Gujarat High Court
Commissioner Of Income Tax-Ii vs Gujarat Gas Co Ltd....Opponent(S) on 5 January, 2015
Author: Jayant Patel
Bench: Jayant Patel, S.H.Vora
O/TAXAP/1386/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 1386 of 2014
================================================================
COMMISSIONER OF INCOME TAX-II....Appellant(s)
Versus
GUJARAT GAS CO LTD....Opponent(s)
================================================================
Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
================================================================
CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL
and
HONOURABLE MR.JUSTICE S.H.VORA
Date : 05/01/2015
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE JAYANT PATEL)
1. The present appeal is directed against the order dated 30.05.2014 passed by the Tribunal in ITA No.1264/Ahd/2006, whereby the appeal is partly allowed.
2. We have heard Mr. M.R. Bhatt, learned advocate for the appellant.
3. As per the appellant following substantial questions of law arise for determination of this Court. The same can be reproduced Page 1 of 5 O/TAXAP/1386/2014 ORDER as under:
"[A] "Whether the Appellant Tribunal is right in law and on facts to delete the disallowance of Rs.8,30,017/ being fees paid to carry out due diligence for laying pipeline for supply of gas by holding the same to be revenue expense?"
[B] Whether the Appellate Tribunal is right in law and on facts to delete the disallowance of Rs.20,90,051/ expenses claimed for purchase of Software not in the nature of license fees and hence was correctly treated as capital expenses?"
[C] "Whether the Appellate Tribunal is right in law and on facts to delete the addition of Rs.16,79,700/ on account of estimated profit on WIP when assessee followed percentage completion method of accounting?"
4. We may consider pointwise submission of the learned advocate for the appellant.
5. Concerning to point question A, the discussion of the Tribunal is at para 7.3 of the order. The Tribunal in turn finds that considering the necessity and on the ground of commercial expediency, if the expenditure is incurred directly to facilitate the promotion of business, which may include the expansion of the business, it can be said as the business expenses and not capital expenses.
6. Mr. Bhatt, learned advocate for the appellant by relying upon the decision of this Court in case of Commissioner of Income Tax vs. Shri Digvijay Cement Company Ltd. reported in 159 (1986) Page 2 of 5 O/TAXAP/1386/2014 ORDER ITR (Gujarat) Page No.253 contended that in case where the shipyard for which the feasibility report was to be prepared and the expenses were incurred such expenses were treated as not of the revenue expenditure but termed as capital expenditure. He submitted that in the present case, project of expansion was to be undertaken and for which the feasibility report was prepared and the fees were paid to the expert namely price water house. In his submission the Tribunal committed an error in holding the expenses as revenue expenditure and not the capital expenditure.
7. We do not find any substance in the contention for the reason that it was not a matter where the project not at all concerning the regular business of the assessee, was to be established like in case of the above referred decision upon the reliance has been placed by Mr. Bhatt. On the contrary it is rather not in dispute that the project was for expansion of laying down the pipeline for supply of gas which is regular business of the assessee and the expansion of the business by laying down pipe line was one of the purpose for which the feasibility report was to be prepared and the expenses were incurred.
Page 3 of 5
O/TAXAP/1386/2014 ORDER
8. In our view the Tribunal cannot be said to have committed any error treating the expenses as business expenses or revenue expanses. Hence, we do not find any substantial questions of law arise as canvassed by the appellant.
9. On second question, the discussion by the Tribunal is rather on para 8.4, wherein, the Tribunal found that the projects of software programmes could be said as revenue expenditure. Be it noted that the licence of software programmes was not for resale of such software or for further sale of software but was for the use of software in running day to day business of the assessee.
10. We do not find any error committed by the Tribunal in finding that such expenses were revenue expenses.
11. On the 3rd question, the discussion by the Tribunal is at para 10.2 of the impugned order. As per the Tribunal as the assessee has regularly offered the tax, there is no reason to separately consider the work in progress and the expenses incurred thereto for different method for the purpose of assessment of tax. Page 4 of 5
O/TAXAP/1386/2014 ORDER
12. We do not find that the Tribunal has committed any error to that extent and hence, no such substantial questions of law arise as sought to be canvassed.
13. In view of the above, there is no substantial questions of law to be considered in the present appeal, the present appeal deserves to be dismissed. Hence, dismissed.
(JAYANT PATEL, J.) (S.H.VORA, J.) ali Page 5 of 5