2013 (7) TMI 1095 - HC - Income Tax

Expenses incurred on replacement of electricity meters - Capital or Revenue nature - HELD THAT- They are of revenue nature aselectricity meters have to be replaced periodically and incurred for the purposes of carrying out business more efficiently. The remaining Questions (b) to (e) are in favour of the assessee by the decision of this Court rendered on 26 June 2013 in Income Tax Appeal No.1688 of 2009.

Summary

Issues involved:
The judgment involves various issues including the classification of expenditure as capital or revenue, entitlement to deduction u/s. 80IA, allocation of expenditure u/s. 14A, disallowance of expenditure on community development, recomputation of deduction u/s. 80IA, applicability of Section 115JB, and deletion of interest charged u/s. 234D.

Classification of Expenditure (Question a):
The Tribunal held that expenditure on replacement of electricity meters is revenue expenditure, not capital, as it is necessary for business operations and does not increase capacity. The Supreme Court's test of enduring benefit is not conclusive. The Tribunal's decision from earlier years applies to the current assessment year. The appeal by the revenue was dismissed as the finding was not shown to be erroneous.

Entitlement to Deduction u/s. 80IA (Questions b-e):
The questions were found in favor of the respondent-assessee based on a previous decision by the Court. The issues were considered settled and not entertained further.

Applicability of Section 115JB and Interest Deletion (Questions f-g):
The Court admitted the appeal on these questions. It will be heard along with another income tax appeal. The questions pertain to the applicability of Section 115JB and the deletion of interest charged u/s. 234D for the assessment year 2002-03.