1988 (3) TMI 115 - AT - Income Tax

Business Expenditure, Development Allowance, Expenditure Incurred, Fixed Assets, Written Down Value

Summary

Issues:
1. Claim for deduction under section 35CC(1).
2. Classification of expenditure as capital or revenue.
3. Deletion of an addition made by the IAC regarding certain outstanding amounts.
4. Allowance of depreciation on fixed assets without reducing it by the amount of subsidy received from the Government.

Analysis:
1. The judgment pertains to appeals by the revenue concerning the assessment against a company for the years 1982-83 and 1983-84, specifically focusing on the claim for deduction under section 35CC(1). The company participated in a rural development program sponsored by the Haryana Government, involving the renovation and extension of a middle school building. The expenditure incurred for this purpose was contested by the revenue, alleging non-compliance with ownership divestment requirements under section 35CC(2). However, the CIT(A) allowed the claim, emphasizing the company's intention to benefit the school and not retain ownership of the asset created.

2. Another issue addressed in the judgment is the classification of an expenditure of Rs. 56,570 as capital or revenue in the assessment year 1982-83. The expenditure was related to the construction of a platform along a railway siding to facilitate unloading of goods. While the IAC considered it capital expenditure, the CIT(A) disagreed, deeming it as revenue expenditure based on previous Tribunal decisions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the expenditure was incurred solely for business purposes without conferring enduring benefits.

3. The judgment also discusses the deletion of an addition made by the IAC concerning outstanding amounts due to certain parties. The IAC contended that the company was not legally obligated to pay these amounts due to the lapse of three years. However, the CIT(A) disagreed and deleted the addition, citing that the limitation period does not extinguish the liability, as established by legal precedents. The Tribunal affirmed the CIT(A)'s decision, emphasizing that the liability persists despite the limitation period.

4. Lastly, the judgment addresses the issue of allowing depreciation on fixed assets without reducing it by the subsidy received from the Government. The CIT(A) ruled in favor of the assessee, following previous Tribunal decisions and High Court judgments that supported the assessee's position. The Tribunal upheld the CIT(A)'s decision, citing precedents from the Andhra Pradesh High Court and the Madhya Pradesh High Court, thereby rejecting the revenue's appeal and affirming the allowance of depreciation without reducing it by the subsidy amount received.