2013 (10) TMI 1290

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..... during benefit in the present case is only "relative". It is related to safeguarding and protection of the cable laid down underground or drawn over the electric poles. If an external agency interferes and the cables are damaged, the assessee has no course of action. The assessee can neither retrieve the cable profitably, nor can it protect the cables by itself. In these circumstances, the cost involved in laying the cables is a sunk cost even though the assessee may get the benefit out of the cable for a period of more than one year. That longevity of the facility alone cannot make the cable as a capital asset in the hands of the assessee. The assessee does not have physical possession of the cable and once laid down, it is gone for all. - .....

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..... g on its business. The Assessing Officer, on the other hand, held that the assessee had secured an enduring benefit by laying down the cables and as such, the expenditure incurred was capital in nature. He accordingly disallowed the cable laying expenditure claimed by the assessee and treated it as capital expenditure and so allowed depreciation of 25 per cent. 4. In the first appeals, the Commissioner of Income-tax (Appeals) accepted the contention of the assessee and held that the cable laying expenditure was revenue in nature and therefore, deductible while computing the income of the assessee. The Revenue is aggrieved and therefore these appeals before us. 5. We heard Shri Shaji P. Jacob, the learned Additional Commissioner of Inc .....

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..... the assessee would not be having any control or title on such cables. Thus the cables might give enduring benefit beyond one year but the cables cannot be repossessed, reused or resold. The test of repossession or reuse or resale is the one that determines the capital nature of goods. In this case, all these are missing and hence, the additions are found to be not sustainable. 7. We agree with the findings of the Commissioner of Income-tax (Appeals) that even though the cables are laid by the assessee for carrying on business, the cables laid down by the assessee did not satisfy the basic features of a capital asset. The question of enduring benefit in the present case is only relative . It is related to safeguarding and protection of .....

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