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TMI Blog2016 (7) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... he plaint sold by the farmers. But, even the farmers could not grow the said herbal plant. Consequently, they sustained loss and in turn the assessee sustained loss. The said cultivation expenses was ₹ 90.64 Lakhs. Therefore, the assessee claimed the said amount as revenue expenditure as the said expenditure was incurred to facilitate its business and due commercial expediency. As such the loss are primarily attributable to the business which the Assessee is carrying on and the said expenses are wholly and exclusively for the purpose of business. The said cultivation expenses incurred by the Assessee is in the nature of revenue expenditure in the course of business and the Assessee is entitled to deduction of the same as business expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the above referred decision of this Court in ITA No.207/2011, it was observed thus: The Revenue has preferred this appeal challenging the order passed by the Tribunal, which has held the cultivating expenses incurred by the Assessee is in the nature of expenditure in the course of business, as such assessee is entitled to claim deduction of said expenditure. 2. The Assessee is involved in the manufacture and export of standardized herbal extracts as well as in the manufacture of fine chemicals. The assessee filed return of Income for the year 2004-2005. Assessee claimed deduction under Section 10-B of the Income Tax Act, 1961 (for short hereinafter referred to as th e Act ). The Assessing Authority disallowed the cultivat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, Assessee was not entitled to claim deduction under the heading revenue expenditure . 4. The material on record disclose that coleus is a rare herbal plant which commands appreciation value in medicinal fraternity for research. The Assessee has been in the business of manufacture and export of herbal extracts including cultivation of coleus. To maximize the production and sale of herbal extract, the assessee incurred expenditure on cultivation activities for the development of coleus. The said plant was grown in wild. Vast research was required to make a commercial cultivation of the plant. To cultivate this plant, the Assessee had to undertake farm trials to optimize in different fields such as:- i) Optimization of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve incurred cultivation expenses to the tune of ₹ 90.64 Lakhs. The fact that Assessee had incurred a sum of ₹ 90.64 Lakhs expenses, in this regard, is not in dispute. 5. The question for consideration is, whether it is to be considered as capital expenditure or revenue expenditure. The Tribunal relied on Circular No.6/2007 issued by the Board, wherein it has been clarified as under:- 2......... These expenses are incurred by the sugar mills for ensuring an adequate and sustained supply of freshly cut sugarcane that is an essential input for the continuous running of such mills. These expenses are, therefore, incurred for a commercial expediency and are prima facie wholly and exclusively for the purpose of business. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of sugarcane and it makes no difference that the sugarcane thus purchased was grown by the oppigedars with the seedlings, fertilizers and money taken on account from the Assessee Company. In so far as the Assessee Company was concerned, it was doing no more than making a forward arrangement for the next year s crop and paying an amount in advance out of the price, so that the growing of the crop may not suffer due to want of funds in the hands of the growers. There was hardly any element of investment which contemplates more than payment of advance price. The resulting loss to the assessee company was just as much a loss on the revenue side as would have been, if it had paid for the ready crop which was not delivered. 8. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herbal plant. Consequently, they sustained loss and in turn the assessee sustained loss. The said cultivation expenses was ₹ 90.64 Lakhs. Therefore, the assessee claimed the said amount as revenue expenditure as the said expenditure was incurred to facilitate its business and due commercial expediency. As such the loss are primarily attributable to the business which the Assessee is carrying on and the said expenses are wholly and exclusively for the purpose of business. The said cultivation expenses incurred by the Assessee is in the nature of revenue expenditure in the course of business and the Assessee is entitled to deduction of the same as business expenditure. Therefore, the Tribunal is justified in upholding such claim and gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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