1994 (7) TMI 43 - HC - Income Tax

Allowable Expenditure Business Expenditure Capital Expenditure Capital Or Revenue Expenditure Income Tax Act

Summary

Issues:
1. Depreciation on copper rolls
2. Shortage on copper rolls
3. Nature of development charges paid to RIICO
4. Nature of payment made to RIICO for water-treatment plant
5. Depreciation on printing tables
6. Allowability of payment made for legalizing unauthorised construction

Depreciation on Copper Rolls:
The Tribunal considered whether the assessee is entitled to depreciation on copper rolls at 30%. The court referred to a previous decision and held that depreciation on printing rolls is not allowable at 30%. Therefore, the assessee was not entitled to depreciation on copper rolls at 30%.

Shortage on Copper Rolls:
The Income-tax Officer disallowed the claim of shortage on copper rolls, stating it would be covered by depreciation. The Tribunal found that since copper rolls are capital assets, the assessee cannot claim shortage separately. The expenditure was found not justified, and the assessee was not entitled to shortage over and above the depreciation.

Nature of Development Charges:
The assessee claimed development charges paid to RIICO as revenue expenditure. The Tribunal held the charges to be capital in nature, following a previous decision. The expenditure was considered capital as it was incurred for developing the industrial belt according to standards set by RIICO.

Nature of Payment for Water-Treatment Plant:
The payment made to RIICO for the water-treatment plant was deemed revenue expenditure by the Tribunal. However, the court held that if the plant was installed by the assessee, it would be capital expenditure. Since RIICO installed the plant for the benefit of multiple entrepreneurs, the payment was considered capital expenditure.

Depreciation on Printing Tables:
The assessee claimed depreciation on printing tables at 15%. The Tribunal allowed the depreciation as the tables came into contact with corrosive chemicals during printing. The court upheld this decision, stating it as a finding of fact.

Allowability of Payment for Legalizing Unauthorised Construction:
The payment made to RIICO for legalizing unauthorised construction was considered business expenditure by the Tribunal. The court agreed that the payment was to facilitate business operations and was allowable under section 37 of the Act. The amount paid was solely for business purposes, making it an allowable expenditure.

In conclusion, all six questions referred were answered in accordance with the detailed analysis provided for each issue without any costs awarded.