1986-VIL-377-KAR-DT

Equivalent Citation: [1987] 163 ITR 657, 60 CTR 45, 26 TAXMANN 575

KARNATAKA HIGH COURT

Date: 06.02.1986

COMMISSIONER OF INCOME-TAX

Vs

KARNATAKA STATE INDUSTRIAL AND INVESTMENT DEVELOPMENT CORPORATION

BENCH

Judge(s)  : R. S. MAHENDRA., K. S. PUTTASWAMY

JUDGMENT

The judgment of the court was delivered by

PUTTASWAMY J.-In these references made under section 256(1) of the Income-tax Act, 1961 (hereinafter called "the Act"), the Income-tax Appellate Tribunal, Bangalore Bench, Bangalore ("the Tribunal"), at the instance of the Revenue, has referred the following question of law for the assessment years 1970-71 to 1973-74 of one and the same assessee.

"Whether, on the facts and circumstances of the case, the Tribunal is right in law in holding that the expenditure incurred in preparation of the project and feasibility reports is revenue expenditure and not capital expenditure ?"

In order to appreciate the question referred to us, it is necessary to notice the facts as found by the Tribunal.

Karnataka State Industrial & Investment Development Corporation Ltd., Bangalore, a wholly owned Government company of the Government of Karnataka, is, inter alia, engaged in the business of promoting and operating schemes for the industrial development of Karnataka. In the course of its business activities, the assessee gets project reports and feasibility studies prepared by qualified persons and incurs expenditure over them.

For the assessment years 1970-71 to 1973-74, the assessee claimed the expenditure incurred on project reports and feasibility studies as "revenue expenditure" before the Income-tax Officer, Company Circle, Bangalore, who disallowed the same and held that it was "capital expenditure". On appeals filed by the assessee, the Appellate Assistant Commissioner of Income-tax, Bangalore, allowed them and held that it was "revenue expenditure" with which the Tribunal has concurred with a direction to the Income-tax Officer to allow such expenditure for each year. Hence, these references.

Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, appearing for the Revenue, contends that the expenditure incurred was not revenue expenditure but was capital expenditure.

Sri G. Sarangan, learned counsel for the assessee, contends that in holding that the expenditure was revenue expenditure and not capital expenditure, the Tribunal had correctly applied the legal principles and had recorded its finding.

We have carefully perused the common orders of the Tribunal and the Appellate Assistant Commissioner. Both the authorities, bearing in mind the correct legal principles for determining whether the expenditure incurred was capital expenditure or revenue expenditure, have concurrently found that the expenditure incurred by the assessee, with due regard to the nature of business, was revenue expenditure. We are of the view that in reaching its conclusions, the Tribunal had not misapplied the legal principles. We see no merit, in the contention of Sri Srinivasan that the expenditure incurred was not revenue expenditure but was capital expenditure. From this, it follows that an answer to the question referred to us must be in the affirmative.

In the light of our above discussion, we answer the question referred to us in the affirmative against the Revenue and in favour of the assessee. But, in the circumstances of the cases, we direct the parties to bear their own costs.

 

 

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