2010 (3) TMI 234 - HC - Income Tax

Disallowance of expenditure contribution towards PF allowance u/s 36(1)(va) share of employee and share of employer deduction of expenditure incurred in connection with load extension (P&E) and purchase of distribution panel (R&M) enduring nature Held that (1) regarding deduction of contribution towards PF, decision of apex court in the matter of CIT v. Alom Extrusions Ltd., (2009 -TMI - 35073 - SUPREME COURT) to be followed and accordingly decided in favor of assessee (2) question whether expenditure is of capital expenditure or revenue expenditure is necessarily a question of fact. There are various ingredients which constitute the conclusion whether the expenditure is capital in nature or revenue

Summary

Issues:
1. Late deposit of employees' contribution to PF
2. Late deposit of employer's contribution to PF and additional charges
3. Expenditure on load extension and purchase of distribution panel

Analysis:

*Late deposit of employees' contribution to PF:*
The Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) deleting the addition of Rs.13,01,730 made by the Assessing Officer for late deposit of employees' PF contribution. The Revenue argued that the payments made beyond due dates should be treated as income under relevant sections of the Income Tax Act. However, the counsel for the Revenue decided not to press this issue based on a Supreme Court judgment. Consequently, the Tribunal's decision was upheld in favor of the assessee.

*Late deposit of employer's contribution to PF and additional charges:*
Similarly, the Revenue contested the deletion of Rs.12,86,353 for late deposit of employer's PF contribution and additional charges by the CIT (A) and ITAT. The Revenue's argument was based on non-compliance with due dates for payments. However, the counsel for the Revenue also decided not to press this issue, leading to a decision against the Revenue and in favor of the assessee.

*Expenditure on load extension and purchase of distribution panel:*
The Revenue disputed the deletion of Rs.1,22,964 incurred on load extension and distribution panel purchase, arguing it should be treated as capital expenditure. The CIT (A) and ITAT had considered the expenditure as recurring and revenue in nature, leading to its deletion. The Tribunal found that no enduring asset was created by the expenditure, and it was incurred in the ordinary course of business. The High Court upheld the Tribunal's decision, stating that the nature of expenditure is a question of fact. Since all criteria for revenue expenditure were met, the Court found no legal infirmity in the Tribunal's decision, ruling in favor of the assessee.

In conclusion, the High Court dismissed the appeal, upholding the decisions of the ITAT regarding all three issues. The Court emphasized that the nature of expenditure is a factual determination, and in this case, the Tribunal's findings were deemed legally sound.