TMI Blog2007 (2) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... s made for the purpose of the business, it satisfies the commercial expediency test to accept the case of the assessee. Thus, we do not find any justification to accept the case of the Revenue that the provisions of section 37 have to be viewed in a very strict manner. It may be noted that section 37 itself is concerned with an expenditure laid out or expended wholly or exclusively for the purpose of the business or profession to qualify for deduction. With the necessity no longer a valid test, we reject the Revenue's appeal. In the circumstances, the first question is answered against the Revenue. As regards the second question, whether the premium payable on redemption of debentures in future years is to be spread over and part of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance of the Trade Chamber was for the furtherance of the business interest of the constituents of the Chamber; hence, the payment had to be treated as a business expenditure as per the decision reported in [1990] 186 ITR 276 (SC) (CIT v. T.V. Sundaram Iyengar and Sons). The assessing authority rejected this plea, taking the view that the payment to the building fund was only a gratuitous payment and that at best, it could only be equated to donation; hence, the same could not be considered as one incurred wholly and extensively for the purpose of the assessee's business. The Assessing Officer rejected the claim under Section 37 of the Act. 3. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Agreeing wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a revenue expenditure or a capital expenditure is a vexed question. The line of demarcation is often found to be a very thin one and each case has to be decided on the facts and circumstances. In fact the trend of judicial decisions show a progressive liberal view on the concepts to treat many an item as revenue expenditure with regard to which a contrary conclusion could have been reached. Hidayathullah, J., in the decision reported in [1962] 44 ITR 689 (SC) (K.T.M.T.M. Abdul Kayoom and Anr. v. Commissioner of Income-tax) held that each case depends on its own facts and close similarity between one case and another is not enough, even a significant detail may alter the entire aspect. Hidayatullah J, in the said decision, also observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive application of the judicial mind to the facts of each case is necessary. 8. The approach, hence, needs to be that of a practical and prudent businessman rather than from the Revenue's strict classification of a right. As the Supreme Court held in the decision reported in [1997] 223 ITR 101 (SC) (Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT), what is to be seen is not whether a payment was compulsory for the assessee to make or not. The correct test is that of a commercial expediency. The Apex Court held that considering the various decisions held that any contribution made by the assessee to a fund which is directly connected or related the carrying on of the assessee's business or which results in benefit to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose interest are taken care of by the Chamber of Commerce, irrespective of whether the expense incurred is compulsory or otherwise. Hence, considering the fact that the payment is made for the purpose of the business, it satisfies the commercial expediency test to accept the case of the assessee. In the circumstances, we do not find any justification to accept the case of the Revenue that the Provisions of Section 37 have to be viewed in a very strict manner. It may be noted that Section 37 itself is concerned with 'an expenditure laid at or extended wholly or exclusively for the purpose of business or profession' to qualify for deduction. With the necessity no longer a valid test, we reject the Revenue's appeal. 11. In the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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