Case Law Details
Bioplus Life Sciences Pvt. Ltd. Vs DCIT (Karnataka High Court)
The issue under consideration is whether the expenditure incurred towards upgraded and development of a product was to be considered as capital expenditure or revenue expenditure?
High Court states that when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of trade, there is very good reason for treating such an expenditure as properly attributable not to revenue but to capital. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In the backdrop of aforesaid well settled legal principles, the facts of the case in hand may be examined. It is pertinent to note that assessee had started a new Unit at Hosur by taking over machineries and properties of M/s V.B.Medicare Pvt. Ltd., Hyderabad on lease. The work of development of ‘SUCRALOSE’ viz., a new product was started in Hosur Unit. The product was developed. Thus, the assessee had produced a new product from which enduring benefit was derived. Therefore, the same has to be treated as capital expenditure. An asset was brought into existence for enduring benefit of the business and therefore, the same has to be treated as capital expenditure. The expenditure has not been made for bringing into existence an asset for running of the business or working with it with a view to produce profits. Therefore, the same cannot be treated as revenue expenditure. It is pertinent to mention here that the assessee himself in the Books of account had shown it as capital expenditure. Therefore, the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal have rightly treated the expenditure incurred by the assessee for development of a new asset as capital expenditure. In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered against the assessee and in favour of the revenue.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment years 2006-07 and 2007-08. The appeal was admitted by a bench of this Court vide order dated 29.05.2012 on the following substantial questions of law:
Please become a Premium member. If you are already a Premium member, login here to access the full content.
