2019 (7) TMI 1440 - HC - Income Tax

Characterization of expenditure - expenditure incurred by way of renovation and Interior work of Stadium, construction of foundation of camera, staircase, control room, fabrication and erection of structural steels, fixing of MS sliding gates, different pipes for sprinkler system in the main ground, excavation of soil, purchasing of LED Reply screen, electric materials etc. for upgrading the stadium in accordance with ICC Standards - revenue or capital expenditure - HELD THAT - Perusal of the materials on record and in particular the impugned judgment of the Tribunal would show that the respondent-assessee had organized several matches of ICC Champion s Trophy. In order to do so, the assessee had undertaken upgradation of the stadium which included arranging the facility for training and warm up areas, providing passages, walk ways, staircase etc., improving the media facility, installation of electronic score board and other similar facilities. The board had also expended in providing proper security and car parking facilities. It was in this background the Tribunal had held that the expenditure was revenue in nature. Looking to the nature of expenditure, it can be seen that the assessee did not create a new asset or create a source of enduring benefit. Essentially, the expenditure was for upgradation of the existing facilities. No question of law arises.

Summary

Issues:
1. Whether expenditure incurred for renovation and upgrading of a stadium constitutes capital expenditure?
2. Whether the expenditure for upgradation of the stadium is of enduring nature?
3. Whether the expenditure incurred by the Cricket Club of India for organizing matches of ICC Champion’s Trophy is revenue or capital in nature?

Issue 1:
The High Court considered whether the expenditure incurred for renovation and upgrading of a stadium by the Cricket Club of India constitutes capital expenditure. The Assessing Officer disallowed the expenditure, considering it capital in nature. The CIT (Appeals) partially allowed the claim, but the Tribunal dismissed the revenue's appeal. The Tribunal found that the expenditure was for upgradation of existing facilities, not creating a new asset. The High Court agreed with the Tribunal's decision, stating that no enduring benefit was created. Therefore, the Court held that the expenditure was revenue in nature, leading to the dismissal of the Income Tax appeal.

Issue 2:
The Court analyzed whether the expenditure for upgradation of the stadium by the Cricket Club of India was of enduring nature. The Tribunal's judgment highlighted that the expenditure was for improving existing facilities, such as training areas, media facilities, security, and car parking. The Court noted that the nature of the expenditure did not result in the creation of a new asset or a source of enduring benefit. Consequently, the Court concluded that the expenditure was not of enduring nature, supporting the Tribunal's decision that the expenditure was revenue in nature.

Issue 3:
The Court examined whether the expenditure incurred by the Cricket Club of India for organizing matches of ICC Champion’s Trophy was revenue or capital in nature. The Tribunal's findings revealed that the expenditure was primarily aimed at enhancing the stadium's facilities to meet ICC standards for hosting matches. The expenditure included various upgrades like electronic scoreboards, security arrangements, and training areas. The Court agreed with the Tribunal's assessment that the expenditure was revenue in nature as it focused on improving existing facilities rather than creating new assets. Therefore, the Court dismissed the Income Tax appeal, upholding the Tribunal's decision on the nature of the expenditure.