TaxTMI 
TaxTMI 
2007 (6) TMI 193
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....6-97, he disallowed the claim of expenditure incurred on replacement of printer and treated the said expenditure as capital expenditure. Aggrieved by the same, the assessee preferred appeals before the Commissioner of Income-tax (Appeals), who, partly allowed the appeals. Against the order of the Commissioner (Appeals), both the assessee and the Revenue preferred appeals before the Income-tax Appellate Tribunal, which, by a common order dated August 30, 2005, held all the issues in favour of the assessee holding the expenditure incurred on software packages, on construction of compound wall, on replacement of UPS and on replacement of printer as revenue expenditure. Hence, the present tax case appeals by the Revenue raising the following substantial questions of law : "1. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred on the software package is a revenue expenditure ? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred on construction of compound wall in the place of barbed wire fencing is a revenue expenditure ? 3. Whether, on the....
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....rinciple laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case." 6. The apex court has further held that there may be cases where expenditure, though referable to or in connection with fixed capital, is nevertheless allowable as revenue expenditure. An illustrative example would be of expenditure incurred in preserving or maintaining capital assets. 7. Reiterating its views expressed in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), su....
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....enue expenditure. 12. That apart, this court in an unreported decision in T. C. (A) No. 1048 of 2006 (between CIT v. Loyal Super Fabrics—since reported in [2008] 304 ITR 78 (Mad)), where the assessee claimed the expenditure incurred while shifting his factory premises from Kovilpatti to Cuddalore, as revenue expenditure, which was disallowed by the Revenue, by judgment dated August 21, 2006, applying the law laid down by the House of Lords in Atherton (H. M. Inspector of Taxes) v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155, 192 (HL), observed as follows (page 83 of 304 ITR) : ". . . the expression 'enduring advantage' availed of by the respondent/assessee by shifting the factory from Kovilpatti to Cuddalore, is a relative term with reference to the survival of the factory in the existing premises. Only if and when the survival in the existing place, but for the shifting, is satisfied, the test of enduring advantage could be applied. If the very survival of the assessee factory in the existing place itself is at stake, the question of applying the test of enduring benefit does not arise, because capital expenditure and revenue expenditure, being not eternal ve....
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.... in acquisition of any capital asset and it merely enhances the productivity or efficiency and hence, has to be treated as revenue expenditure. 15. In view of the above, we hold that the Tribunal had rightly held that the expenditure incurred on software packages as a revenue expenditure. Question No. 2 : "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred on construction of compound wall in the place of barbed wire fencing is a revenue expenditure ?" 16. This issue relates to the assessment years 1995-96 and 1996-97, during which the claim of the assessee with respect to the expenditure incurred on construction of compound wall in the place of barbed wire fencing as revenue expenditure was disallowed by the Revenue. 17. While chalking out the balancing point for deciding the substantial questions of law raised by the Revenue based on the ratio laid down by the House of Lords, Privy Council, the apex court as well as by other High Courts, referred supra, we have already observed that there cannot be any single rigid formula to find out whether a particular expenditure is revenue in nature or capital an....
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.... to provide enduring safety to the assessee. But, we find that the ratio laid down by the House of Lords, Privy Council, apex court as well as by other High Courts, referred supra, were not brought for consideration by the Karnataka High Court while deciding the question raised in the said case. 20. Therefore, since the decision of the Karnataka High Court in CIT v. B. V. Ramachandrappa and Sons [1991] 191 ITR 34, is fully supported by the ratio laid down by the House of Lords, Privy Council, apex court as well as by other High Courts, referred supra, in our considered opinion, in the case on hand, the Tribunal has rightly held that the expenditure incurred on the construction of the compound wall in the place of barbed wire fencing is a revenue expenditure. Questions Nos. 3 and 4 : "Whether, on the facts and circumstances of the case, the Tribunal was right that the expenditure incurred on replacement of UPS system is a revenue expenditure ? Whether, on the facts and circumstances of the case, the Tribunal was right that the expenditure incurred on replacement of printer is a revenue expenditure ?" 21. The reasons that weighed with this court in deciding the i....