Southern Switchgear Ltd. v. CIT

232 ITR 359Supreme Court of India1998#1130 most cited

What is Southern Switchgear Ltd. v. CIT authority for?

Payments made for different subject matters, even if part of a larger transaction, can be separately classified as capital or revenue expenditure based on their individual nature and purpose. This distinction is crucial for determining tax deductibility, often applying the enduring benefit test.

99

judgments rely on this decision, according to BharatTax’s citation analysis of 292,668 Indian tax judgments — from 2008 to 2025.

Also referred to as

Southern Switchgear Ltd. v. CIT · 232 ITR 359 · Section 37(1) Income Tax Act · capital expenditure · revenue expenditure · enduring benefit test · apportionment of expenditure · different subject matters · Section 35ABB · Section 35A · deductible expenditure

Sections most often in play

Section 143(3)Section 37(1)Section 194H Section 35ABB Section 40(a)(ia)Section 144B Section 154 of the Income Tax Act Section 260A

Issues it is cited on

section 35abb section 35ab test of enduring benefit section 35a enduring benefit prohibited by law disallowance under section 40(a)(ia)section 194h intangible assets section 35 revenue expenditure capital expenditure

Judgments citing Southern Switchgear Ltd. v. CIT

DCIT CIRCLE 4(2), NEW DELHI vs. BHARTI HEXACOM LTD., DELHI

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1113/DEL/2023[2019-20]Status: DisposedITAT Delhi12 Dec 2025AY 2019-20

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

DCIT CIRCLE 4(2), NEW DELHI vs. BHARTI HEXACOM LTD., DELHI

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1112/DEL/2023[2018-19]Status: DisposedITAT Delhi12 Dec 2025AY 2018-19

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

DCIT CIRCLE-4(2), NEW DELHI vs. BHARTI HEXACOM LTD., DELHI

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1111/DEL/2023[2017-18]Status: DisposedITAT Delhi12 Dec 2025AY 2017-18

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

DCIT CIRCLE 4(2), NEW DELHI vs. BHARTI HEXACOM LTD., DELHI

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1110/DEL/2023[2016-17]Status: DisposedITAT Delhi12 Dec 2025AY 2016-17

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

THE DEFENCE ACCOUNTS CO-OPERATIVE CREDIT SOCIETY LIMITED,MEERUT vs. ITO WARD 1(2)(4), MEERUT

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1112/DEL/2024[2019-20]Status: DisposedITAT Delhi30 Jan 2025AY 2019-20

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

VARTUL SHARMA,GHAZIABAD vs. ITO WARD 3(2), NAJIBABAD

In the result, the appeals of the revenue are partly allowed as indicated above

ITA 1111/DEL/2024[2017-18]Status: DisposedITAT Delhi30 Jan 2025AY 2017-18

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 143(3)Section 194HSection 260ASection 35ASection 37(1)Section 40

…f the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT 91 Taxman 1/224 ITR 342 (SC)(SC); CIT v. Best and Co [1966] 60 ITR 11 (SC); Southern Switch Gear Limited v. CIT 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, m…

CHOICE HOSPITALITY (INDIA) P.LTD,NEW DELHI vs. ACIT, CIRCLE-6(1), NEW DELHI

In the result, the appeal of the assessee is partly allowed for statistical purpose

ITA 7575/DEL/2018[2014-15]Status: DisposedITAT Delhi15 May 2024AY 2014-15

Bench: Sh. Kul Bharatdr. B. R. R. Kumar

For Appellant: NoneFor Respondent: Sh. Vivek Kr. Upadhyay, Sr. DR

…IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI Before Sh. Kul Bharat, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 7575/Del/2018 : Asstt. Year : 2014-15 Choice Hospitality (India) Pvt. Ltd., Vs. ACIT, B-92, 9th Floor, Himalaya House, 23, Circle-6(1), Kasturba Gandhi Marg, New Delhi-110002 New Delhi-110001 (APPELLANT) (RESPONDENT) PAN No. AABCC4755C Assessee by : None Revenue by : Sh. Vivek Kr. Upadhyay, Sr. DR Date of Hearing: 11.03.2024 Date of Pronouncement: 15.05.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against th…

