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TMI Blog2015 (5) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... rds high value and less water intensive crops. Evidently, the Punjab Government has provided the land in question to the appellant on lease to carry out seed multi plication programme. In fact, the annual report and accounts of the appellant company pertaining to the previous year relevant to the assessment year under consideration contain a proclamation of the progress in the diversification through contract farming carried out. It illustrates the new crops promoted and also the increase in the acre age of the crop so grown. By referring to the aforesaid, we are only trying to point out that the objective of the assessee in putting to use the land in question was for the furtherance of its objects of business. Thus the expenditure was revenue in nature. See Empire Jute Co. [1980 (5) TMI 1 - SUPREME Court ] and Alembic Chemical Works Co. Ltd.'s [1989 (3) TMI 5 - SUPREME Court ] cases - Decided in favour of assessee. - ITA No.163 of 2009 (O&M) - - - Dated:- 18-9-2014 - MR. AJAY KUMAR MITTAL AND MR. FATEH DEEP SINGH, JJ. For the Appellant : Ms. Urvashi Dhugga, Advocate For the Respondent : Ms. Radhika Suri, Sr. Advocate with Ms. Rinku Dahiya, Advocate, Mr. Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 4.43 lakhs had been allowed as revenue expenditure and the balance expenses of ₹ 33.74 lakhs were disallowed being in the nature of capital expenses for developing the land. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) ( the CIT(A) ). Vide order dated April 25, 2008, annexure A.2, the Commissioner of Income-tax (Appeals) dismissed the appeal holding that the expenditure incurred to make a barren land into fertile land was capital in nature. The assessee filed further appeal before the Tribunal. Vide order dated September 30, 2008, annexure A.3, the Tribunal allowed the appeal holding that the land was fallow and not barren and the mere fact that the benefit from the expenditure shall be available to the assessee in succeeding assessment years could not be a ground to hold such expenditure as capital expenditure. Hence, the instant appeal by the Revenue. 5. We have heard learned counsel for the parties and perused the record. 6. Learned counsel for the Revenue submitted that the expenditure which was incurred by the assessee was of capital nature. Drawing support from the judgment of the apex court in CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the colour of another. To decide, therefore, on which side of the line a case falls, its broad resemblance to another case is not at all decisive. What is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired and their relation inter se and this is the only key to resolve the issue in the light of the general principles, which are followed in such cases. 11. The test for categorising a particular expenditure to be revenue or capital has been laid down in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC) as under (page 10) : The decided cases have, from time to time, evolved various tests for distinguishing between capital and revenue expenditure but no test is paramount or conclusive. There is no all embracing formula which can provide a ready solution to the problem ; no touchstone has been devised. Every case has to be decided on its own facts, keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. But a few tests formulated by the courts may be referred to as they might help to arrive at a correct decision of the controversy between the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee that brings the case within the principle laid down in the enduring benefit test. (c) If the advantage consists of merely in facilitating the assessee's trading operations or enabling the management or conduct of the assessee's business to be carried on more efficiently or more profit ably while leaving the fixed capital untouched, the expenditure would be on revenue account even though the advantage may endure for an indefinite period. (d) The test of enduring benefit is not the conclusive test and can not be applied blindly and mechanically without regard to particular facts and circumstances of a given case. (e) Outgoings on account of capital or revenue depend on particular and business point of view rather than upon juristic classification of the legal right, if any, secured, employed or exhausted in the process and the question must be viewed in the larger context of business necessity or expediency. (f) In the infinite variety of situational diversities in which the concept of what is capital expenditure and what is revenue arises, it is well nigh impossible to formulate any general rule, even in the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing put to alternative use may require a special effort on the part of assessee initially but all such activities are to be viewed having been carried out in the course of farming activity. During the year under consideration, the total land cultivated by the appellant out of the land leased was to the extent of 94 acres in kharif season and 499 acres in rabi season. 15. Further, the expenditure which was incurred by the assessee and claimed to be revenue were tractor hiring charges ; jeep vehicle expenditure ; staff welfare ; HSD ; preparation and renewal of seeds and electricity charges. The expenses incurred were for the furtherance of the business objectives. The Tribunal on examination of the entire matter, keeping in view the main objects of the assessee, the activities of the assessee, the nature of expenses incurred and also the legal principles noticed hereinbefore, had concluded that the expenditure was revenue in nature. It was observed as under : Applying the above principles to the details of the expenditure incurred, we find that, none of them in any manner can be held to be capital expenditure. Mere fact that the benefit from incurring such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in question has been accounted for by the appellant in its revenue account. The mere fact that in the initial year the expenses have outweighed the receipts cannot be the determining factor to hold that percentage of expenses are of capital nature. In fact, we have also examined the expenses incurred by the assessee for the next assessment year, i.e., 2006-07 (pertaining to the year ending March 31, 2006) which have been enclosed as an annexure to the assessment order. Here again, we notice that the expenses are, by and large, of similar nature as of those incurred during the year under consideration. Ostensibly, the income by way of produce in the next year stands on a much higher footing. It is quite understandable, for the agriculture operations involve a certain gestation period for incomes to accrue in the hands of an assessee but presence of the gestation period is no ground to treat a portion of the expense as cap ital in nature. From the aforesaid it is evident that the expenses undertaken by the assessee are expenses for carrying out normal farming activities and no ad hoc basis can be adopted to segregate the expenditure between capital nature and revenue. 16. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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