Business expenditure: Revenue or capital: A.Y. 2002-03: Assessee in business of manufacture of steel wire rods, etc.: Paid Rs. 45,21,000 to Mahanagar Gas Ltd. towards CNG connection: Is revenue expenditure.

fiogf49gjkf0d

[CIT v. TATA SSL Ltd. (Bom.), ITA No. 1321 of 2010 dated 8-6-2011] The assessee, a public limited company, was engaged in the business of manufacturing steel wire rods, wires, CR sheets and profiles. In the relevant year i.e., A.Y. 2002-03, the assessee had paid Rs. 45,21,000 to Mahanagar Gas Ltd. towards CNG connection. The assessee claimed the expenditure as revenue expenditure. The Assessing Officer disallowed the claim. The Assessing Officer held that expenditure is capital in nature on the ground that the payment was made as capital contribution towards the cost of acquiring service meter, twin steam regulator, meter regulating station and cost of pipelines up to meter regulating station and that the payment was made before commencement of the gas supply. The Tribunal allowed the assessee’s claim. The Tribunal held that by paying the impugned amount to Mahanagar Gas Ltd., the assessee did not acquire any right or control over the gas facility. The Tribunal held that the facilities served the sole purpose of supplying the gas to the assessee’s work and, therefore, it was an integral part of profitearning process and facilitated in carrying on the assessee’s business more efficiently without giving any enduring benefit to the assessee.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“(i) In the present case, the finding recorded by the Tribunal is that the assets remained the property of Mahanagar Gas Ltd. and that the sole object of payment was to get gas to facilitate the manufacturing activity carried on by the assessee.

(ii) In these circumstances, in our opinion, no fault can be found with the decision of the Tribunal.”