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March 2012

Capital or revenue expenditure: Section 37 of Income-tax Act, 1961: A.Y. 1998-99: Airport authority: Expenditure towards removal of encroachments in and around technical area of airport for safety and security: Is revenue expenditure.

By K. B. Bhujle, Advocate
Reading Time 1 mins
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[Airport Authority of India v. CIT, 340 ITR 407 (Del.) (FB)]

The assessee is the Airport Authority managing the airports in India. The assessee incurred expenditure towards removal of encroachments in and around technical area of the airport for safety and security. The assessee’s claim for deduction of the expenditure was disallowed by the Assessing Officer and the disallowance was confirmed by the Tribunal.

On appeal by the assessee, the Delhi High Court reversed the decision of the Tribunal and held as under:

“The land belonged to the assessee. In the scheme formulated by the Government for removal of encroachers and their rehabilitation amount was not for acquisition of new assets. The payment was made to facilitate its smooth functioning of the business in a profitable manner and, therefore, such an expenditure was revenue in nature.”

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