Case Law Details
DCIT Vs M/s Sapient Corporation Pvt Ltd. (ITAT Delhi) – It is by now well-settled that if the expenditure incurred by the taxpayer is of revenue nature, the same is entirely deductible even if there accrues an advantage of enduring nature in favor of the taxpayer as a result of the said expenditure. This is because going by the very nature of the expenditure being revenue, it operates in the revenue field leaving the capital field untouched. The enduring benefit resulting from the said expenditure may justify the action of the taxpayer to write off the said expenditure in his books of account over a period of more than one year. However, such accounting treatment by itself is not conclusive to decide the nature of the relevant expenditure, whether capital or revenue. In the case of Amar Raja Batteries Ltd. v. Dy. CIT [2004] 91 I. T.D. 280. Hyderabad Bench of ITAT has held after taking into consideration the decision of Hon ’ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. (supra) that even though the taxpayer had written off the expenditure in its books of account over a period of five years, it must be allowed in its entirety in the year in which it was incurred if it was the revenue expenditure and if it was wholly and exclusively incurred for the purposes of its business.
In the present case, there is no dispute that the expenditure in question incurred by the taxpayer company on training of its employees was wholly and exclusively incurred for the purpose of its business. As regards the nature of the said expenditure, the submission of the taxpayer company before the authorities below as well as before us has been that the said expenditure was incurred for the purpose of imparting training to its employees in order to increase their efficiency in day-to-day working and there is nothing brought on record on behalf of the revenue to controvert/rebut this position. In the case of Hindustan Aluminum Corpn. Ltd. (supra) cited by the learned counsel for the taxpayer, the expenditure incurred on practical training and experience of its employees by the taxpayer company in order to achieve efficient running of factory for getting optimum production was held to be a revenue expenditure by the Hon’ble Calcutta High Court observing that the same was directly linked to profit earning process. In the case of Associated Cement Co. Ltd. (supra), the advantage secured by the taxpayer by incurring the expenditure was absolution or immunity from liability to pay municipal rates or taxes for a period of fifteen years and as the said liability was on revenue account, it was held by the Hon ’ble Supreme Court that the expenditure incurred was of revenue nature as the advantage secured was in the field of revenue and not capital. In the present case, the expenditure incurred by the taxpayer company on imparting training to its employees in order to increase their efficiency in day-to-day working was in the revenue field and this being so and keeping in view the legal position emanating from the judicial pronouncements discussed above, we hold that the same was entirely deductible in the year under consideration as rightly claimed by the taxpayer. The impugned order of the learned CIT(A) confirming the disallowance made by the Assessing Officer to the extent of 50 per cent on this issue is, therefore, reversed and the Assessing Officer is directed to allow the said expenditure in full.
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH “G” DELHI ]
I.T. A. No. 1856 (Del) of 2010
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