2018 (12) TMI 1657 - HC - Income Tax

Nature of expenditure - Animal Breeding Co-operative Development Expenses - revenue or capital expenditure - HELD THAT - The expenditure incurred by the assessee was general in nature and aimed at improving the practices for better fertility amongst milch animals by addressing the issues which caused infertility. The expenditure, therefore, was for the purpose of its business and would not be co-relatable to any tangible returns which can be expected out of such expenditure. Thus, this court has held that such expenditure incurred by the assessee is not capital in nature. The above decision of GUJARAT CO. OP. MILK MARKETING FEDARATION LTD. 2018 (10) TMI 1385 - GUJARAT HIGH COURT therefore, be squarely applicable to the facts of the present case - Decided in favour of assessee.

Summary

Issues:
Appeals filed by revenue under section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal regarding the deletion of Animal Breeding & Co-operative Development Expenses as capital expenditure.

Analysis:
The appeals were filed by the revenue under section 260A of the Income Tax Act against the common order of the Income Tax Appellate Tribunal for assessment years 2008-09, 2010-11, and 2011-12. The main question raised was whether the Tribunal erred in confirming the deletion of disallowance of Animal Breeding & Co-operative Development Expenses of a specific amount as capital expenditure. The senior standing counsel for the appellant reiterated the grounds mentioned in the memorandum of appeal and relied on the reasoning of the Assessing Officer. The Tribunal, in its order, noted that the CIT (Appeals) had followed a previous decision in favor of the assessee, which was upheld by the Tribunal. The Tribunal maintained parity with the decision of the Coordinate Bench and found no reason to interfere with the Commissioner (Appeals) order.

The decision of the Tribunal in a similar case was appealed before the High Court, where it was affirmed that the expenditure incurred by the assessee was general in nature and aimed at improving practices for better fertility amongst milch animals. The High Court held that such expenditure was not capital in nature as it was for the purpose of the business and not directly related to tangible returns. This decision was deemed applicable to the present case. Therefore, based on the judgment and order of the High Court, it was concluded that the impugned order of the Tribunal did not give rise to any substantial question of law warranting interference.

Consequently, the appeals were dismissed as they failed to establish any substantial question of law necessitating intervention.