ESCORTS LTD.,NEW DELHI vs. DCIT, NEW DELHI

In the result, the assessee’s appeal is partly allowed for statistical

ITA 792/DEL/2010[2006-07]Status: PendingITAT Delhi27 Feb 2024AY 2006-07

Bench: Shri Shamim Yahya & Shri Challa Nagendra Prasadm/S. Escorts Limited, Vs. Dcit, Central Circle 3, 11, Scindia House, New Delhi. Connaught Circus, New Delhi. (Pan : Aaace0074B) Dcit, Central Circle 3, Vs. M/S. Escorts Limited, New Delhi. 11, Scindia House, Connaught Circus, New Delhi.

For Appellant: Shri R.M. Mehta, CAFor Respondent: Shri T. James Singson, CIT DR

…essment proceedings, it is found that the assessee has been continuously payment royalty since 1954 and as such enduring benefit was derived by the assessee. Following the decision of the Apex Court in the case of M/s. Southern Switchgear Ltd. vs. CIT (1997) (232 ITR 359) wherein it had been held that entire payment towards royalty could not be allowed as revenue expenditure and that 25% of the expenditure would have to be taken as capital in nature. In view of this, AO disallowed the amount of Rs.100,75,000/- and added back to income. 34. Upon assessee’s appeal, ld. CIT (A) deleted the addition. We may gainfull…

DCIT, NEW DELHI vs. M/S. ESCORTS LTD., NEW DELHI

In the result, the assessee’s appeal is partly allowed for statistical

ITA 1313/DEL/2010[2006-07]Status: DisposedITAT Delhi27 Feb 2024AY 2006-07

Bench: Shri Shamim Yahya & Shri Challa Nagendra Prasadm/S. Escorts Limited, Vs. Dcit, Central Circle 3, 11, Scindia House, New Delhi. Connaught Circus, New Delhi. (Pan : Aaace0074B) Dcit, Central Circle 3, Vs. M/S. Escorts Limited, New Delhi. 11, Scindia House, Connaught Circus, New Delhi.

For Appellant: Shri R.M. Mehta, CAFor Respondent: Shri T. James Singson, CIT DR

…essment proceedings, it is found that the assessee has been continuously payment royalty since 1954 and as such enduring benefit was derived by the assessee. Following the decision of the Apex Court in the case of M/s. Southern Switchgear Ltd. vs. CIT (1997) (232 ITR 359) wherein it had been held that entire payment towards royalty could not be allowed as revenue expenditure and that 25% of the expenditure would have to be taken as capital in nature. In view of this, AO disallowed the amount of Rs.100,75,000/- and added back to income. 34. Upon assessee’s appeal, ld. CIT (A) deleted the addition. We may gainfull…

M/S TORRENT ROOFING SYSTEM,HOSHIARPUR vs. INCOME TAX OFFICER WARD-4, HOSHIARPUR

In the result, the appeal of the assesse is allowed for statistical

ITA 84/ASR/2023[2014-15]Status: DisposedITAT Amritsar12 May 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 143Section 263Section 40(1)(ia)

…terest of revenue. 5.1 Hence, both the limbs of Malabar Industrial Co. Vs. CIT 243 ITR 83 (S.C.) are satisfied. Hence, the Assessing Officer is justified in making addition on the basis of judgment of Hon’ble Supreme Court in the case of Southern Switch Gear 232 ITR 359 (S.C.). 5.2 Hence, the order of the Assessing Officer is confirmed and the appeal of the appellant is dismissed.” 6. The Ld. Counsel for the appellant reiterated the submissions made before the Ld. CIT(A) as under: 4 I.T.A. No. 84/Asr/2023 Torrent Roofing Systems v. ITO That during the year we have paid the royalty to M/s Kamdhenu Ispat Ltd…

