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Haryana State Road & Bridges Development Corporation Ltd vs. CIT (P&H High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: September 29, 2016 (Date of pronouncement)
DATE: October 8, 2016 (Date of publication)
AY: 2010-11
FILE: Click here to download the file in pdf format
CITATION:
S. 37(1): While expenditure for purchase of a capital asset is capital expenditure, guarantee commission to acquire the asset on installment terms is revenue expenditure

Expenditure incurred for the purchase of the machinery was undoutedly capital expenditure; for it brought in an asset of enduring advantage. But the guarantee commission stands on a different footing. By itself, it does not bring into existence any asset of an enduring nature; nor did it bring in any other advantage of an enduring benefit. The acquisition of the machinery on installment terms was only a business exigency. If interest paid on a credit purchase of machinery could be held to be revenue expenditure, we fail to see how guarantee commission paid to a bank for obtaining easy terms for acquisition of the machinery could be regarded as capital payments (Sivakami Mills Ltd. Vs Commissioner of Income Tax, [1979] 120 ITR 211 approved in Commissioner of Income Tax Vs Sivakami Mills Ltd. [1997] 227 ITR 465 followed. Chhabirani Agro Industrial Enterprises Ltd. Vs Commissioner of Income Tax [1991] 191 ITR 226 is not good law)

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