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TMI Blog2014 (9) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Investment Corporation Limited v. CIT, [1997 (4) TMI 5 - SUPREME Court] - considering the principle of commercial trading, when the question is to be addressed, both the CIT(A) as well as the Tribunal rightly held it to be revenue in nature and the same cannot be said to be capital - It is quite apparent that the fees paid for support for LAN work; providing and upgradation of Internet Bandwidth, or for coordination with BSNL for internet connectivity, etc are not having any enduring benefit - If any consultancy is required for the said purpose, the amount clearly would come under the head of Consultancy and that surely could not be considered as capital in nature - the expenditure made was at the best for continuing the benefit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for short] was assigned the function of bulk purchase and sale of power. The return of income filed by the respondentassessee on 31st December 2006 for the A.Y 200607 declared total income at Rs. Nil and the book profit was shown at ₹ 77,76,44,000/- and the same was revised later on on 26th October 2007 on account of some error in computation and the same had been reduced to ₹ 72,68,26,004/-. 2.2 Such return was processed under Section 143 (1) of the Incometax Act, 1961 { the Act for short}. However later, the same was scrutinized and in scrutiny assessment order under Section 143 (3) of the Act came to be passed on 26th December 2008. The total income of the assessee was computed and so was the book profit under Section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A] and dismissed the appeal of the Department, and therefore, the present Appeal raising aforementioned substantial question of law. 7. We have heard extensively learned standing counsel Shri K.M Parikh for the Department and Mr. Manish J. Shah, learned counsel for the respondentassessee. Both have fervently made submissions in support of their respective claims. 7.1 It could be noticed from the material on the record that the respondent no. 1 is one of the resulting companies from the demerger of erstwhile Gujarat Electricity Board into seven companies. A.Y 2006-07 was the first year of the existence of the respondent Company in wake of directions issued by the GERC and Gujarat Electricity Regulation Commission, demerger took place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [A] and Tribunal both have accepted such interpretation by upholding the say of the respondentassessee. 8. It would be profitable to summarily reproduce the details of the legal and professional expenditure amounting to ₹ 660.52 lacs, as was submitted before the Assessing Officer, which reads thus - Particulars Amount Rs. Remarks 1 CRISIL Limited 90,61,969 Consultancy 2 Feedback Ventures Ltd 86,25,925 Consultancy 3 Gujarat Info Petro Ltd 1,10,54,247 IT system Maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Suits. Wherever, there was a legal consultancy or fees paid to the advocates, there is hardly any dispute that such fees cannot be said to have been capital in nature. The only emphasis is on the sum of ₹ 1.10 Crores which has been spent towards IT system by Gujarat Info Petro Limited. As could be noticed, this was for the purpose of supporting LAN networking for providing IT professional facility management service and also for coordination with BSNL for internet connectivity and providing IT providing and upgrading internet bandwith. It can be noted that such consultancy work and preparation of ARR can be said to be connected with the business of the assessee. 9. Before dilating further on this issue, a reference needs to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the said amount to be revenue in nature applying the decision of the Supreme Court in the case of Madras Industrial Investment Corporation Limited (Supra), when the amount has been spread over a period of six years, no error is committed by both the authorities. Once the expenditure is held to be revenue in nature incurred wholly and exclusively for the purpose of business, it can be allowed in its entirety in the year in which it is incurred. However, considering the decision in the case of Madras Industrial Investment Corporation Limited (Supra), when the spreading is done for over a period of six years and as the assesseerespondent has no objection to such revenue expenditure being spread out, though it could have insisted for this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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