2013 (10) TMI 417 - AT - Income Tax

Revenue expenditure or capital expenditure - By contributing towards the bridge built by the State Government for replacing annual recurring expenses towards piling up of cement bags to prevent sea water entering into the premises of the assessee during rainy season, the assessee derived benefit of an enduring nature whereas, as per the assessee, the contribution is towards replacement of the recurring revenue expenditure Held that - Assessee does not have any ownership or right over the bridge constructed by the State Government. The assessee contributed towards part of the expenditure for construction of a bridge to prevent the sea water entering into the factory premises of the assessee which naturally hurt the commercial interest of the assessee and for which the assessee was making a certain recurring expenditure annually in preventing the sea water entering into its premises. Replacement of annual recurring expenditure by one time contribution is revenue expenditure - Expenditure did not bring any capital asset of an enduring benefit or advantage and the object of making the payment was purely one of commercial expediency Decided in favor of Assessee.

Summary

Issues involved:
1. Ratification sought in the order dated 16.5.2012 by the assessee for two sets of cross appeals for the assessment years 1996-97 and 1997-98.
2. Non-adjudication of certain grounds in the impugned order.
3. Allowability of expenses on statutory/cost auditors.
4. Disposal of alternative plea regarding the computation of total turnover.
5. Allowability of legal and professional charges.
6. Allowability of ESI contribution.

Detailed Analysis:

Issue 1: Ratification sought in the order dated 16.5.2012
The assessee filed a Miscellaneous Application seeking ratification in the order dated 16.5.2012 of the Tribunal for two sets of cross appeals for the assessment years 1996-97 and 1997-98.

Issue 2: Non-adjudication of certain grounds
The Tribunal failed to dispose of specific grounds raised by the assessee, leading to discrepancies in the impugned order. The Tribunal acknowledged the oversight and rectified the errors in the order.

Issue 3: Allowability of expenses on statutory/cost auditors
The Tribunal decided in favor of the assessee by allowing the claim of expenses on statutory/cost auditors in full for both assessment years 1996-97 and 1997-98 based on previous rulings in the assessee's favor.

Issue 4: Disposal of alternative plea regarding total turnover computation
The Tribunal addressed the alternative plea regarding the computation of total turnover for the purpose of section 80HHC in favor of the assessee, following previous Tribunal decisions and rulings.

Issue 5: Allowability of legal and professional charges
The Tribunal allowed the ground regarding the allowability of legal and professional charges in favor of the assessee for the assessment year 1997-98 based on previous favorable decisions in the assessee's case.

Issue 6: Allowability of ESI contribution
The Tribunal upheld the disallowance of ESI contribution for the assessment year 1997-98 as the payment was made beyond the prescribed period under section 43B of the Income Tax Act.

In conclusion, the Miscellaneous Application filed by the assessee for the assessment year 1996-97 was allowed, while the application for the assessment year 1997-98 was partly allowed, with the order pronouncement on 4th October 2013.