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TMI Blog2016 (12) TMI 1849X X X X Extracts X X X X X X X X Extracts X X X X ..... . M/s. Ford India Pvt. Ltd had given notice to the assessee for terminating the shared supply agreement w.e.f. 1st January, 2009 is also not doubted. Electricity was an essential input for carrying on the manufacturing activity of the assessee and there can be no two opinions on this. To ensure supply of uninterrupted electricity, assessee had to agree with M/s. Ford India Pvt. Ltd to part finance the total cost of additional power infrastructure to be established by M/s. Ford India Pvt. Ltd. M/s. Ford India Pvt. Ltd would not have supplied electricity after 1st January, 2009 but for assessee agreeing to part finance the cost of the project for establishing additional power infrastructure - additional power infrastructure created was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cross objection filed by the Revenue and assessee respectively directed against an order dated 10.09.2015 of the Commissioner of Income-tax (Appeals)- 11, Chennai. 2. Appeal filed by the Department is delayed by three days. Condonation petition has been filed. Reason shown for the delay seems to be justified. Ld. Authorised Representative did not raise any serious objection. Delay is condoned. Appeal is admitted. 3. Facts apropos are that assessee engaged in the business of manufacturing and selling motor vehicle parts, had filed return of income for the impugned assessment year disclosing income of ₹ 1,41,43,14,595/-. During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- being a part of the total cost of ₹ 20,21,20,000/- that was required for setting up the additional power infrastructure. Assessee had paid such sum and claimed such amount as revenue outgo u/s.37(1) of the Act. However, ld. Assessing Officer was of the opinion that the claim could not be allowed. According to him, additional power infrastructure created gave enduring benefit to M/s. Ford India Pvt. Ltd. and it was not a routine business expenditure. The said infrastructure facility was shown as an asset by the M/s. Ford India Pvt. Ltd. in its books of accounts. As per ld. Assessing Officer capital expenditure could not become a revenue expenditure just for a reason that it was incurred in connection with business activities or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure as resulting in an intangible asset. On the other hand, assessee in its cross objection is aggrieved on the disallowance of the claim as capital expenditure. 6. Opening the arguments, ld. Departmental Representative submitted that creation of additional infrastructure for supplying electricity resulted in enduring benefit to M/s. Ford India Pvt. Ltd as well as the assessee. As per the ld. Departmental Representative this however did not result in creation of any intangible asset for the assessee. The asset remained in the books of M/s. Ford India Pvt. Ltd. Thus according to him, ld. Commissioner of Income Tax (Appeals) though he was correct in upholding the expenditure as capital outgo, erred in directing the ld. Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Pvt. Ltd and assessee had no ownership over any part of the said asset. The only benefit assessee derived was supply of uninterrupted electricity, without which it could have not functioned. In this situation, the said expenditure in our opinion can only be treated as revenue expenditure which ensured continued electricity supply. The payment did not result in any enduring benefit but only enabled the assessee to carry on its day to day activities. Just because additional power infrastructure was an asset in the hand of the M/s. Ford India Pvt. Ltd, we cannot say that amount given by the assessee to M/s. Ford India Pvt. Ltd was a capital outgo. The expenditure was incurred wholly and exclusively for the business of the assessee and it di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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