TaxTMI 
TaxTMI 
2015 (5) TMI 316
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....sp; "Whether, on the facts and in the circumstances of the case and in law, the hon'ble Income-tax Appellate Tribunal was correct in hold ing that the mere fact that the benefit from recurring expenditure shall be available to the appellant in succeeding assessment years cannot be a ground to hold such expenditure as capital expenditure ?" 3. On July 21, 2009, the appeal was admitted to consider the question formulated in the order dated April 28, 2009, which reads thus : "Learned counsel for the appellant states that only such expen diture incurred on agriculture that results in raising a current crop, can be treated as revenue expenditure, whereas the expenses incurred to reclaim the land must be treated as capital expenditure." 4. A few facts relevant for the decision of the controversy involved as narrated in I. T. A. No. 163 of 2009 may be noticed. The assessee is a Punjab Government undertaking engaged in the business of contract farming, procurement of food grains, marketing and export, etc. A return declaring income of Rs. 1,50,75,000 was filed by the as....
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....ed on the noting of the Punjab Government dated July 28, 2005, wherein it was stated that the land was lying more or less fallow and was not being put to any alternative use. Learned counsel for the assessee, thus, claimed that these expenses rightly been allowed by the Tribunal as revenue expenditure. 8. After hearing the learned counsel for the parties, we do not find any merit in the appeals. 9. The core issue that arises for consideration in these appeals relates to whether, in the facts and in the circumstances, the expenditure incurred by the assessee for the development of the land is capital expenditure or revenue expenditure. 10. An expenditure would qualify for deduction under section 37 of the Act if it is incurred wholly and exclusively for the purpose of the business. It should be revenue in nature as distinguished from capital expenditure. There is no standard formula providing for determination of an expenditure to be capital or revenue. Every case is to be adjudicated on its own facts and the expenditure is to be looked from commercial point of view. The Supreme Court in K. T. M. T. M. Abdul Kayoom v. CIT [1962] 44 ITR 689 (SC) noticed that there can be no rule o....
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....clu sion) for treating such an expenditure as properly attributable not to revenue but to capital.' " 12. A Division Bench of this court in CIT v. Varinder Agro Chemicals Ltd. [2009] 309 ITR 272 (P&H) recorded that there is no rigid rule to determine when expenditure is capital or revenue but generally where advantage is for enduring nature, it would be capital and where the same is for running the business, it would be revenue. The following observations in this regard are relevant (page 274) : "It is well-settled that for claiming deduction, apart from expen diture being for business, the same has to be revenue expenditure. Though, there is no rigid rule to determine when expenditure is capi tal or revenue, generally acceptable test is where advantage is for Page No : 0105 enduring nature, it may be capital expenditure, while if the expen diture is for running of the business, it is of revenue nature. Some of the leading judgments of the hon'ble Supreme Court dealing with the issue are : Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34, CIT v. Vazir Sultan and Sons [1959] 36 ITR 175, Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) ; [1980] 4 SCC 25, Alembic Chem....
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....n any particular case might reasonably be held to fall. These tests are efficacious and serve as useful servants but as masters they tend to be over exacting. (g) The idea of 'once for all' payment and 'enduring benefit' are not to be treated as something akin to statutory conditions nor are the notions of 'capital' or 'revenue' a judicial fetish. What is capital expenditure and what is revenue expenditure are not eternal verities but must need be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an enduring nature' is evolved to emphasise the element of a sufficient degree of durability appropriate to the context. (h) There is also no single definitive criterion which by itself is determinative whether a particular outlay is capital or revenue. The 'once for all' payment test is also inconclusive. What is relevant is the purpose of outlay and its intended object and effect, considered in a common sense way having regard to the business realities. In a given case, the test of 'enduring benefit' might break down." 14. Examining the factual matrix in the present ap....
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....hat such expenditure is capital expenditure. The details of the expenditure would show that they are tractor hiring charges ; jeep vehicle expenditure ; staff welfare ; HSD ; preparation and renewal of seeds and electricity charges. In our considered opinion, none of the expenditure is of a nature of providing an advantage in the capital field, hence, it cannot be held that they are capital expenditure. 10. Moreover, in this case, we have also perused the main objects of the assessee-appellant company as emerging from the memorandum of association. A perusal of the aforesaid reveals that the appellant company has been set up by the Punjab Government to undertake work of land development, seed multiplication, processing and its distribution and sale. Further, the appellant is empowered to under take, assist and promote operations pertaining to agriculture, horti culture, fisheries, poultry, piggery, sheep and dairy and other related activities. The appellant company is also empowered to process, sale, purchase, import export, etc., and otherwise deal in all kinds of produce of agriculture, horticulture, etc. In sum and substance, the main objectives of the appellant company are to ....