| Case ID |
10c72097-ec49-4813-aaf5-ad6efb8f565c |
| Body |
View case body. Login to View |
| Case Number |
IT REFERENCE No. 139 OF 1976 |
| Decision Date |
|
| Hearing Date |
|
| Decision |
The Tribunal held that the payments made by the assessee to two companies as commission for securing contracts were allowable as revenue expenditure. The payments were not for the initiation of business but were incidental to the business of procuring and executing contracts. The Tribunal found that the business had commenced long before these payments were made, and thus, the payments did not create any enduring advantage or asset. The court emphasized that the payments were part of the normal business operations and did not constitute capital expenditure. |
| Summary |
In the case of IT REFERENCE No. 139 OF 1976, the Calcutta High Court addressed the issue of whether certain payments made by a foreign company, engaged in securing and executing contracts in India, could be classified as revenue expenditure under Section 37(1) of the Income-tax Act, 1961. The company made payments to two Indian firms as commission for their assistance in securing contracts. Initially, the Income Tax Officer disallowed these payments, classifying them as capital expenditures, which led to an appeal. The Tribunal found that the payments were not made for the initiation of the business, which had started well before the payments were made. The Tribunal concluded that the payments were necessary for the normal operations of the business and did not create any enduring asset. This ruling underscores the distinction between capital and revenue expenditures, emphasizing that expenses incurred in the regular course of business, particularly for securing contracts, are generally considered revenue expenditures. This case is significant in understanding the treatment of business expenditures under tax law, particularly for foreign companies operating in India. |
| Court |
Calcutta High Court
|
| Entities Involved |
Not available
|
| Judges |
Sabyasachi Mukharji, J
|
| Lawyers |
B.K. Bagchi,
A.N. Bhattacharjee,
D.R. Pal,
R.N. Dutt
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Hewitt Robins (New York)
|
| Citations |
1983 SLD 918 = (1983) 141 ITR 278
|
| Other Citations |
Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 (SC),
Tata Hydro-Electric Agencies Ltd. v. CIT [1937] 5 ITR 202 (PC),
Benarsidas Jagannath, In re [1947] 15 ITR 185 (Lah.) [FB],
CIT v. Coal Shipments P. Ltd. [1971] 82 ITR 902 (SC),
Hindustan Gas and Industries Ltd. v. CIT [1979] 117 ITR 549 (Cal.),
Vizagapatnam Sugars and Refinery Ltd. v. CIT [1963] 47 ITR 139 (AP)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1)
|