INCOME TAX ACT, 1961

--Capital or revenue expenditure--Club membership fee Enduring advantageAssessing officer treated amounts paid to clubs for obtaining membership was a capital expenditure as the amount was to be paid only once and the acquisition of membership would confer benefit of an enduring nature. Held:Was not justified as according to the principles given in the case of Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1 (SC) : 1980 TaxPub(DT) 1083 (SC)  it had been specifically held that acquisition of membership of club would be revenue expenditure and not capital expenditure.

Income Tax Act, 1961 Section 37(1)

INCOME TAX ACT, 1961

--Capital or revenue expenditure--Expenditure incurred on obtaining ISO certificate Benefit of enduring nature Assessing officer held that the sum paid by the assessee for obtained ISO-9001 certificate was a capital expenditure as the same created the benefit of enduring nature. Held: Was not justified as the certificate would only certify the quality which was already maintained by the assessee in the manufacturing process and only guaranteed the quality, it did not confer any benefit of enduring credibility. Therefore, following the decisions in the case of CIT v. Perot Systems TSI (India) Ltd. (2010) ITOL 672 (HC)(Del) and according to the principles in the case of Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1 (SC) : 1980 TaxPub(DT) 1083 (SC)  it was held that the expenditure incurred towards acquisition of ISO-9001 certificate was revenue expenditure.

Income Tax Act, 1961 Section 37(1)

In The Karnataka High Court

V. G. Sabhahit & Ravi Malimath, JJ.

Dy. CIT & Anr. v. Infosys Technologies Ltd.

ITA Nos. 2975, 2976 and 3011 of 2005

A.Y. 1994-95 to 1996-97

21 October, 2012

Appellant by : Arvind Datar

Respondent by : King and Partridge

V. G. Sabhahit J.

ITA Nos. 2975 of 2005 and 2976 of 2005 are filed by the Revenue being aggrieved by the common order dated 31-3-2005, passed by the Income Tax Appellate Tribunal, Bangalore Bench 'A' (hereinafter referred to as 'the ITAT') in ITA Nos. 732/Bang/1998 ad 734/Bang/1998 for the assessment years 1995-96 and 1996-97 wherein the appeals filed by the Revenue challenging the order passed by the first appellate authority were dismissed holding that the amount spent by the assessee for acquisition of membership of the clubs should be treated as revenue expenditure.

2. ITA No. 3011 of 2005 is filed by the Revenue being aggrieved by the common order dated 31-3-2005, passed by the Income Tax Appellate Tribunal in ITA Nos. 733/Bang/1998 for the assessment year 1994-95, wherein the appeal filed by the revenue challenging the order passed by the appellate authority, was dismissed confirming the order passed by the appellate authority wherein the appellate authority had set aside the order of the assessing officer holding that amount spent for acquisition of membership of the club and sum of Rs. 11,99,000 spent towards obtaining ISO-9001 certificate would amount to revenue expenditure.

3.ITA No. 3011 of 2005 has been admitted for consideration of the following substantial questions of law :