TaxTMI 
TaxTMI 
2017 (9) TMI 489
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....995-96. 2. While admitting this appeal by order dated 30th November, 2011, this Court framed following questions of law: "1. Whether the Income Tax Appellate Tribunal was correct in law in setting aside the Commissioner of Income Tax (Appeals) order wherein it was held that the method of accounting followed by the assessee in past and accepted in earlier assessment years is such that correct income cannot be properly detected from the accounts and the Assessing Officer was justified in invoking the provisions of First Proviso to Section 145(1) of the Income Tax Act, 1961? 2. Whether the Income Tax Appellate Tribunal was correct in law in deletion addition made by assessing officer on account of sale price in respect of constructed/....
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....m as a part of the contribution to the Shelter Fund, failing which, the land was to be acquired under the Urban Land Ceiling and Regulation Act, 1976 ('ULCRA'). That the land was held as stock-in-trade of the Assessee was not in dispute. However, the AO was of the view that no activity was done on the land during the year in question and, therefore, the expenditure incurred in protecting the land from the acquisition under the ULCRA should be treated as capital expenditure and not as revenue expenditure. It was held that the amount should be capitalised in stock-in-trade. Disallowing the expenditure towards contribution to the Government Shelter Fund, the AO added it back to the total income of the Assessee. 6. After the CIT (A) affirmed....
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....ted. Unlike the Assessee in the present case, the Assessee in that case was not in the real estate business. The question of the Assessee, in that case, holding land as stock-in-trade did not arise. The Bombay High Court held on those facts that that the decision in Empire Jute Co. (supra) would have no application since the payment was made in the capital field "and does not in any manner affect the day to day running of the appellant's business." It was held that, for protecting the land from acquisition, the Assessee there was "getting rid of defective title or a threat to litigation". It was held "threat to a certain acquisition would on a higher footing than a threat to litigation". 10. In the considered view of the Court, the facts....
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....d in Hallstrorm's Property Limited v. Federal Commissioner of Taxation 72 C.L.R. 634 "What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the justice classification of the legal rights, if any, secured, employed or exhausted in the process." The question must be viewed in the larger context of business necessity or expediency. If the outgoing expenditure is so related to the carrying on or the conduct of the business that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a conditi....