2001 (10) TMI 279 - AT - Income Tax

Summary

Issues:
1. Deletion of disallowance of expenditure on Ghosunda Dam treated as capital expenditure.
2. Disallowance of expenditure on installation of power lines.
3. Disallowance of expenditure on construction of link roads and roads.
4. Disallowance of claim for provision for loss of stocks/stores and spares.
5. Disallowance of deferred revenue expenditure on transfer of a diesel generating set.

Analysis:

1. Deletion of Ghosunda Dam Expenditure Disallowance:
The Revenue appealed against the deletion of the disallowance of expenditure on Ghosunda Dam treated as capital expenditure. The Tribunal noted that the expenditure incurred on the dam alterations did not create a new asset or property acquisition, enabling business operations more efficiently. Citing previous judgments, the Tribunal upheld the CIT(A)'s decision that the expenditure was revenue in nature, not capital.

2. Disallowance of Power Lines Expenditure:
The AO disallowed the expenditure on power lines as capital in nature, but the CIT(A) deleted the disallowance. The Tribunal agreed with the CIT(A) that the power lines were for facilitating routine operations, not creating a new asset. Citing relevant case laws, the Tribunal upheld the CIT(A)'s decision on this issue.

3. Disallowance of Link Roads and Roads Expenditure:
Regarding the construction of link roads and roads, the AO disallowed the expenditure as creating enduring benefits. The CIT(A) directed the AO to allow 1/3rd of the expenses, emphasizing that no new asset was acquired. The Tribunal upheld the CIT(A)'s decision, stating that the expenditure facilitated routine operations without creating new assets.

4. Provision for Loss of Stocks/Stores and Spares:
The AO disallowed the claim for provision for loss of stocks/stores and spares. The CIT(A) deleted the disallowance, citing past practices and internal control measures of the assessee. The Tribunal declined to interfere with the CIT(A)'s decision, noting consistency with previous years.

5. Deferred Revenue Expenditure on Diesel Generating Set:
The AO disallowed the deferred revenue expenditure on the transfer of a diesel generating set. The CIT(A) held that past practice of allowing 1/3rd expenditure should continue. The Tribunal upheld the CIT(A)'s decision, emphasizing that the expenditure was allowable based on the nature of the expense. Citing relevant case law, the Tribunal dismissed the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all issues, emphasizing the revenue nature of the expenditures and consistent past practices.