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“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

Deputy Commissioner of Income Tax, Cir-4(1), Kolkata vs. Sublime Agro Limited, Kolkata

In the result, the appeal filed by the revenue is dismissed

ITA 1358/KOL/2023[2012-13]Status: DisposedITAT Kolkata10 Feb 2025AY 2012-13

Bench: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]

Section 143(2)Section 14ASection 80I

which reads thus: “Any expenditure (note 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

Johnson and Johnson Private Limited (As Successor of Nr Jet Enterprises Pvt. Ltd.), Mumbai vs. CIT(Appeals) NFAC, Delhi

In the result, the appeal by the assessee is partly allowed

ITA 1756/MUM/2023[2011-12]Status: DisposedITAT Mumbai10 Feb 2025AY 2011-12

Bench: Shri Sandeep Singh Karhail & Smt. Renu Jauhri

For Appellant: Shri Nikhil TiwariFor Respondent: Shri Prashant Barate, Sr. DR
Section 112Section 142(1)Section 143(2)Section 234BSection 234CSection 234DSection 250Section 50

marks, licences, franchises or any other business or commercial rights of the assessee will form a separate block of assets. As and when any capital expenditure is incurred by an assessee on acquiring such intangible assets the amount of such expenditure will be added to the block of intangible assets

DCIT., Circle 8(1), Hyderabad vs. East India Petroleum Limited, Hyderabad

In the result, appeal filed by the Revenue is dismissed

ITA 1087/HYD/2024[2018-19]Status: DisposedITAT Hyderabad06 Feb 2025AY 2018-19

Bench: Shri Manjunatha G. & Shri K.Narsimha Charyआ.अपी.सं /Ita No.1087/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2018-19) Deputy Commissioner Of Vs. East India Petroleum Income Tax Limited Circle-8(1)(Incharge) Hyderabad Hyderabad [Pan : Aaace4494K] (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri H.Srinivasulu, Ar रधजस् व द्वधरध/Revenue By: Ms.M.Narmada, Cit-Dr सुिवधई की तधरीख/Date Of Hearing: 16/01/2025 घोर्णध की तधरीख/Date Of 06/02/2025 Pronouncement: आदेश / Order Per. Manjunatha G., A.M: This Appeal Filed By The Revenue Is Directed Against Order Dated 19.08.2024 Of The Commissioner Of Income Tax (Appeals) [“Ld.Cit(A)”], National Faceless Appeal Centre (Nfac), Delhi, Pertaining To A.Y.2018-19. 2. The Brief Facts Of The Case Are That The Assessee, Engaged In The Business Of Providing Terminalling Services To Oil Marketing Companies For Storage Of Bulk Liquid Products Including Fuels Like High Speed Diesel, Motor Spirit, Petroleum

For Appellant: Shri H.Srinivasulu, ARFor Respondent: Ms.M.Narmada, CIT-DR
Section 32

Since the interest paid on loan borrowed for the purpose of acquiring shares of assessee company from third party is in the nature of capital expenditure and was not allowed as deduction, therefore, rejected the claim of the assessee and disallowed interest expenditure ... that the loan borrowed from bank is for the purpose of acquisition of shares and interest paid on such loans partakes the nature of capital expenditure and therefore, cannot be allowed is incorrect. In this regard, he relied upon the decision of Hon'ble Bombay High Court in the case

ACIT Cir 2(1)(1), Mumbai vs. Bank of Baroda, Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 2777/MUM/2019[2016-17]Status: DisposedITAT Mumbai06 Feb 2025AY 2016-17

Bench: Shri Amarjit Singhshri Sandeep Singh Karhailbank Of Baroda, C-26, G-Block, Baroda Corporate Centre, Bandra Kurla Complex, Bandra (East), Mumbai-400051. ……………. Appellant Pan: Aaacb 1534 F V/S Acit, 2(1)(1), ……………. Respondent Mumbai-400051. Acit, Circle - 2(1)(1), Room No. 561, 5Th Floor, Aayakar Bhavan, M.K. Road, ……………. Appellant Mumbai-400020. V/S Bank Of Baroda, C-26, G-Block, Baroda Corporate Centre, Bandra ……………. Respondent Kurla Complex, Bandra (East), Mumbai-400051. Pan: Aaacb 1534 F

For Appellant: Mr. C. NareshFor Respondent: Mr. Kailash C. Kanojiya, CIT-DR
Section 115JSection 143(3)Section 14ASection 250

paid broken period of interest, since said securities were treated as stock in trade, the broken period interest could not be considered as capital expenditure and would have to be treated as revenue expenditure. 36. Therefore, in view of the aforesaid findings and respectfully following the decision

