“capital expenditure”

Business ExpensesSection 37Section 373,515 judgments

The decision most relied on for capital expenditure is Empire Jute Co. Ltd. v. CIT (124 ITR 1), cited in 622 judgments on BharatTax.

Leading authorities on capital expenditure

Empire Jute Co. Ltd. v. CIT

124 ITR 1 · 1980 · Supreme Court

622

citing judgments

Expenditure is classified as revenue or capital based on its practical business effect, necessity, or expediency, rather than solely on the juristic classification of rights; an enduring benefit does not automatically make an expenditure capital if it facilitates trading operations or business efficiency.

Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT

227 ITR 172 · 1997 · Supreme Court

621

citing judgments

Interest income earned on deposits, particularly before the commencement of business operations or as a requirement for business licensing, is taxable as "income from other sources" under Section 56, and cannot be treated as business income or set off against interest on borrowed funds.

Madras Industrial Investment Corporation Ltd. v. CIT

225 ITR 802 · 1997 · Supreme Court

568

citing judgments

Expenditure that provides an enduring benefit should be amortized over its useful life, not allowed as a deduction in a single year, to prevent a distorted picture of profits. Specifically, premium paid on debentures for their issue should be amortized on a straight-line method over the life of the debentures.

South Indian Bank Ltd. v. CIT

438 ITR 1 · 2021 · Supreme Court

508

citing judgments

The mixed fund theory is affirmed, holding that no disallowance of interest expenditure under Section 14A can be made if the assessee possesses sufficient non-interest bearing funds, such as capital and reserves, to cover investments made in tax-free securities.

CIT v. Institute of Banking Personnel Selection

264 ITR 110 · 2003 · High Court

398

citing judgments

Depreciation is allowable on assets for which the cost has been fully allowed as an application of income under Section 11 in previous years, when computing the income of a charitable trust. Charitable trusts are also entitled to carry forward their deficit.

Taparia Tools Ltd. v. JCIT

372 ITR 605 · 2015 · Supreme Court

343

citing judgments

An expenditure does not automatically become capital in nature merely because it results in some enduring benefit for the assessee; it can be treated as revenue expenditure if incurred for genuine business purposes.

Biocon Ltd. v. DCIT

35 Taxmann.com 335 · 2013 · ITAT

322

citing judgments

The discount arising from the grant of Employee Stock Option Plans (ESOPs) is an allowable business expenditure under Section 37(1) of the Income-tax Act, 1961, as it is an ascertained liability, not a contingent one, and constitutes a revenue expense rather than a capital expense.

Alembic Chemical Works Co. Ltd. v. CIT

177 ITR 377 · 1989 · Supreme Court

275

citing judgments

Expenditure that provides a commercial advantage of an enduring nature may still be classified as revenue expenditure if its purpose is to facilitate existing trading operations, improve business efficiency, or upgrade existing products, depending on the specific context and objective.

Judgments citing capital expenditure

ACIT, Hisar vs. M/S Jindal Steel & Power Ltd., Hisar

In the result, the appeal filed by the Revenue for the Assessment Year 2008-09 is dismissed

ITA 220/DEL/2009[2003-04]Status: DisposedITAT Delhi01 Dec 2021AY 2003-04

Bench: Shri Amit Shukla & Dr. B.R.R. Kumar(Through Video Conferencing)

For Appellant: Shri Salil Kapoor, AdvocateFor Respondent: Date of Hearing

Section 115JSection 143(3)Section 234BSection 80H

subsidy essentially boils down to the purpose for which, the subsidy is granted. If the grant of subsidy is for meeting the capital expenditure for achieving a national objective, the same would be in the nature of capital receipt not liable to tax. On the other hand, if the subsidy

Jindal Steel & Power Limited vs. Addl. CIT

In the result, the appeal filed by the Revenue for the Assessment Year 2008-09 is dismissed

ITA 167/DEL/2009[2003-04]Status: DisposedITAT Delhi01 Dec 2021AY 2003-04

Bench: Shri Amit Shukla & Dr. B.R.R. Kumar(Through Video Conferencing)

