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TMI Blog1982 (3) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... n bank loan obtained for purchasing a new Tanker, Rs 2,608 being insurance against loss or damage of that new tanker and Rs. 6,271 being road tax paid in respect of that tanker under the law levying road tax on vehicles using roads for purpose of transport. Subsequently, the ITO came to hold the view that the aforesaid three items of expenses should have been capitalised alongwith the original cost of the new tanker and so they were wrongly allowed as revenue expenses in the original assessment. Hence, he proposed to rectify the original assessment order u/s 154 of the IT Act, 1961. The assessee objected to the proposed rectification on the ground that the business of the assessee was started in the asst. yr. 1971-71 and that the new tanke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the order of the AAC. He pointed out that the decision of Challapalli Sugars Ltd. applied to newly commenced business while the business carried on by the assessee was already an only one. All that the assessee did was to add one more tanker to its existing business. He referred to the decision of the Bombay High Court in the case of Calico Dyeing an printing Works vs. CIT (1958)34 ITR 265(Bom) for the proposition that the assessee was entitled for deduction of interest on funds borrowed for the purchase of plant and machinery even though they were not used in the year of account. He pointed out that the new tanker was actually used in the year of account. Regarding insurance, he stated that s. 31 clearly allowed insurance charges of plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assets of the business carried on by the assessee is admissible u/s 36(1)(iii). It is immaterial whether the borrowed funds were used for buying a capital asset or spent as revenue expense. The decision in the case of Calico Dyeing and Printing Works also supports the case of the assessee. The ld. counsel for the assessee had also realised on the decisions in the case of State of Madras vs. G.J. Coelho (1964) 53 ITR 186 (SC) and Bombay Steam Navigation Company Pvt. Ltd. vs. CIT (1965) 56 ITR 52 (SC) as well as India Cements. In these cases, it has been held that expenses like stamp duty, registration fees, etc., which are spent for acquiring a fixed asset, are allowable as revenue expenditure. We find from the insurance policy produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its reply dt. 29th, January, 1981 urged before the CIT that the three items of expenditure were allowable as revenue expenditure on the authority of the decision already referred to earlier in this order. Further, reliance was placed on the Circulars No. 2-P(XI-6) of 1965 and P. No. 10/67/65-IT(AI)dt. 23rd August, 1965 in which it has been stated by the CBDT that interest payable on loan raised for the purchase of machinery and plant should be allowed as revenue deduction. The CIT did not agree with the contentions of the assessee and held that the aforesaid expenses were incurred in acquiring a new asset and so they were capital expenditure. However, he accepted the assessee's contention that the sum of Rs. 19,958 paid as interest on lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted order of the CIT. 9. We have considered the contention of both the parties as well as the facts on record. We find that the CIT himself has considered the interest on the loan acquired for purchasing the revenue expense. For the reasons already given earlier in this order, we see no justification in treating the road tax and insurance charges in respect of the new tanker as capital expense. That reason is that these expenses were incurred in the course of carrying on the existing business of the assessee. Hence, there was no mistake in the assessment order passed by the ITO. It was not erroneous to the prejudice of the revenue. Hence, the CIT erred in assuming jurisdiction u/s 263. Order dt. 3rd March, 1981. of the CIT is set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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