Bank of Baroda, Mumbai vs. ACIT 2 (1)(1), Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 1649/MUM/2019[2016-17]Status: DisposedITAT Mumbai06 Feb 2025AY 2016-17

Bench: Shri Amarjit Singhshri Sandeep Singh Karhail

For Appellant: Mr. C. NareshFor Respondent: Mr. Kailash C. Kanojiya, CIT-DR
Section 115JSection 143(3)Section 14ASection 250

paid broken period of interest, since said securities were treated as stock in trade, the broken period interest could not be considered as capital expenditure and would have to be treated as revenue expenditure. 36. Therefore, in view of the aforesaid findings and respectfully following the decision

M/S. Mashreq Bank Psc., Mumbai vs. DDIT (It) - 3(2), Mumbai

In the result, the appeal is allowed, as indicated above

ITA 1342/MUM/2006[2002-2003]Status: DisposedITAT Mumbai06 Feb 2025AY 2002-2003

Bench: Justice (Retd.) C. V. Bhadangshri Saktijit Dey & Ms. Padmavathy Sassessment Year: 2002-03

Section 37Section 44C

submitted, in case of State Bank of Mauritius (ITA Nos. 2254 & 3005/Mum/2005 dated 26.09.2012) relied upon by learned Departmental Representative, the Tribunal has disallowed capital expenditure incurred for acquisition of fixed assets on the proposition that the profits mentioned in the DTAA are commercial profits while the capital expenditure incurred

ACIT, Patna vs. New Era Social Development Welfare Society, Patna

Appeal is treated as allowed for statistical purposes

ITA 296/PAT/2023[2017-18]Status: DisposedITAT Patna04 Feb 2025AY 2017-18
Section 10Section 11Section 12Section 12ASection 12A(1)(b)Section 139(1)Section 144Section 2Section 250Section 288

section (1) of section 12A, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the trust or institution, subject to fulfilment of the following conditions, namely:— (a) such expenditure is not from the corpus ... whether the Ld. CIT(A) could give a direction in which the AO would give relief on account of revenue expenditure (as opposed to capital expenditure) at the time of giving effect to the first appellate order. However, since we agree in principle with the action

DCIT-2(3)(1), Mumbai vs. Ntt Global Data Centers Cloud Infrastructure India Pvt Ltd, Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 4102/MUM/2023[2015-16]Status: DisposedITAT Mumbai04 Feb 2025AY 2015-16

Bench: Shri Br Baskaranshri Sandeep Singh Karhailassessment Year : 2015-16

For Appellant: Shri Tarang Mehta, AdvFor Respondent: Ms. Monika H. Pande, Sr. DR
Section 250

case and in the law, the Ld. CIT (A) justified deleting disallowance of Finance Lease Rental Payments, when the same is part of Capital Expenditure for payment of Finance Lease Rental Payments." 6. The only issue raised by the Revenue pertains to the deletion of disallowance on account of Finance ... Payment is allowable under section 37(1) of the Act but also raised an alternative ground that if the expenses incurred are considered as capital expenditure for acquisition of assets, depreciation on such assets were to be allowed to the assessee being the lessee. The learned CIT(A), vide impugned

Preeti Goyal, New Delhi vs. DCIT Central Circle-31, New Delhi

ITA 1240/DEL/2024[2021-22]Status: DisposedITAT Delhi04 Feb 2025AY 2021-22

Bench: Shris.Rifaur Rahman & Shri Yogesh Kumar U.S.

For Appellant: Shri Rohit Kapoor, AdvocateFor Respondent: Shri Abhijeet Kumar, Sr. DR

converted into shares, then it partakes the character of capital, and in that event, the expenditure would not be revenue expenditure, and would be capital expenditure. Learned counsel for the assessee informs, that though it has not come on record so far, but as a matter of fact the debentures

Dacit-14(1)(1), Mumbai vs. Avendus Capital Pvt. Ltd., Mumbai

Appeal is dismissed

ITA 6547/MUM/2024[2015-16]Status: DisposedITAT Mumbai31 Jan 2025AY 2015-16

Bench: Smt. Beena Pillai (Jm) & Shri Omkareshwar Chidara (Am) Dcit, Circle 14(1)(1) M/S. Avendus Capital Room No. 432, 4Th Pvt. Ltd. Floor, Aayakar Bhavan Vs. 901 Platina, 9Th Floor M.K. Road, Mumbai Plot No. C-59, Bandra 400 020. Kurla Complex, Bandra East, Mumbai-400 051. Pan : Aabcc2404Q Appellant Respondent

For Appellant: Shri Ram Krishn KediaFor Respondent: Shri Ujjval Gangwal
Section 37(1)

confirming the disallowance of Rs. 1,20,47,684/-claimed u/s. 37(1) of the Act towards Employee Stock Option Plan (ESOP) expenses as capital expenditure. An identical issue was considered by the Tribunal Special Bench Bangalore in the case of Biocon (supra) has held that ESOP expenses

