2010 (9) TMI 918

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....ng the previous year. 2. When the matter came up for admission, we have heard standing counsel appearing for the appellant and have also gone through the orders of the Income-tax Appellate Tribunal and other authorities who held in favour of the assessee. We notice that the payment under the voluntary retirement scheme is covered by a later amendment made in the Income-tax Act, 1961 (hereinafter called "the Act"), by introducing section 35DDA with effect from April 1, 2001, wherein the provision is to allow the expenditure through amortisation that is, in a phased manner by allowing the expenditure equally in the course of five assessment years. Even though the position is now settled through a statutory amendment, the question to be con....

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....r deduction of any expenditure incurred for the purpose of business or profession other than,  (i) expenditure which is of a capital nature ;(ii) expenditure incurred for personal purpose of the assessee. 4. Admittedly, the payment made under the voluntary retirement scheme to allow premature retirement of employees is not a personal expenditure of the assessee and, therefore, the only question to be considered is whether the expenditure by way of payments made under the voluntary retirement scheme for retirement of employees is a revenue expenditure and not a capital expenditure. The first decision on the subject appears to be that of the Bombay High Court in CIT v. Bhor Industries Ltd. reported in  [2003] 264 ITR 180 (Bom)....

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..... Certainly, expenditure incurred for creation of an asset will be capital in nature and so much so, there cannot be any controversy on the finding in this regard. However, the question is whether the expenditure which does not lead to creation of fixed asset is always revenue expenditure. In our view, in order to constitute an expenditure as a capital expenditure, creation of asset is not mandatory. It is the settled position that expenditure incurred for achieving the benefit of an enduring nature is also capital in nature. Applying this test, we feel the purpose of introduction of the voluntary retirement scheme which is to reduce the staff strength, is to achieve viability and profitability of the industry and the in general of the asse....