Where entire purchases were made by bill and sales tax was paid thereupon and payments to party were made by account payee cheques, addition on account of bogus purchases was not justified

Selvel Advertising (P.) Ltd.[2015] 58 taxmann.com 196 (Kolkata - Trib.)JANUARY  1, 2015 

Contribution for the construction and development of roads between various sugarcane-producing centres and the sugar factories of the assessee. The roads remained the property of the Government. Held revenue expenditure

Lakshmiji Sugar Mills Co. (P.) Ltd. v.CIT [1971] 82 ITR 376 (SC), the assessee-company was carrying on the business of manufacture and sale of sugar. It paid to the Cane Development Council certain amounts by way of contribution for the construction and development of roads between various sugarcane-producing centres and the sugar factories of the assessee. The roads remained the property of the Government. This Court held that the expenditure was not of a capital nature and had to be allowed as an admissible deduction in computing the profits of the assessee’s business. The expenditure was incurred for the purpose of facilitating the running of the assessee’s motor vehicles and other means employed for transportation of sugarcane to its factories.

Expenditure on contribution for construction of tenements for asessee's workers which remain property of housing board is revenue expenditure

In the case of CIT v. Bombay Dyeing & Mfg. Co. Ltd. [1996] 219 ITR 521 / 85 Taxman 396 (SC), the company contributed to the State Housing Board certain amounts for construction of tenements for its workers. The tenements remained the property of the Housing Board. It was held that the expenditure was incurred wholly and exclusively on the welfare of the employees and, therefore, constituted legitimate business expenditure. As the assessee-company acquired no ownership rights in the tenements, this Court said that the expenditure was incurred merely with a view to carry on the business of the company more efficiently by having a contented labour force

PipeLines and Transmission lines set up to provide water and electricity in lieu of exemption from municipal taxes for 15 years is revenue expenditure

 In the case of CIT v. Associated Cement Cos. Ltd. [1988] 172 ITR 257 /38 Taxman 110A (SC), the respondent-company entered into an agreement to supply water to the municipality and provide water pipelines as also to supply electricity for street lighting and put up a transmission line for that purpose. The assessee also agreed to concrete the main road from the factory to the railway station. The amounts expended for these purposes were held to be revenue expenditure since the installations and accessories were the assets of the municipality and not of the assessee. The expenditure, therefore, did not result in creating any capital asset for the company. The advantage secured by the respondent was immunity from liability to pay municipal rates and taxes for a period of 15 years. This Court said that had these liabilities been paid, the payments would have been on revenue account. Therefore, the advantage secured was in the filed of revenue and not capital.

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1968-69 - Assessee obtained premises on lease for 39 years - In terms of lease agreement, assessee demolished existing construction and constructed new building to suit its business at its own expenses - In any circumstances assessee would not be entitled for any compensation on account of putting up new construction and it should be treated as tenant subject to payment of rent lower than rent prevailing - Assessee claimed said construction expenditure as revenue expenditure - Assessing Officer rejected its claim and treated said expenditure as capital expenditure - Whether since asset created by assessee by spending amounts did not belong to assessee but assessee got only business advantage of using modern premises at a low rent, thus, saving considerable revenue expenditure for next 39 years, said expenditure should be treated as revenue expenditure - Held, yes

Madras Auto Service (P.) Ltd[1998] 99 TAXMAN 575 (SC)AUGUST 12, 1998

Assessee-company claimed depreciation on LED video display boards - Assessing Officer disallowed said claim - Commissioner (Appeals) held that LED video display boards were purely temporary structures and therefore, assessee was entitled to 100 per cent depreciation - Whether since structure could not be re-used and said structures were put on land not belonging to assessee, order of Commissioner (Appeals) could not be interfered with - Held, yes

Selvel Advertising (P.) Ltd[2015] 58 taxmann.com 196 (Kolkata - Trib.)JANUARY  1, 2015 CIT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468/99 Taxman 575 (SC) (para 15) followed

Chit dividend paid by of chit fund company to its members is not interest falling under section 2(28A) and, consequently, no deduction of TDS under section 194A is required to be made

Avenue Super Chits (P.) Ltd[2015] 58 taxmann.com 368 (Karnataka)JANUARY  16, 2015 CIT v. Sahib Chits (Delhi) (P.) Ltd. [2010] 328 ITR 342/[2009] 185 Taxman 34 (Delhi). (para 7)followed.