ACIT, CIRCLE- 2, LTU, NEW DELHI vs. GKN DRIVELINE (INDIA) LTD., FARIDABAD

In the result, the appeal of the Revenue stands dismissed

ITA 8384/DEL/2019[2016-17]Status: DisposedITAT Delhi16 Mar 2023AY 2016-17

For Appellant: Shri S.K. Aggarwal, CAFor Respondent: Ms. Indu Bala Saini, Sr. DR

…Trademark Sub-License Agreement dated March 25, 2010 as entered into between the Appellant and AP Newall, UK. The AO has made disallowance of royalty payment, relying on the decision of Hon'ble -Supreme Court in the case of Southern Switch Gear Ltd. Vs. CIT (232 ITR 359) and. Jonas Wood Head and Sons (India) Ltd. Vs. CIT (224 ITR 342). 8.1 During the appellate proceeding, the Ld. AR of the appellant is submitted that the AP Newall, UK has agreed to grant a non- exclusive right to use the Trademarks to G KN India in relation to the provision and promotion of the services, manufacture, promotion 3 ITA No.8384/Del…

ACIT LARGE TAX PAYER UNIT 2, CHENNAI vs. M/S INDIA JAPAN LIGHTING LIMITED, CHENNAI

In the result, the appeals filed by the Revenue are

ITA 719/CHNY/2018[2014-15]Status: DisposedITAT Chennai23 Nov 2022AY 2014-15

Bench: Shri Mahavir Singh & Shri G. Manjunathaआयकरअपीलसं./Ita Nos.: 718 & 719/Chny/2018 िनधा"रणवष" / Assessment Years: 2011-12 & 2014-15

For Appellant: Shri. AR V Sreenivasan, Addl. CITFor Respondent: Shri. N V Balaji, Advocate

Section 143(3)Section 14A

…r for assessment year 2005-06 towards which our attention was also invited. The Assessing Officer has relied on the decision of Hon'ble Madras High Court rendered in the case of CIT vs Southern Switchgear, 148 ITR 272, affirmed by the Hon'ble Supreme Court in 232 ITR 359, to hold that the entire royalty paid has to be treated as capital. But we have noticed that the facts of this case are slightly different and the Hon'ble Madras High Court has held in numerous other decisions that mere grant of exclusive right to manufacture may not result in acquiring any capital asset. In this regard, decision of Hon'ble Madra…

ACIT LARGE TAX PAYER UNIT 2, CHENNAI vs. M/S INDIA JAPAN LIGHTING LIMITED, CHENNAI

In the result, the appeals filed by the Revenue are

ITA 718/CHNY/2018[2011-12]Status: DisposedITAT Chennai23 Nov 2022AY 2011-12

Bench: Shri Mahavir Singh & Shri G. Manjunathaआयकरअपीलसं./Ita Nos.: 718 & 719/Chny/2018 िनधा"रणवष" / Assessment Years: 2011-12 & 2014-15

For Appellant: Shri. AR V Sreenivasan, Addl. CITFor Respondent: Shri. N V Balaji, Advocate

Section 143(3)Section 14A

…r for assessment year 2005-06 towards which our attention was also invited. The Assessing Officer has relied on the decision of Hon'ble Madras High Court rendered in the case of CIT vs Southern Switchgear, 148 ITR 272, affirmed by the Hon'ble Supreme Court in 232 ITR 359, to hold that the entire royalty paid has to be treated as capital. But we have noticed that the facts of this case are slightly different and the Hon'ble Madras High Court has held in numerous other decisions that mere grant of exclusive right to manufacture may not result in acquiring any capital asset. In this regard, decision of Hon'ble Madra…

