1998 (12) TMI 62 - HC - Income Tax

Court upholds capital expenditure treatment for Stock Exchange fund contributions

The court dismissed the challenge against orders confirming contributions to Stock Exchange building fund as capital expenditure for assessment periods ... Business Expenditure, Writ Issues involved: Challenge against orders passed by Commissioner of Income-tax in revision u/s 264 confirming assessment orders for periods 1992-93 and 1995-94 regarding contributions to Stock Exchange building fund being treated as capital expenditure.Summary:The petitioner, a share broker and member of Cochin Stock Exchange, contested orders treating contributions to Stock Exchange building fund as capital expenditure. The petitioner initially claimed the contributions as revenue expenditure but later agreed to treat them as capital expenditure. The main issues were whether the petitioner could retract his admission and whether the contributions were revenue expenditure deductible u/s 37 of the Income-tax Act.Regarding the first issue, the court found that the petitioner voluntarily agreed to treat the expenditure as capital before tax authorities without evidence of coercion. The court deemed the petitioner's attempt to resile from the admission as self-serving and not permissible.On the second issue, the court noted that the petitioner failed to establish the contributions as revenue expenditure wholly and exclusively for business purposes. The court cited precedent emphasizing that the nature of the transaction determines capital or revenue expenditure. As the petitioner had conceded to the capital expenditure status before, the court found no error in the assessment orders.The court, based on previous judgments and lack of grounds for interference, dismissed the original petition, emphasizing that there was no legal basis to overturn the orders confirming the treatment of contributions as capital expenditure.