| COURT: | P&H High Court |
| CORAM: | Deepak Sibal J, S. J. Vajifdar CJ |
| SECTION(S): | 37(1) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | capital vs. revenue expenditure |
| COUNSEL: | Salil Kapoor |
| 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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