CIT v. Denso India Ltd.
INCOME TAX ACT, 1961
Capital or revenue expenditure - Allowability -Expenditure incurred for setting up a separate cell -Nature of expenses
Assessee was engaged in business of manufacture of auto electrical parts and for this purpose it was importing several components. In place of importing components, it planned for components locally procured and indigenously manufactured, and for it, a separate cell was set up for developing import substitute components. Assessee incurred expenditure and in its books of account it was under head 'Deferred revenue expenditure'. It claimed said expenditure. AO disallowed the expenses on account of capital expenditure. Held: Merely because the benefit of expenditure involved in this case was such that benefit would also be available later, was not a good enough reason to treat expenditure as a capital expenditure. Therefore, expenditure in question was allowed as revenue expenditure under section 37(1).
Income-tax Act, 1961, Section 37(1)
Decision: In favour of assessee.
Case Law Analysis:Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802 (SC), CIT v. Printpack Machinery [2001] 248 ITR 684 (Delhi), Empire Jute Company v. CIT [1980] 124 ITR 1 (SC), CIT v. J.K. Synthetics Ltd. [2009] 309 ITR 371 (Delhi) and CIT v. Usha Iron Ferro Metal Corpn. Ltd. [2008] 296 ITR 140 (Delhi)