TaxTMI 
TaxTMI 
2006 (1) TMI 64
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....business of goods transport, filed its return declaring a total income of Rs. 87,94,210. The Assessing Officer while completing the assessment, inter alia, made the following disallowances/additions: (i) disallowance of telex rent, telephone rent, postal franking machine rent, rates and taxes Rs. 4,74,649, (ii) disallowance of the prepaid expenditure Rs. 59,53,330, (iii) computer software and hardware upgradation expenses was treated as capital expenditure, and (iv) addition under section 41(1) Rs. 6,21,863. Not satisfied with the order of the Assessing Officer dated December 6, 1996, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) partly allowed the appeal holding th....
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....when the amounts were being merely carried forward for years and no details were submitted by the assessee? (iv) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that Rs. 24,12,000 paid to HCL for purchase of new computers allowable as a deduction as a revenue expenditure?" Learned counsel for the Revenue contends that the Tribunal ought to have appreciated that the amounts towards telex rent, telephone rent, postal franking machine rent, rates and taxes were claimed even before they became due. She also contends that even though the assessee follows the mercantile system of accounting, they have n6t charged the prepaid expenses in the profit and loss account, but, have, for the purpose of income-....
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.... appeal, the Commissioner of Income-tax accepted the contention of the appellant. On second appeal, the Tribunal held that in principle, the assessee is entitled to the revenue deduction either on the basis of the 'matching principle' or with reference to section 43B of the Act, that the said sum of Rs. 26,729 is not governed by either, thereby it set aside the decision of the Commissioner of Income-tax, and to that extent, restored the order of the Assessing Officer. The case of the assessee is that they are following the mercantile system of accounting, the amount has been actually incurred for which liability to pay has arisen in that accounting year. There is no dispute in this case that the amount has been actually paid. In ....
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....he apex court has held as follows: "It will be seen that the following words in the section are important: 'the assessee had obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him'. Thus, the section contemplates the obtaining by the assessee of an amount either in cash or in any other manner whatsoever or a benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is sine qua non for the application of this section. The mere fact t....
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....ery was brought into existence. As rightly pointed out by the Appellate Tribunal, there was no complete structural alteration and, on the other hand, there were only changes in certain areas for improving efficiency and achieving good results. The assessee has not achieved any enduring benefit. The Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377, after referring to B.P. Australia Ltd. v. Commr. of Taxation of the Commonwealth of Australia [1966] AC 224 (PC), held that: "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....