COMMISSIONER OF INCOME TAX Vs. JCT ELECTRONICS LTD.

JUDGEMENT

(1.) THE Revenue has approached this Court by filing the instant appeal under s. 260A of the IT Act, 1961 ('the Act') been claimed that following substantive question of law would arise for determination of this Court :

(2.) IN order to appreciate the controversy few facts may be noticed. The assessee -company is manufacturing colour picture tubes. In respect of the asst. yr. 2004 -05 the assessee -company incurred expenditure for the purpose of restructuring. The assessee -company had become a sick unit and that regard a reference was made to BIFER for its and Kapoor, Chartered Accountants were engaged which resulted in preparation of final restructuring scheme. On account of assistance rendered by the Chartered Accountants major concession and substantial relief was given to the assessee -company. A professional payment of Rs. 53,70,000 was made to the chartered accountants and Rs. 15,00,000 were paid to M/s Asset Care Enterprises Ltd. The aforesaid expenditure were claimed as expenses for professional services for processing of its case before the BIFER. The AO opined that such expenditure incurred by the assessee - company for the purpose of restructuring would be an advantage of enduring nature. The expenditure has not been incurred for enhancing sale nor for earning of any income. The CIT(A) also accepted the opinion expressed by the AO. However, the Tribunal on the aforesaid issue held otherwise by observing as under :

(3.) THERE is no statutory definition of expression 'capital expenditure'. The Courts have repeatedly held that such expression has to be construed in a business sense save insofar as there may be rules of construction applicable to it. The expression occurring in s. 37(1) of the Act makes its meaning more elastic in its application to the facts of each case. This is consistent view of the Courts. The word 'capital' connotes permanency and capital expenditure is therefore, closely akin to the concept of securing something, tangible or intangible property, corporeal or incorporeal right so that they could be of a lasting or enduring benefit to the enterprise in issue. Revenue nature expenditure, on the other hand, is operational in its perspective and solely intended for the furtherance of the enterprise. [See CIT vs. Wolkem (P) Ltd. Co. (2002) 175 CTR (Raj) 303 : (2002) 258 ITR 350 (Raj)].