M/S. Beaver Automotive Private Limtied, Bengaluru vs. The Assistant Commissioner of Income Tax, Circle-1(1)(2), Bangalore

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 1433/BANG/2024[2017-18]Status: DisposedITAT Bangalore30 Jan 2025AY 2017-18

Bench: Shri Laxmi Prasad Sahu & Shri Soundararajan K.Assessment Year : 2017-18

For Appellant: Shri V. Srinivasan, AdvocateFor Respondent: Shri Subramanian, JCIT-DR
Section 115JSection 142(1)Section 14ASection 234B

various persons who had previously agreed to purchase the capital asset that was sold by the appellant and therefore, the compensation so paid was capital expenditure incurred by the appellant for the year in which the compensation was paid and therefore, the same was allowable. 5. Without prejudice

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

Telegraph Act grants a single license for the establishment, upkeep, and operation of telecommunications services. The license fee is allocated as capital expenditure and revenue expenditure without any legal justification because the license is not provided for divisible rights that envisioned divisible payments. In order to classify the nature ... consider whether the subsequent payment made in installments has a direct connection to the original obligation. 15. The Supreme Court has further observed that capital expenditure does not always bring into existence an asset for the enduring benefit of the trade. The nature of the advantage acquired

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

Telegraph Act grants a single license for the establishment, upkeep, and operation of telecommunications services. The license fee is allocated as capital expenditure and revenue expenditure without any legal justification because the license is not provided for divisible rights that envisioned divisible payments. In order to classify the nature ... consider whether the subsequent payment made in installments has a direct connection to the original obligation. 15. The Supreme Court has further observed that capital expenditure does not always bring into existence an asset for the enduring benefit of the trade. The nature of the advantage acquired

Skill Promoters Holding and Leasing Private Limited, Hyderabad vs. DCIT., Central Circle-2(3), Hyderabad

In the result, appeal filed by the assessee is dismissed

ITA 370/HYD/2023[2019-20]Status: DisposedITAT Hyderabad29 Jan 2025AY 2019-20

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita No.370/Hyd/2023 (निर्धारण वर्ा/Assessment Year: 2019-20) M/S Skill Promoters Vs. Pcit (Central) Holding & Leasing Hyderabad Private Limited Hyderabad [Pan : Aascs8012P] (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri P.Murali Mohan Rao,Ar रधजस् व द्वधरध/Revenue By: Shri B.Bala Krishna,Cit-Dr सुिवधई की तधरीख/Date Of Hearing: 07/01/2025 घोर्णध की तधरीख/Date Of 29/01/2025 Pronouncement: आदेश / Order Per. Manjunatha G., A.M: This Appeal Filed By The Assessee Is Directed Against The Order Dated 23.06.2023 Of The Learned Principal Commissioner Of Income Tax (Central) (Ld.Pcit), Hyderabad, Pertaining To A.Y.2019-20 On The Following Grounds : 1. The Order Passed U/S 263 Of The Act Dated 23.06.2023 Is Erroneous Both On Facts & In Law. 2. The Ld.Pr.Cit Erred In Holding That The Assessment Order Dated 26.09.2021 Passed U/S 153A Is Erroneous In So 2

For Appellant: Shri P.Murali Mohan Rao,ARFor Respondent: Shri B.Bala Krishna,CIT-DR
Section 127Section 132Section 143(2)Section 153ASection 263Section 37

issue of deduction allowed towards ROC legal fee of Rs.5,54,581/-, even though the said expenditure is in the nature of capital expenditure and not allowable deduction u/s 37 of the Act. In response to the show cause notice, the assessee vide letter dated 16.02.2023 submitted that the assessment ... shares, with a view to increase their capital is directly related to the expansion of the capital base of the company and is capital expenditure” ii. In view of the above mentioned decisions of Hon'ble Supreme Court the legal fee paid by the Assessee

Vodafone Mobile Services Limited, New Delhi vs. DCIT, Coimbatore

In the result, the appeal filed by the assessee is allowed

ITA 587/CHNY/2017[2010-2011]Status: DisposedITAT Chennai29 Jan 2025AY 2010-2011

Bench: Shri Ss Viswanethra Ravi & Shri Jagadishआयकर अपील सं./Ita No.587/Chny/2017 िनधा:रण वष: /Assessment Year: 2010-11

