Commissioner Of Income Tax,Chandigarh-Ii v. M/S Pml Industries Ltd.,Sco 3004, Sector 32-D,Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.135 of 2008Date of decision:12.5.2008 Commissioner of Income tax,Chandigarh-II Versus M/s PML Industries Ltd.,SCO 3004, Sector 32-D,Chandigarh. ......Appellant ......Respondent CORAM:-HON'BLE MR.JUSTICE RAJIVE BHALLAHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Ms. Urvashi Dhugga, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . 1.The revenue has filed the present appeal under Section 260-Aof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) againstthe order dated 20.7.2007 passed by the Income Tax Appellate Tribunal,Chandigarh Bench-A in ITA No.446/Chandi/2005 and has sought to raisethe following substantial questions of law:- “1.Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was correct in holdingthat the expenditure of Rs.8,86,771/- incurred by theassessee has to be treated as revenue expenditure asno capital asset was acquired by the assessee ? 2.Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was correct in holdingthat the expenditure of Rs.8,86,771/- incurred by theassessee was revenue expenditure?” 2.The assessee has filed the return declaring a loss ofRs.12,38,06,711/- on 30.11.1998. This return was accompanied by profitand loss account and balance sheet and tax audit report . The return wasprocessed as such under Section 143(1)(a) on 30.3.1999. Thereafter, the assessment under Section 143(3) of the Act was completed on 25.1.2001and apart from other additions, an amount of Rs.8,86,771/- claimed asrevenue expenditure by the assessee spent on foreign travelling expenseswas disallowed and added in the income of the assessee. 3.Aggrieved against this order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals) which was partlyallowed vide his order dated 18.3.2005. However, the addition made bythe Assessing Officer of Rs.8,86,771/- on account of foreign travellingexpenses spent by the appellant was held to be a capital expenditure andthe order of the Assessing Officer was upheld in this regard. 4.Still aggrieved against the order of the Commissioner ofIncome Tax (Appeals), the assessee further filed an appeal before theIncome Tax Appellate Tribunal, Chandigarh Bench, Chandigarh who videthe impugned order held that no capital asset was acquired by theassessee. However, the expenditure was incurred wholly and solely for thepurpose of business and the said expenditure was allowable as adeduction. Thus, the appeal of the assessee was partly allowed. 5.Aggrieved against the said order of the Tribunal, the revenueis in appeal before us. 6.We have heard Ms. Urvashi Dhugga, learned counsel for therevenue and perused the record. 7.We find no merit in the appeal as we are satisfied that noquestion of law much less substantial question of law arises for ourdetermination in the present appeal. The Tribunal has given a pure findingof fact that the assessee incurred an expenditure of Rs.8,86,771/- for thepurpose of business, therefore, the same was allowable as an expenditureof revenue nature. The relevant portion of the order of the Tribunal isreproduced: “On careful consideration of the rival contentions we areof the considered view that the disallowance is notjustified. The assessee had incurred the expenditure forthe purpose of business. It is not disputed that theassessee has not acquired any capital asset.Therefore, the issue as to whether the expenditureincurred in connection with the acquisition of a capitalasset was required to be capitalized or not, does notarise in this case in so far no capital asset has beenacquired. The expenditure in dispute has been incurredfor the purpose of business and therefore, the same wasallowable as an expenditure of revenue nature. Weaccordingly delete the addition of Rs.8,86,771/.” “On careful consideration of the rival contentions we areof the considered view that the disallowance is notjustified. The assessee had incurred the expenditure forthe purpose of business. It is not disputed that theassessee has not acquired any capital asset.Therefore, the issue as to whether the expenditureincurred in connection with the acquisition of a capitalasset was required to be capitalized or not, does notarise in this case in so far no capital asset has beenacquired. The expenditure in dispute has been incurredfor the purpose of business and therefore, the same wasallowable as an expenditure of revenue nature. Weaccordingly delete the addition of Rs.8,86,771/.” 8.From the perusal of the above finding recorded by theTribunal, it is crystal clear that it is not disputed by the revenue that theassessee has not acquired any capital asset and has incurred anexpenditure for the purpose of business. The issue as to whether theexpenditure incurred in connection with the acquisition of capital asset isrequired to be capitalized or not, does not arise in the present case,insofar as no capital asset had been acquired. However, the expenditurein dispute is allowable as expenditure of revenue nature. Thus, we find noground to interfere in the findings of fact recorded by the Tribunal. Nosubstantial question of law arises in this appeal for our determination.Accordingly, the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE (RAJIVE BHALLA) JUDGE