2018 (9) TMI 1845 - AT - Income Tax

Allowability of expenditure u/s 37 - Disallowance on account of expenses claimed against animal breeding and cooperative development expenses - treating these expenses to be revenue in nature without appreciating the fact that incurring of such expenses resulted in benefit of enduring nature - capital expenditure OR revenue expenditure - HELD THAT - Issue was adjudicated in favour of the assessee from AY 2008-09 onwards in the decisions concerning the earlier assessment years, the action of the AO in making disallowance of the expenses incurred towards an animal breeding and cooperative development expenses on the ground that expenses resulted in benefit of enduring nature and therefore capital in nature, was set aside and it was concurrently held by the first appellate authority as well as the second appellate authority that such expenditure are revenue in nature. Thus, the issue is no longer resintegra. Consistent with the view taken by the co-ordinate bench in earlier years 2018 (4) TMI 1555 - ITAT AHMEDABAD the appeal of the Revenue is found to be devoid of any merit. - Appeal of the Revenue is dismissed.

Summary

Issues:
Appeal against CIT(A) order on expenses claimed for animal breeding and cooperative development.

Analysis:
The appeal was filed by the Revenue against the order of the CIT(A) concerning the assessment year 2012-13. The main ground of appeal was the disallowance of expenses amounting to ?3,95,49,392 made by the Assessing Officer (AO) on the basis that the expenses were capital in nature due to resulting benefits of enduring nature. The AR for the assessee pointed out that a similar issue had been decided in favor of the assessee in earlier years. The AR argued that since the issue had already been adjudicated in favor of the assessee by both the CIT(A) and the ITAT in previous years, there was no need for fresh discussion. The DR, on the other hand, relied on the AO's order.

Upon reviewing the decision of the co-ordinate bench in the assessee's case for the assessment year 2010-11, it was found that the issue had been consistently decided in favor of the assessee from the assessment year 2008-09 onwards. The AO's disallowance of the expenses related to animal breeding and cooperative development was set aside in earlier years, with both the CIT(A) and the ITAT holding that such expenses were revenue in nature. As a result, the issue was considered settled law, and the appeal of the Revenue was deemed to lack merit. Consequently, the appeal of the Revenue was dismissed.

This judgment highlights the importance of consistency in decision-making and the significance of precedent in tax matters. It underscores the principle that expenses should be categorized based on their nature, with expenses resulting in enduring benefits considered capital in nature, while revenue expenses are those incurred in the ordinary course of business operations. The decision also emphasizes the role of prior rulings in shaping current outcomes, demonstrating the impact of past decisions on present cases.