Court affirms business expenses on fertility program as revenue, not capital.

The High Court upheld the Tribunal's decision to allow expenses incurred on a fertility improvement program as revenue expenditure rather than capital. The Court emphasized that the expenditure aimed at business improvement through activities like awareness camps, deworming, vaccination, and feed distribution. The Court found the expenses to be general in nature for business enhancement without providing enduring benefits. The Supreme Court dismissed the Revenue's appeal, affirming the decision that the expenditure was revenue in nature, leading to the dismissal of the appeal.

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Issues:
1. Disallowance of expenses incurred towards fertility improvement program.
2. Nature of expenditure - capital or revenue.

Analysis:
1. The Tax Appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order passed by the Tribunal regarding the disallowance of expenses amounting to Rs. 591.38 Lacs incurred towards a fertility improvement program for the assessment year 2012-13. The Revenue raised two substantial questions of law regarding the deletion of the disallowance by the ITAT. The High Court noted that the questions raised were similar to a previous decision and quoted relevant observations from a case to support its decision.

2. The High Court referred to a previous decision in the case of Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop, Op. Milk Marketing Federation Ltd. where it was observed that the expenditure in question was aimed at improving fertility among milk animals by addressing various issues causing infertility. The activities undertaken as part of the program were detailed, focusing on practices for better fertility, such as holding camps for awareness, mass deworming programs, vaccination, distribution of mineral mixture, and providing balanced cattle feed. The Court concluded that the expenditure was general in nature, aimed at business improvement, and not correlatable to tangible returns. The Court further mentioned that the Assessing Officer did not provide detailed reasons for considering the expenditure as capital in nature.

3. The judgment of the High Court in the aforementioned case was appealed before the Supreme Court, and the Special Leave Petition (S.L.P.) filed by the Revenue was dismissed on 26th April 2019. As a result, the High Court upheld the decision of the Tribunal and dismissed the appeal by the Revenue. The Court concluded that the expenditure incurred towards the fertility improvement program was revenue expenditure and not of a capital nature, as it was for the purpose of the business and did not result in enduring benefits or advantages to the assessee.

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