For Appellant: Shri Salil Kapoor, AdvocateFor Respondent: Date of Hearing

Section 115JSection 143(3)Section 234BSection 80H

Heidelberg Cement India Ltd., Gurgaon vs. DCIT, Circle- 2, Gurgaon

In the result, both the appeals filed by the assessee are partly allowed

ITA 5822/DEL/2018[2013-14]Status: DisposedITAT Delhi29 Nov 2021AY 2013-14

Bench: Shri R.K. Panda & Ms Suchitra Kamble

For Appellant: Shri Harpreet Singh Ajmani, Adv.&For Respondent: Shri Kumar Padmapani Bora, Sr.DR

total technical know-how expenses of Rs.14,09,84,000/- which comes to Rs.3,52,46,000/- treating the same as capital expenditure being spent towards acquisition of capital asset as it gives rise to enduring benefit which can be enjoyed by the assessee over a number of years ... claimed deduction of said payment under section 37(1). The Assessing Officer rejected assessee's claim holding that it was in the nature of capital expenditure; and the Tribunal, however, allowed assessee's claim on revenue's appeal. 24. On appeal filed by the Revenue, the Hon'ble High Court

Hero Moto Corp Ltd., New Delhi vs. Neac, Delhi

ITA 706/DEL/2021[2016-17]Status: DisposedITAT Delhi26 Nov 2021AY 2016-17

Bench: Shri Kul Bharat & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri Surendra Pal

Section 143(3)Section 144BSection 144CSection 144C(13)Section 145Section 1lSection 80ISection 92C

Indo-Japan DTAA. 60. In the assessment order, the AO treated the aforesaid expenditure incurred by way of royalty paid to Honda as capital expenditure on the ground that the appellant had received benefit of enduring nature. The assessing officer, accordingly, disallowed Rs. 62.13 crores, out of total expenditure ... royalty after allowing depreciation @ 25% thereof, amounting to Rs. 20.71 crores. 61. The learned authorised representative submitted that the same is not a capital expenditure. His arguments were as Under:- Royalty– not capital expenditure No ownership rights - only limited right to use During the currency of the agreement, the appellant

Bt Global Communications India Pvt. Ltd., New Delhi vs. Addl. CIT, Special Range- 2, New Delhi

In the result, appeal of the assessee is allowed

ITA 7576/DEL/2018[2014-15]Status: DisposedITAT Delhi25 Nov 2021AY 2014-15

Bench: Sh. Anil Chaturvedi & Sh. Kuldip Singh(Through Video Conferencing) Bt Global Communication Vs. Acit India Pvt. Ltd. Special Range – 2 11Th Floor, Eros Corporate New Delhi Tower, Opp. International Trade Tower, Nehru Place, New Delhi Pan No. Aaacg 1534 A (Appellant) (Respondent) Assessee By Shri Vishal Kalra, Adv. Revenue By Shri Satpal Gulati, Cit-D.R. Date Of Hearing: 18.11.2021 Date Of Pronouncement: 25.11.2021 Order Per Anil Chaturvedi, Am: This Appeal Filed By The Assessee Is Directed Against The Order Of The Addl. Commissioner Of Income Tax – Special Range–2, New Delhi Under Section 143(3) R.W.S. 144C(13) Of The Act Pursuant To The Direction Of Dispute Resolution Panel (Drp) – 1, New Delhi Order Dated 27.08.2018 For Assessment Year 2014-15. 2. The Relevant Facts As Culled From The Material On Records Are As Under :

Section 143(3)Section 234BSection 271(1)(c)Section 274Section 35ASection 37

making a disallowa'nce of annual license fee amounting to Rs. 516,389,972 paid by the Appellant holding the same to be a capital expenditure not allowable under section 37 of the Act. 3. Without prejudice to the above, that on facts and circumstances of the case ... No.730 of 2016. AO therefore, in view of the stand of the Department, treated the amount of Rs.51,63,89,972/- to be capital expenditure and not allowable u/s 37 of the Act. When the matter was carried before DRP by the assessee, DRP declined to interfere with the order

Bharat Gears Ltd., New Delhi vs. ACIT, Central Circle- 6, New Delhi

ITA 6933/DEL/2017[2014-15]Status: DisposedITAT Delhi25 Nov 2021AY 2014-15

Bench: Shri R.K. Panda & Shri Kuldip Singh

For Appellant: Shri M.K. Madan, CAFor Respondent: Shri Om Prakash, Senior DR

Section 43B

facts. 2. That the ld. CIT (A) has erred in confirming the disallowance of repair of Rs.23,62,833/- by holding the same as capital expenditure. 3. That the ld. CIT (A) has erred in confirming disallowance of Rs.32,95,425/- on account of leave encashment ... erred in treating the revenue expenditure of Rs.36,35,125/- as claimed by the assessee company for reconditioning/repair of plant and machinery as capital expenditure?” 10. Ld. AR for the assessee challenging the impugned order passed by the ld. CIT (A) contended inter alia that when the machinery

