiring benefit or income-yielding asset. By avoiding business expenditure, the company could not be said to have acquired enduring benefit or any income-yielding asset. Findings: As stated above, the first contention advanced on behalf of the Department was, the voluntary retirement scheme expenditure was not deductible as it was capital in nature. The Department is estopped from raising this contention. The assessee claimed deduction of Rs. 10,02,23,735 for the accounting year ending March 31, 1996. However, the Assessing Officer restricted the deduction at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a period of five years. In the accounts, the company had debited the profit and loss account at the rate of Rs. 11 spread over for a period of five years. In that matter, the annual report contained a note. In that note, it was stipulated that Rs. 55 constituted deferred revenue expenditure written off over a period of five years. In that matter, on the facts, the Department had doubted the bona fides of the scheme. In such circumstances, the court took the view that in cases of deferred revenue expenditure, because of its special feature, its spread over is warranted. In Taparia Tools Ltd.' s case [2003] 260 ITR 102 (Bom), the life of non-convertible debenture (NCD) was five years and under the NCD, there was a stream of income coming i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This expense was not referable to any income-yielding asset. It is well settled that, ordinarily, revenue expenditure, which is incurred wholly and exclusively for the purposes of business, must be allowed in its entirety in the year in which it is incurred and it cannot be spread over a number of years even though the assessee has written it off in its books over a period of years. It is only in cases of special type of assets that the spread over is warranted. In the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), it has been held by the Supreme Court that there are cases where the test of enduring benefit may break down. In that case, expenditure was incurred to remove certain restrictions on the number of working hours so tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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