Hinduja Foundries Ltd. Vs ACIT (Madras High Court)
Madras High Court held that development charges paid to SIPCOT not being capital asset doesn’t qualify for the claim of depreciation. However, the same qualifies as revenue expense and assessee entitled to claim deduction @5% as SIPCOT would deduct 5% every year.
Facts- The present petition has been preferred by the petitioner mainly on the question of law that whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not eligible to claim depreciation on sums paid to SIPCOT for development of common infrastructural facilities?
Conclusion- The assessee, who had contributed this amount towards the infrastructural development, though does not own the same and is also developed by SIPCOT, still the assessee has a right of usage and without using this right, the assessee will not be in a position to put up the factory or run the business. The expenditure made by the assessee is not towards betterment of the business or for any enduring benefit, but it is a basic requirement without which the business cannot be established or run. The contributions made by the assessee towards development charges not being owned by him and there being no capital asset, qualifies for deduction as a revenue expenditure.
