Expenses incurred to raise floor height of warehouse to prevent water logging during monsoon is revenue exp.: HC

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Expenses incurred to raise floor height of warehouse to prevent water logging during monsoon is revenue exp.: HC

 

 

The question of any expenses as revenue expenditure or capital expenditure is always there whever some expenses are incurred over the properties or vehicle or pland and machinery.

Here was ione such issue which was involved in the following case:

Jetha Properties (P.) Ltd.

[2022] 136 taxmann.com 384 (Bombay)

Let us have a short overview of the case:

The issue was regarding the allowability of deduction under section 37(1) of the Income-tax Act, 1961 as Business expenditure.

Here Asessee-company was a warehouse keeper &  had incurred expenditure towards raising floor height of its warehouse so as to prevent water logging during monsoon.

It was located in an area prone to severe water logging during monsoon which leads to damaging of goods.

During assessment year 1991-92, assessee incurred an expenditure for raising floor height of its warehouse/godown to prevent such water logging and claimed same as revenue expenditure.

Assessing Officer disallowed same and treated said expenditure as capital in nature.

Assessee submitted that expenditure incurred by assessee did not bring into existing any new asset.  Expenditure was incurred wholly and solely to ensure that existing business of assessee was continued uninterrupted.

The issue before the court was whether since impugned expenditure incurred by assessee was directly related to carrying on or conducting of warehouse business of assessee, same was to be allowed as revenue expenditure under section 37(1)?

The issue was answered in affirmative & in favour of the assessee. The court observed that since assessee did not bring into existing any new asset and impugned expenditure was related to carrying on or conducting of warehouse business of assessee, same was to be allowed as revenue expenditure under section 37(1).

 

Conclusion:

Where assessee-company, a warehouse keeper, had incurred expenditure towards raising floor height of its warehouse so as to prevent water logging during monsoon, since assessee did not bring into existing any new asset and impugned expenditure was related to carrying on or conducting of warehouse business of assessee, same was to be allowed as revenue expenditure under section 37(1)

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