For Appellant: Shri Ketan K. Ved, C.A HIFor Respondent: Shri A. Sasikumar, CIT
Section 143(3)Section 144CSection 144C(1)Section 153(2)Section 201(1)Section 40

made disallowance of entry fee/subscription charges paid by the assessee of Rs. 58,337/- on the ground that the said expenditure is capital expenditure. On appeal, the Ld. CIT(A) relying on the decision of Hon’ble Kerala High Court in the case of Framatone Connector OEN Ltd. v. DCIT ... assessee has incurred club expenses of Rs.58,337 and claimed as revenue expenditure. The A.O without examining the nature of expenditure has held it capital expenditure The Hon’ble Karnataka High Court in the case Ingersoll-Rand India Ltd. v. CIT, supra, has held that expenditure spend on club expenses

DCIT- 2(3)(1), Mumbai vs. Paranjape Schemes Construction Limited, Vile Parle East, Mumbai

In the result, appeal of the assessee is partly allowed for statistical purposes and the Revenue appeal is dismissed

ITA 5501/MUM/2024[2021-22]Status: DisposedITAT Mumbai29 Jan 2025AY 2021-22

Bench: SHRI AMIT SHUKLA (Judicial Member), SMT RENU JAUHRI (Accountant Member)

Section 143(3)Section 14ASection 41(1)Section 68

entire expenses incurred till the year are shown as WIP Thus I find that the interest expenses claimed by the appellant are of capital expenditure nature being part of land cost shown in WIP of the project which is not yet started. Therefore the action of the AO of disallowing ... constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commissioner was erroneous. In the case of India Cements Ltd. v. CIT, Madras, reported in 60 ITR Page

Assistant Commissioner of Income Tax, Mumbai, Maharashtra vs. Mazagon Dock Shipbuilders Limited, Mumbai, Maharashtra

In the result, appeal of the Revenue is partly allowed for statistical purposes

ITA 5332/MUM/2024[2019-20]Status: DisposedITAT Mumbai29 Jan 2025AY 2019-20

Bench: Us It Has Been Submitted That Now Form 3Cl Has Been Issued By The Dsir Wherein Following R & D Expenditure Has Been Held To Be Eligible For Deduction U/S 35(2Ab). (In Lakhs) Assessment Year 2019-20

Section 143(3)Section 154Section 199Section 35

DSIR wherein following R & D expenditure has been held to be eligible for deduction u/s 35(2AB). (in lakhs) Assessment Year 2019-20 A Capital expenditure (other than land & building) Nil B Recurring expenditure 5495.78 C R&D expenditure eligible for deduction u/s 35(2AB) 5495.78 3 Mazagaon Dock Shipbuilders

Paranjape Schemes Construction Limited, Mumbai vs. Deputy Commissioner of Income Tax - 2(3)(1), Mumbai

In the result, appeal of the assessee is partly allowed for statistical purposes and the Revenue appeal is dismissed

ITA 5274/MUM/2024[AY 2021-22]Status: DisposedITAT Mumbai29 Jan 2025

Bench: SHRI AMIT SHUKLA (Judicial Member), SMT RENU JAUHRI (Accountant Member)

Section 143(3)Section 14ASection 41(1)Section 68

entire expenses incurred till the year are shown as WIP Thus I find that the interest expenses claimed by the appellant are of capital expenditure nature being part of land cost shown in WIP of the project which is not yet started. Therefore the action of the AO of disallowing ... constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commissioner was erroneous. In the case of India Cements Ltd. v. CIT, Madras, reported in 60 ITR Page

DCIT-24(1), Mumbai, Piramal Chambers vs. Akruti Jay Chandan Joint Venture, Mumbai

The appeal of the Revenue is dismissed

ITA 4188/MUM/2023[2015-16]Status: DisposedITAT Mumbai29 Jan 2025AY 2015-16

Bench: Smt. Beena Pillai (Jm) & Shri Omkareshwar Chidara (Am)

For Respondent: Shri Jayeshkumar Jain

case and in law, Ld. CIT(A) has erred in not considering the fact that any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended fully or exclusively for the purpose of business of the assessee. Nothing has been brought

Dy. Commissioner of Income -Tax Ershtwhile 26(1), Now DCIT-41(1)(1), Mumbai vs. Gulermak Tpl Joint Venture, Mumbai

In the result, appeals of the assessee and the revenue are dismissed

ITA 3020/MUM/2022[2018-2019]Status: FixedITAT Mumbai29 Jan 2025AY 2018-2019

Bench: Shri Saktijit Dey, Hon’Ble & Shri Narendra Kumar Billaiya, Hon’Ble

For Appellant: Shri J.D. Mistry, Sr. Advocate & Hiten ThakkarFor Respondent: Shri Kishor Dule, CIT D/R
Section 80I

purpose of business and, therefore, eligible for deduction under section 37 of the Act. Moreover, the AO has never treated the said claim as capital expenditure and has accepted the same as revenue expenditure, therefore, we do not find any reason to interfere with the findings