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2014 (3) TMI 61 - AT - Income TaxNature of Expenses Capital OR Revenue expenditure maintenance of market yard - Held that - The aim and object of the expenditure has to be looked into, which would determine the character of the expenditure, whether it is a capital expenditure or a revenue expenditure - the assessee earns income by making available marketing sites in various marketing yards - The expenses incurred above are incurred for facilitating proper maintenance of the same and thus the assessee earns income by doing so - The decision in CIT Versus AGRICULTURAL PRODUCE MARKETING COMMITTEE 2010 (9) TMI 156 - DELHI HIGH COURT followed the expenditure incurred by the assessee was absolutely in the realm of revenue expenditure as there has been no construction which had enduring benefit to the assessee - it was difficult to say that the repairs carried out by the asseesee have any enduring benefit to its assets - the expenditure was recurring in nature and the assessee was required to do the same to carry out the business Decided against Revenue. Depreciation on capital expenses not allowed Held that - The expenditure which is in the nature of capital is entitled to depreciation in accordance to law and the AO is directed to give consequential depreciation to the capital expenditure for which depreciation was not given - Other than that there was no merit in the contention of the assessee that certain items for which expenses was made by them was erroneously held as capital in nature by the CIT(A) there was no infirmity in the order of the CIT(A) Decided partly in favour of Assessee.
Issues Involved:
1. Classification of expenses as capital or revenue in nature. 2. Entitlement to exemption under section 10(20) of the Income Tax Act. 3. Allowance of depreciation on capital expenditure. 4. Disallowance of contributions made to Delhi Agricultural Marketing Board (DAMB). 5. Charging of interest under sections 234-A, 234-B, and 234-C of the Income Tax Act. Issue-wise Detailed Analysis: 1. Classification of Expenses as Capital or Revenue in Nature: The primary contention revolves around whether certain expenses incurred by the assessee for the maintenance of market yards (civil and electrical) should be classified as capital or revenue in nature. The CIT(A) allowed a portion of these expenses as revenue expenditure while treating others as capital. The Tribunal upheld the CIT(A)'s decision, noting that the aim and object of the expenditure determine its nature. The Tribunal referenced the Supreme Court's decision in Assam Bengal Cement Co. Ltd. and Lakshmiji Sugar Mills Co Pvt Limited, which distinguished between capital and revenue expenditure based on whether the expenditure brings an enduring benefit or facilitates the running of the business. The Tribunal concluded that the expenses incurred for repairing roads, footpaths, and other facilities were revenue in nature, as they were recurring and necessary for the assessee's business operations. 2. Entitlement to Exemption under Section 10(20) of the Income Tax Act: The assessee claimed exemption under section 10(20) of the Act, arguing that it was a local authority. This claim was initially accepted by the Tribunal and the Delhi High Court but ultimately rejected by the Supreme Court. Consequently, the assessee's claim for exemption was disallowed by the Assessing Officer (AO). 3. Allowance of Depreciation on Capital Expenditure: For the assessment year 2006-07, the assessee argued that depreciation should be allowed on capital expenditure added to the income. The Tribunal directed the AO to grant depreciation on capital expenditure in accordance with the law, acknowledging that the assessee is entitled to depreciation on such expenditure. 4. Disallowance of Contributions Made to Delhi Agricultural Marketing Board (DAMB): The AO disallowed the contributions made to DAMB, but the CIT(A) treated these contributions as statutory payments and directed the AO to delete the addition. The Tribunal upheld the CIT(A)'s decision, recognizing the statutory nature of these contributions. 5. Charging of Interest under Sections 234-A, 234-B, and 234-C of the Income Tax Act: The assessee contested the charging of interest under sections 234-A, 234-B, and 234-C. The Tribunal did not find merit in this contention and upheld the charging of interest as per the provisions of the Income Tax Act. Conclusion: The Tribunal dismissed the appeals of both the assessee and the Revenue for the assessment year 2004-05. For the assessment year 2006-07, the Tribunal partially allowed the assessee's appeal, directing the AO to grant depreciation on capital expenditure, but dismissed the Revenue's appeal. The Tribunal's decision was pronounced in the open court on 20.12.2013.
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