M/S Bharat Gears Ltd., New Delhi vs. ACIT, New Delhi

ITA 315/DEL/2017[2013-14]Status: DisposedITAT Delhi25 Nov 2021AY 2013-14

Bench: Shri R.K. Panda & Shri Kuldip Singh

For Appellant: Shri M.K. Madan, CAFor Respondent: Shri Om Prakash, Senior DR

Section 43B

M/S. Flair Exports Pvt. Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee is allowed

ITA 2286/DEL/2017[2014-15]Status: DisposedITAT Delhi24 Nov 2021AY 2014-15

Bench: Ms. Suchitra Kambledr. B. R. R. Kumar(Through Video Conferencing) Ita No. 2286/Del/2017 : Asstt. Year : 2014-15 M/S Flair Exports Pvt. Ltd., Vs Dcit, 227, Okhla Indls. Estate, Central Circle-8, Phase-3, New Delhi New Delhi (Appellant) (Respondent) Pan No. Aaacf1183A Assessee By : Sh. Pradeep Dinodia, Fca Revenue By : Sh. Javed Akhatar, Cit Dr Date Of Hearing: 12.10.2021 Date Of Pronouncement: 24.11.2021

For Appellant: Sh. Pradeep Dinodia, FCAFor Respondent: Sh. Javed Akhatar, CIT DR

Section 143(3)Section 263Section 36(1)(vii)

Section 37 is a general provision for allowing the deductions of expenditure taking into consideration the business of the assessee. The exception being capital expenditure and personal expenditure. The Hon’ble Supreme Court in the case of Quershi Vs CIT 287 ITR 547 held that explanation II Section

M/S. Logix Buidltech (P) Ltd., New Delhi vs. ACIT, New Delhi

In the result, appeal of the assessee is partly allowed

ITA 3208/DEL/2017[2012-13]Status: DisposedITAT Delhi17 Nov 2021AY 2012-13

Bench: Sh. Anil Chaturvedi & Sh. Kul Bharat(Through Video Conferencing) M/S Logix Buildtech (P) Vs. Acit Ltd., 301-A, World Trade Circle – 15(2), Tower, Barakhamba Lane, Cr Building Connaught Place, New Delhi New Delhi - 110 001 Pan : Aabcl 7527 R (Appellant) (Respondent) Assessee By Shri V. K. Agarwal, Ar Ms. Shweta Bansal, C.A. Revenue By Shri Lakshminarayan, Sr. D.R. Date Of Hearing: 25.10.2021 Date Of Pronouncement: 17.11.2021 Order Per Anil Chaturvedi, Am :

Section 143(3)Section 211Section 57

expenses being advertising, brokerage and commission for booking of the flats which is in the nature of revenue expenses cannot be treated as capital expenditure. He relied on the judgment o f Hon’ble High Court of Bombay in the case of CIT Vs Piem Hotel

Bharti Infratel Ltd., New Delhi vs. DCIT, Circle- 2(1), New Delhi

In the result appeal of assessee is allowed

ITA 425/DEL/2018[2011-12]Status: DisposedITAT Delhi15 Nov 2021AY 2011-12

Bench: Shri Amit Shukla & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: Shri Rohit Jain, Advocate; &For Respondent: Shri Satpal Gulati [CIT] – DR

Section 115JSection 143(3)Section 2Section 37Section 37(1)

says that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed

Hitachi Metglas (India) Pvt. Ltd., New Delhi vs. DCIT, Circle- 11(2), New Delhi

In the result, the appeal filed by the assessee in ITA No

ITA 5906/DEL/2017[2010-11]Status: DisposedITAT Delhi11 Nov 2021AY 2010-11

Bench: Shri N.K. Billaiya & Shri Kuldip Singh[A.Y 2010-11]

For Appellant: Shri Saleel Kapoor, AdvFor Respondent: Shri Pradeep Kumar Meel, CIT- DR

aforesaid, the assessing officer, vide impugned order dated 16.12.2014 disallowed the following expenditure aggregating to Rs. 51,15,000, holding the same to be capital expenditure on the ground that such expenditure had resulted in benefit of enduring nature to the appellant: S.No.. Particulars Amount (in Rs.) 1. Freight