DCIT CORPORATE CIRCLE 2 (2), CHENNAI vs. ISS SDB SECURITY SERVICES PRIVATE LIMITED, CHENNAI

The appeal stands dismissed

ITA 3536/CHNY/2018[2014-15]Status: DisposedITAT Chennai21 Feb 2022AY 2014-15

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri MP Lohia (CA) – Ld. ARFor Respondent: Shri P. Sajit Kumar (JCIT) –Ld. DR

Section 143(3)Section 14ASection 32(1)(ii)Section 36(1)(va)Section 43B

…on similar payment basis. The same was in lieu of the right to use the management services including correspondences, reports manuals and training. However, Ld. AO, relying upon the decision of Hon’ble Supreme Court in the case of Southern Switchgear V/s CIT (232 ITR 359) held that depreciation of 25% would be allowable to the assessee.In other words, the expenditure was held to be capital in nature. During appellate proceedings, the assessee submitted that as per the agreement, ISS A/S Denmark agreed to grant the right to the assessee to use ‘ISS’ name and ISS proprietary trademark etc. The payment of royalty wa…

DCIT CORPORATE CIRCLE 2(2), CHENNAI vs. ISS SDB SECURITY SERVICES PVT. LIMITED, CHENNAI

The appeal stands dismissed

ITA 2707/CHNY/2017[2011-12]Status: DisposedITAT Chennai21 Feb 2022AY 2011-12

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri MP Lohia (CA) – Ld. ARFor Respondent: Shri P. Sajit Kumar (JCIT) –Ld. DR

Section 143(3)Section 14ASection 32(1)(ii)Section 36(1)(va)Section 43B

…on similar payment basis. The same was in lieu of the right to use the management services including correspondences, reports manuals and training. However, Ld. AO, relying upon the decision of Hon’ble Supreme Court in the case of Southern Switchgear V/s CIT (232 ITR 359) held that depreciation of 25% would be allowable to the assessee.In other words, the expenditure was held to be capital in nature. During appellate proceedings, the assessee submitted that as per the agreement, ISS A/S Denmark agreed to grant the right to the assessee to use ‘ISS’ name and ISS proprietary trademark etc. The payment of royalty wa…

FRICK INDIA LTD.,NEW DELHI vs. DCIT, NEW DELHI

Accordingly, the appeal filed by the assessee is allowed in terms of our

ITA 330/DEL/2012[2005-06]Status: DisposedITAT Delhi30 Dec 2021AY 2005-06

Bench: Shri G.S. Pannu & Shri Ravish Sood

For Appellant: Shri Tarandeep Singh, Advocate and Shri Pulkit Verma, AdvocateFor Respondent: Shri Sumit Kumar Varma, Sr. DR

Section 143(3)Section 14ASection 251(2)Section 263Section 94(7)

…depreciation would be allowed as per Clause (ii) to Sec. 32(1) of the Act. The Ld. CIT(A) further referring to the Clauses of the ‘agreement’ in the backdrop of the judgment of the Hon’ble Supreme Court in the case of, viz. CIT Vs. Southern Switchgear Ltd., 232 ITR 359 observed, viz. that the technical knowledge that was obtained by the assessee company from M/s Vilter Manufacturing Corporation, USA ,vide ‘agreement’, was in the nature of an enduring advantage and benefit that was available to the assessee for its manufacturing and industrial processes; that the technical assistance contemplated in the agreeme…

FRICK INDIA LTD vs. DCIT CIRCLE-11 (1),

Accordingly, the appeal filed by the assessee is allowed in terms of our

ITA 2072/DEL/2008[2004-2005]Status: DisposedITAT Delhi30 Dec 2021AY 2004-2005

Bench: Shri G.S. Pannu & Shri Ravish Sood

For Appellant: Shri Tarandeep Singh, Advocate and Shri Pulkit Verma, AdvocateFor Respondent: Shri Sumit Kumar Varma, Sr. DR

