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Issues Involved: Determination of whether the admission fee paid by the assessee to a research organization should be treated as revenue or capital expenditure for the assessment year 1972-73.
Summary: The High Court of Delhi considered the question referred by the Income-tax Appellate Tribunal regarding the admission fee paid by the assessee to a research organization. The assessee, a public sector undertaking, paid an admission fee of Rs. 90,000 to Fractionisation Research Inc. for membership, claiming it as revenue expenditure. The Income-tax Officer initially disallowed the claim, treating it as capital expenditure due to the enduring benefit it provided. The Appellate Assistant Commissioner upheld this decision, but the Tribunal disagreed, stating that the fee did not ensure lasting benefits and directed the Income-tax Officer to allow it as revenue expenditure. The court deliberated on whether the membership fee payment was revenue or capital in nature, considering the thin line between the two types of expenditure. Referring to the Assam Bengal Cement Co. Ltd. v. CIT case, the court noted that expenditure for enduring benefit is considered capital, while expenditure for running the business is revenue. The court agreed with the Tribunal's decision, stating that the membership fee did not provide enduring benefits as the receipt of technical information was contingent on annual subscription payments. As such, the membership did not confer an enduring asset or advantage, making it revenue expenditure. In conclusion, the court ruled in favor of the assessee, affirming that the initial membership fee should be treated as revenue expenditure, as it did not result in an enduring benefit for the business. No costs were awarded in this matter.
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