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TMI Blog2021 (12) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... not bring into existing any new asset. The expenditure was incurred wholly and solely to ensure that the existing business with the Customer, which was offering attractive returns to Appellant, was continued uninterrupted. The expenditure incurred by Appellant had direct relation to the business with the customer because Appellant also received corresponding increased compensation from the customer. Appellant also incurred the expenditure, notwithstanding that the volume of the space available in the ware-house would get reduced, for the business with the Customer would survive. There was a benefit by way of continuing business with the Customer or increase in compensation from the Customer. Appellant achieved both these objectives by incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Dyeing Manufacturing Company Limited (the Customer). At the relevant time, the Customer was storing its goods in the ware-house of Appellant for the past three or four years and was occupying nearly 90% of the total space available in the ware-house. During the relevant previous year, Appellant had received income of ₹ 18,25,137/- from the Customer out of a total income of ₹ 19,29,975/-. The goods stored were clothing material manufactured by the Customer for export. On few occasions, due to flooding, the Customer's goods got damaged and the Customer cautioned Appellant that if any remedial measure was not taken, the Customer will have to change its business arrangement with Appellant. On the advice of the Chief Engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case that by spending the said amount of ₹ 10,70,000/- (Ten lakhs seventy thousand only), Appellant did not bring into existence any new asset. 5. Ms. Hariya submitted that expenditure was wholly and solely incurred to ensure that the existing business with the Customer, which was offering attractive returns to Appellant, was continued uninterrupted. It was also submitted that by incurring this expenditure, Appellant succeeded in tying up with the customer for initial period of four years on enhanced rates of 25%. Ms. Hariya submitted that this expenditure had also not brought to Appellant any benefit or advantage of enduring nature as this expenditure was incurred only from the point of view of the "goods" stored by the Customer. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred by Appellant was a capital expenditure. 8. Both Ms. Hariya and Mr. Suresh Kumar relied upon a judgment of the Apex Court in Ballimal Naval Kishore and Another v/s. Commissioner of Income Tax (1997) 224 ITR 414 (SC). From Ballimal Naval Kishore (Supra), it is quite clear that the test to be borne in mind is that as a result of the expenditure, which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. If the amount was spent only to preserve and maintain the already existing assets that would be a revenue expenditure. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining whether in a given case expenditure is capital or revenue, for the determination of the question must depend upon the facts and circumstances of each case. The Court has to consider the nature and ordinary course of business and the objects for which the expenditure is incurred. Whether a particular expenditure is a revenue expenditure incurred for the purpose of business must be determined on a consideration of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. (ii) CIT v/s. Vallabh Glass Works Ltd. (1982) 137 ITR 389 (Guj.), where the Court held it is now well settled that the question whether a particular expenditure is a revenue expenditure incurred for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure. (iii) Dalmia Jain & Co. Ltd. v/s. CIT (1971) 81 ITR 754 (SC) where the Apex court held where the expenditure laid out for the acquisition or improvement of a fixed assets is attributable to capital, it is a capital expenditure but if it is incurred to protect the trade or business of the assessee then it is a revenue expenditure. In deciding whether a particular expenditure is capital or revenue in nature, what the Courts have to see is whether the expenditure in question was incurred to create any new asset or was incurred for maintaining the business of the company. If it is the former, it is capital expenditure; if it is the latter, it is revenue expenditure. 10. With this position in law let us examine the case at hand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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