TMI Blog2018 (12) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that it is not necessary that every expenditure results in taxable income and it cannot be held that unless income is generated, expenditure cannot be allowed. - Decided in favour of the assessee. - Tax Case (Appeal) Nos.73 & 74 of 2011 - - - Dated:- 27-11-2018 - Mr. Justice T.S. Sivagnanam And Mr. Justice N. Sathish Kumar For the Appellant in both Appeal : M/s.Akshita Sakariya for Mr.P.J.Rishikesh For the Respondent in both Appeals : Mr.T.R.Senthil Kumar COMMON JUDGMENT T.S.SIVAGNANAM, J. These appeals filed by the assessee under Section 260A of the Income Tax Act, 1961('the Act' for brevity) are directed against the orders passed by the Income Tax Appellate Tribunal, Chennai, 'B' Bench, dated 20.02.2009 in I.T.A.No.501/Mds/2002 for the assessment year 1998-1999 and in I.T.A.No.573/Mds/2001 for the assessment year 1997-1998 respectively. 2.The appeals have been admitted on 02.03.2011, on the following substantial questions of law: (i) Whether in facts and circumstances of the case, the Appellate Tribunal was right in holding that the expenditure incurred in developing/upgrading the software as capital expenditure? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara Industries Ltd . 5.We have perused the said decision and we note from the last paragraph of the decision that the case pertains to an amount of ₹ 20 lakhs to be deposited by the assessee therein with the licensor company for the purpose of securing licence under which the assessee had acquired the right to work the licensor's cotton mills. Further it was noted that the deposit was made pursuant to a clause in the leave and licence agreement and had a deposit as required by that clause not been made, the assessee would not have secured the license of the cotton mill. Thus, it was concluded that the deposit was clearly made for the purpose of acquiring a profit-making asset to carry on business in cotton. Therefore, it cannot be held that the deposit was made on the revenue account or that the loss thereof must be treated as a business loss. Thus, it was held that the loss thereof was a loss suffered on the capital account and could not be treated as business loss. In our considered view, the decision in the case of Hasimara Industries Ltd. , can have no application to the facts of the present case. 6.The case of the assessee, not disputed by the Revenue is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the efficiency of the existing system with a view to keep pace with improvement of technology and no machinery was brought into existence. Such expenses incurred by the assessee for enhancement of efficiency, in our considered opinion, is nothing but an upgradation of computers for achieving the desired result and, therefore, the same has to be treated as revenue expenditure. 7. The Apex Court in Alembic Chemical Works Co. Ltd. v. CIT after referring to B. P. Australia Ltd. v. Commissioner of Taxation of the Common Wealth of Australia (1966) AC 224 (PC), held that (page 386): What is capital expenditure and what is revenue are not eternal verities but must needs be flexible so as to respond to the changing economic realities of business. The expression asset or advantage of an enduring nature was evolved to emphasise the element of a sufficient degree of durability appropriate to the context. 8. It was also held that the phrase enduring benefit is not thinking of advantages that are permanent. There is a difference between the lasting and the everlasting. 9. In the light of the above ratio laid down by the Supreme Court, we are of the view that upgrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit, does not result in acquisition of any capital asset and it merely enhances the productivity or efficiency and hence, has to be treated as revenue expenditure. 5.2 In view of the above, we hold that the Tribunal had rightly held the expenditure incurred on software packages as a revenue expenditure. Question No.2 : Whether in the facts and circumstances of the case, the Tribunal was right in holding that expenditure incurred on construction of compound wall in the place of barbed wire fencing is a revenue expenditure ? 6.1 This issue relates to the asst. yrs. 1995- 96 and 1996-97, during which the claim of the assessee with respect to the expenditure incurred on construction of compound wall in the place of barbed wire fencing as revenue expenditure was disallowed by the Revenue. 6.2 While chalking out the balancing point for deciding the substantial questions of law raised by the Revenue based on the ratio laid down by the House of Lords, Privy Council, the apex Court as well as by other High Courts, referred supra, we have already observed that there cannot be any single rigid formula to find out whether a particular expenditure is revenue in nature or capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure as capital expenditure because the compound wall had been built to provide enduring safety to the assessee. But, we find that the rati laid down by the House of Lords, Privy Council, apex Court as well as by other High Courts, referred supra, was not brought for consideration by the Karnataka High Court while deciding the question raised in the said case. 6.5 Therefore, since the decision of the Karnataka High Court in CIT vs. B.V. Ramachandrappa Sons (supra), is fully supported by the ratio laid down by the House of Lords, Privy Council, apex Court as well as by other High Courts, referred supra, in our considered opinion, in the case on hand, the Tribunal has rightly held that the expenditure incurred on the construction of the compound wall in the place of barbed wire fencing is a revenue expenditure. Question Nos. 3 and 4 : Whether in the facts and circumstances of the case, the Tribunal was right that the expenditure incurred on replacement on UPS system is a revenue expenditure ? Whether in the facts and circumstances of the case, the Tribunal was right that the expenditure incurred on replacement of printer is a revenue expenditure ? 7.1 The reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
