9911796707
|
Home
Issues Involved:
1. Whether the expenditure incurred by the assessee for the installation of poles and additional power lines is of a revenue nature or capital nature. 2. Whether the Tribunal was justified in not referring the question to the High Court for its opinion. Issue-wise Detailed Analysis: 1. Nature of Expenditure: The primary issue revolves around whether the sum of Rs. 18,501 spent by the assessee on the installation of poles and additional power lines by the Rajasthan State Electricity Board (RSEB) should be classified as revenue expenditure or capital expenditure. The assessee, a registered partnership firm engaged in the manufacture of guwar gum and pulses, incurred this expenditure to enhance its electricity load from 40 H.P. to 290 H.P. for its manufacturing purposes. The Income Tax Officer (ITO) initially classified this expenditure as capital expenditure and disallowed the deduction. However, on appeal, the Appellate Assistant Commissioner (AAC) and subsequently the Income Tax Appellate Tribunal (ITAT) held that the expenditure was of a revenue nature. They reasoned that the expenditure was incurred to make the existing setup of the assessee function more efficiently without creating any new asset, thus qualifying it as revenue expenditure. 2. Justification for Tribunal's Decision: The second issue concerns whether the ITAT was justified in refusing to refer the question of law to the High Court. The Tribunal concluded that the expenditure was revenue in nature, primarily based on the fact that it was incurred to improve the efficiency of the existing profit-making apparatus without creating a new asset. The Tribunal also noted that the finding was essentially a factual determination, and no substantial question of law arose from it. The High Court examined precedents, including CIT v. Chander Bhan Harbhajan Lal [1966] 60 ITR 188 (SC), CIT v. Indian Mica Supply Co. P. Ltd. [1970] 77 ITR 20 (SC), and CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC), which established that if the answer to a question of law is self-evident or concluded by a Supreme Court decision, the Tribunal is not bound to refer the question to the High Court. The High Court also referred to CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) and Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), where it was held that expenditures aimed at enhancing the efficiency of existing machinery or operations are generally considered revenue expenditures. The Court emphasized that if the expenditure is incurred for commercial expediency and to improve the productivity of the existing profit-making apparatus, it should be treated as revenue expenditure. Conclusion: The High Court concluded that the expenditure incurred by the assessee for the installation of poles and additional power lines was indeed revenue in nature. The Court found that the principles laid down by the Supreme Court in Empire Jute Co.'s case were directly applicable, making the answer to the question self-evident. Consequently, the Court held that no substantial question of law arose from the Tribunal's order, and thus, there was no need to direct the Tribunal to refer the question to the High Court. The application made by the Revenue was dismissed.
|