Addl. CIT, New Delhi vs. M/S. Jasper Infotech Pvt. Ltd., New Delhi

ITA 2605/DEL/2017[2012-13]Status: DisposedITAT Delhi10 Nov 2021AY 2012-13

Bench: Ms Suchitra Kamble & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: N o n eFor Respondent: Ms. Sarita Singh [CIT] – D. R

Section 143(3)

advertisement, publicity and business promotion incurred on brand building of E-commerce portal "Snapdeal" considering the same as revenue expenditure whereas the same is capital expenditure for brand building on ecommerce portal "Snapdeal". 2. Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs.29 ... Assessing Officer was of the view that same are not s revenue expenditure, but are incurred for acquisition of intangible assets being capital expenditure as those are incurred in the formative years of the business of the assessee and such expenditure have enduring benefit. The Assessing Officer held that

Qualcomm India Pvt. Ltd., New Delhi vs. Addl.CIT, Special Range-7, New Delhi

In the result, the appeal of the assessee is allowed

ITA 6421/DEL/2019[2015-16]Status: DisposedITAT Delhi01 Nov 2021AY 2015-16

Bench: Ms. Suchitra Kambledr. B. R. R. Kumar(Through Video Conferencing) Ita No. 6421/Del/2019 : Asstt. Year : 2015-16 Qualcomm India Pvt. Ltd., Vs Addl. Cit, Unit No. 201, 2Nd Floor, Tolstoy House, Special Range-7, 15, Tolstoy Marg, New Delhi-110001 New Delhi-110002 (Appellant) (Respondent) Pan No. Aaacq0231C

For Appellant: Ms. Ananya Kapoor, AdvFor Respondent: Ms. Anshu Shukla Pandey, CIT DR

Section 143(3)Section 92CSection 92C(3)(c)

under: “37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed ... find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the assessee, it is mandatory for it to pay Education Cess and for the purpose of computation

Curadev Pharma Pvt. Ltd., New Delhi vs. ACIT, Circle- 6(2), New Delhi

In the result, the appeal of the assessee is allowed

ITA 7187/DEL/2017[2013-14]Status: DisposedITAT Delhi01 Nov 2021AY 2013-14

Bench: Sh. Amit Shukladr. B. R. R. Kumar(Through Video Conferencing)

For Appellant: Sh. S. Vasudevan, AdvFor Respondent: Sh. Ajay Kumar, Sr. DR

Section 37(1)

that the same is not in the nature of revenue expenditure and further the said expenditure is also not capital expenditure. 3.1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law confirming the finding arrived ... case, the Ld. CIT(A) has erred in stating that the Appellant had admitted that these expenses were in the nature of capital expenditure. The Ld. CIT(A) has failed to take note of the categorical submission of the Appellant that the R&D expenditure were in the nature

Convergys India Services Pvt. Ltd., New Delhi vs. Addi. CIT Spl. Range-02, New Delhi

In the result, the appeal of the assessee is allowed

ITA 4370/DEL/2019[2015-16]Status: DisposedITAT Delhi29 Oct 2021AY 2015-16

Bench: Sh. K. N. Charydr. B. R. R. Kumar(Through Video Conferencing) Ita No. 4370/Del/2019 : Asstt. Year : 2015-16 Convergys India Services Pvt. Ltd., Vs Addl. Cit, Ground Floor, Bestech Business Special Range-02, Towers, Sohna Road, Sector-48, New Delhi-110002 Gurgaon-122001 (Appellant) (Respondent) Pan No. Aabcc5056G

For Appellant: Sh. K. M. Gupta, AdvFor Respondent: Sh. Surendrapal, CIT DR

Section 143(3)

under: “37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed ... find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation

Interglobe Aviation Ltd., New Delhi vs. JCIT, Special Range- 4, New Delhi

Accordingly, appeal filed by the assessee for assessment year 2015 – 16 is allowed

ITA 7695/DEL/2018[2015-16]Status: DisposedITAT Delhi29 Oct 2021AY 2015-16

Bench: Ms Suchitra Kamble & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: Shri Tarandeep Singh, Adv.; &For Respondent: Ms. Sunita Singh [CIT] – D.R

Section 28Section 37(1)Section 40

extent such credits are amortised and netted with Lease Rent payable in the P&L Account, the Lease Rent is to be disallowed as capital expenditure. 4. That on facts and in law the CIT(A) has erred in upholding disallowance u/s section ... that as IEA credits are held to be capital in nature then lease rental paid by the assessee is also to be considered as capital expenditure. The assessee has amortized a sum of Rs. 366,32,13,778/- against the lease rentals. She confirmed that as the lease rent