2022 (10) TMI 687

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.... stock? 3. Whether on the facts and circumstances of the case, the Tribunal was right in treating the expenses in connection with construction and handing over of transmission lines/substation to Karnataka Government was treated as revenue expenditure? 4. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the date on which the advance tax cheque was tendered to the bank for payment i.e., 15.06.2000 had to be taken for consideration and accordingly the date of clearance being 16.6.2000 cannot be taken and accordingly levy of interest u/s 234C is not warranted?" 3. This Court by order dated 22.03.2010 admitted the appeal in T.C.A.No.22 of 2010 on the third question alone and held as follows: Questions 1 and 2 are covered by the decision in the assessee's own case against the Revenue in T.C.(A).Nos.582and 583 of 1995. Question No.4 is already decided in 128 ITR 617 (Commissioner of Income-tax, Tamil Nadu-I vs. Kumudam Publications (P) Ltd.). Hence, this Tax Case Appeal is admitted on the third question alone. 4. Similarly, in TCA.No.140 of 2010, this Court admitted the appeal on the above said third question of law. ....

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....ight to make use of the asset for facilitating efficient conduct of its business and making it more profitable but without getting any advantage of enduring benefit to itself. He did not acquire any asset as envisaged in Section 32 of the Act. Therefore, the expenditure incurred was of revenue nature..." 7. The view of the Commissioner (Appeals) has been confirmed by the Tribunal. 8. Now, it is trite law as laid down by the House of Lords in British Insulated and Helsby Cables Ltd Vs Atherton [1925] 10 TC 155 (HL), that where an expenditure is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, there is very good reason, in the absence of special circumstances leading to an opposite conclusion, to treat it as an expenditure properly attributable not to revenue but to capital. 9. In Empire Jute Co Ltd Vs Commissioner of Income Tax [1980] 124 ITR 1/3 Taxman 69, the Supreme Court held that the true test is to consider 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: ....

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....ble to make any distinction based on that ground. The true test is whether the expenditure which has been incurred by the assessee is for the purpose of obtaining a commercial advantage in the capital field. In the present case, it is clearly evident that the power transmission lines which were laid by the assessee were, upon erection, to constitute the exclusive property of UPPCL. UPPCL was the only consumer of the electricity generated by the assessee.. The assessee incurred the expenditure to facilitate its own business. The fixed capital of the assessee was untouched and there was no capital accretion for the assessee. This was exactly the position before the Supreme Court in L H Sugar Factory (supra). 12. At this stage, it would be appropriate for the Court to also make a reference to a decision of the Gujarat High Court in Commissioner of Income Tax Vs Gujarat Mineral Development Corporation [1981] 132 ITR 377/[1980] 4 Taxman 526 where the assessee had laid out an expenditure which was paid over to the Gujarat Electricity Board for laying electric transmission lines and other ancillary facilities. The Gujarat High Court took note of the fact that the transmission lin....

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....e (1980) 124 ITR 1, it is obvious that, in spite of the presumption, it can be held on the facts and circumstances of this case that the expenditure was not of a capital nature but was of a revenue nature." 13.The decision of the Gujarat High Court has been confirmed by the Supreme Court in Commissioner of Income Tax Vs Gujarat Mineral Development Corporation. [2001] 249 ITR 787/119 Taxman 277. A similar principle has been laid down in a Division Bench judgment of the Madras High Court in Commissioner of Income Tax Vs Coats Viyella India Ltd. [2002] 253 ITR 667/124 Taxman 797, where the expenditure incurred by the assessee by way contribution to the government for building a new bridge for providing access to the factory of the assessee was held to be on the revenue account. The Madras High Court held as follows: Here, the bridge is one, which is built across the river. The bridge is not owned by assessee. It is built by the government, and the assessee does not acquire any rights of ownership over the bridge in the short-term or in the long run by reason of the contribution that it agreed to pay towards the construction of the bridge. So far as the assessee is co....