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Issues involved: The judgment addresses the following issues: (1) Deduction of liabilities for calculating capital under section 80J, (2) Allowability of expenditure on construction of a jetty as a deduction in arriving at business income, (3) Claiming one-third of the jetty construction expenditure as revenue expenditure, and (4) Claiming depreciation on the cost of the jetty.
Issue 1: Deduction of Liabilities for Capital Calculation under Section 80J: The Tribunal held that certain liabilities of the assessee should be deducted while calculating the capital employed for the purpose of relief under section 80J. The liabilities amounted to Rs. 13,93,61,581. In light of the decision in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, it was affirmed that these liabilities should indeed be deducted for the purpose of section 80J. Issue 2: Allowability of Jetty Construction Expenditure: The Supreme Court precedent in CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257 was cited, where it was established that expenditure incurred for obtaining a commercial advantage, without securing any capital assets, should be considered revenue expenditure. Applying this principle, the expenditure of Rs. 6,41,193 on constructing the jetty was deemed to be revenue in nature, facilitating trading operations. Therefore, it was allowed as a deduction in arriving at the business income of the company. Issue 3 and 4: As the expenditure on the jetty was considered admissible as revenue expenditure, questions 3 and 4 regarding the claim for one-third of the expenditure as revenue and the claim for depreciation on the jetty were not addressed in the judgment. Conclusion: The judgment upheld the deduction of liabilities for capital calculation under section 80J and allowed the expenditure on jetty construction as a deduction in determining the business income, following the precedent that such expenditure for commercial advantage is revenue in nature.
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