2013 (4) TMI 570 - HC - Income Tax

Whether garden expenses and foreign registration fees can be treated as revenue expenditure Held that - It cannot be gainsaid that the expenses for garden had nexus with business activity. It can well be treated for business purpose and can be claimed as revenue expenditure. The expenses for foreign country registration was for business purpose only, because the same helped the assessee in marketing its products in the foreign countries and promoting the sales. The Tribunal committed no error. Its findings are proper and in no way are perverse. No substantial question of law arises for consideration. Dismissed.

Summary

Issues:
1. Disallowance of garden expenses as revenue expenditure
2. Treatment of foreign registration fees as revenue expenses

Analysis:
1. The appellant raised two substantial questions of law concerning the disallowance of garden expenses and foreign registration fees. The Assessing Officer disallowed Rs. 24,32,322 for garden expenses and Rs. 28,14,355 for foreign registration fees. The Commissioner of Income Tax (Appeals) allowed both disallowances based on the explanation provided by the assessee.

2. The assessee justified the garden expenses as necessary for controlling pollution inside the factory premises. The CIT(A) noted that similar expenses were treated as revenue expenditure in a previous assessment year. Regarding foreign registration fees, the CIT(A) considered them as essential for marketing products overseas and allowed them as revenue expenses.

3. The Tribunal upheld the CIT(A)'s decision on both counts. It confirmed that the garden expenses were business-related, aiding in pollution control due to the release of pollutants. Similarly, the foreign registration fees were crucial for marketing products overseas, leading to a significant increase in exports over the years.

4. The Tribunal justified its decision by emphasizing the business purpose behind both expenses. The garden maintenance directly related to business activities by controlling pollution, while foreign registration fees facilitated product marketing and sales promotion in foreign countries.

5. The Tribunal's findings were deemed appropriate as both expenses had a clear nexus with business operations. The judgment concluded that no substantial question of law arose for consideration, ultimately dismissing the Tax Appeal.

In summary, the High Court upheld the Tribunal's decision, allowing the garden expenses and foreign registration fees as revenue expenditure due to their direct relevance to business activities and sales promotion efforts.