Section 143(3)Section 14ASection 251(2)Section 263Section 94(7)

…depreciation would be allowed as per Clause (ii) to Sec. 32(1) of the Act. The Ld. CIT(A) further referring to the Clauses of the ‘agreement’ in the backdrop of the judgment of the Hon’ble Supreme Court in the case of, viz. CIT Vs. Southern Switchgear Ltd., 232 ITR 359 observed, viz. that the technical knowledge that was obtained by the assessee company from M/s Vilter Manufacturing Corporation, USA ,vide ‘agreement’, was in the nature of an enduring advantage and benefit that was available to the assessee for its manufacturing and industrial processes; that the technical assistance contemplated in the agreeme…

PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA vs. SICPA INDIA LTD.

The appeal stands disposed of on the ground of low tax effect

ITAT/36/2017HC Calcutta10 Dec 2021

Bench: HON'BLE JUSTICE T. S. SIVAGNANAM,HON'BLE JUSTICE HIRANMAY BHATTACHARYYA

…unal was justified in law by quashing the finding of the Assessing Officer that 25% of the Royalty payment was capital in nature in view of the decision of the Hon’ble Supreme Court in the case of Southern Switch Gear Ltd. vs. CIT and Another, reported in 232 ITR 359 (SC) ? We have heard Mr. Tilak Mitra, learned Standing Counsel for the appellant/revenue and Mr. Somak Basu, learned Counsel appearing for the respondent/assessee. The learned Counsel for the respondent/assessee even on the earlier occasion pointed out that the appeal could not be pursued by the revenue on the ground of low t…

ACIT, CIRCLE-9(1), NEW DELHI vs. FCC CLUTCH INDIA P.LTD, GURGAON

In the result, all the appeals of revenue are dismissed

ITA 443/DEL/2019[2013-14]Status: DisposedITAT Delhi30 Jul 2021AY 2013-14

Bench: Shri R.K. Panda & Shri Amit Shukla

For Appellant: Shri K.M. Gupta, AdvocateFor Respondent: Ms. Nidhi Srivastava, CIT(DR)

Section 143(3)Section 147

…arts in India. Hence, it was claimed that it was revenue expenditure. However, Ld. AO held that royalty claimed by the assessee is capital in nature after relying upon the judgment of Hon’ble Supreme Court in the case of Southern Switchgear Ltd vs CIT ([1998] 232 ITR 359 (SC). 5. It is pertinent to note that exactly similar basis for disallowances were made in the earlier assessment years starting from Assessment year 2005-06. The appeal for A.Y. 2005-06 was allowed in the first appeal in favour of the assessee holding that it is revenue expenditure after detail analysis and reasoning. However, in assessment yea…

ACIT CIRCLE-9(1), NEW DELHI vs. FCC CLUTCH INDIA PVT LTD(SUCCESSOR OF FCC RICO LTD.), GURGAON

In the result, all the appeals of revenue are dismissed

ITA 3667/DEL/2019[2009-10]Status: DisposedITAT Delhi30 Jul 2021AY 2009-10

Bench: Shri R.K. Panda & Shri Amit Shukla

For Appellant: Shri K.M. Gupta, AdvocateFor Respondent: Ms. Nidhi Srivastava, CIT(DR)

Section 143(3)Section 147

…arts in India. Hence, it was claimed that it was revenue expenditure. However, Ld. AO held that royalty claimed by the assessee is capital in nature after relying upon the judgment of Hon’ble Supreme Court in the case of Southern Switchgear Ltd vs CIT ([1998] 232 ITR 359 (SC). 5. It is pertinent to note that exactly similar basis for disallowances were made in the earlier assessment years starting from Assessment year 2005-06. The appeal for A.Y. 2005-06 was allowed in the first appeal in favour of the assessee holding that it is revenue expenditure after detail analysis and reasoning. However, in assessment yea…

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