The Tax Publishers2020 TaxPub(DT) 4671 (Mad-HC) : (2020) 429 ITR 0244 : (2021) 277 TAXMAN 0454

INCOME TAX ACT, 1961

Section 37(1)

Where assessee paid a sum for establishing additional infrastructure facility to ensure uninterrupted power supply, even though assessee parted with substantial funds to supplier (F), the capital asset continued to remain the property of supplier, therefore, expenditure was held to be in revenue field.

Business expenditure - Capital or revenue expenditure - Establishment of additional infrastructure facility to ensure uninterrupted power supply -

Assessee paid a sum for getting continued supply of electricity and to establish additional infrastructure facility to ensure uninterrupted power supply to the assessee. Revenue was aggrieved by order of Tribunal, wherein lump sum payment made by assessee for development of infrastructure for uninterrupted power supply was held to be revenue expenditure under section 37(1). Revenue contended that lump sum expenditure was incurred for obtaining uninterrupted power supply for 14 years and same could not be allowed in one year as same would result in distorted profit of the assessee. Held: Even though assessee parted with substantial funds to supplier (F), the capital asset continued to remain the property of supplier. Issue as to whether for the same asset, supplier claimed depreciation and assessee was claiming deduction under section 37, could not be a relevant factor. Tribunal rightly examined the nature of transaction and held that expenditure to be in revenue field.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11



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